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December 2004 Christmas has been celebrated. Finals and papers were graded. My basketball team started the Beltway League season strong going 2-1 in December. The new edition of The Economic Way of Thinking is in the last stages of production. My Elgar series has some new and exciting books coming out in 2005. The RAE is moving along nicely and has some great papers slated to appear in 2005. So as we end 2004 and head to 2005, all signs are positive for
a happy, healthy and productive New Year.
November 2004 The month of November was a busy month with my return from London and assuming my responsibilities as the Director of the PhD program, searching for a new graduate program administrator, serving on the search committee for two new faculty members of our department, serving on the university committee for the realignment of the College of Arts and Sciences, teaching, running the seminar, dissertation supervision, my own research commitments, attending the SDAE/SEA meetings, organizing the RAE editors dinner, and the start of a new basketball season for my AAU team. I didn’t realize how good I had it in London!!! Actually I did. I also am fortunate to have a very able support staff on my side.
The month ended with my AAU team going to the championship game in the Thanksgiving Holiday tournament where we lost to the Virginia Rapids, a team that qualified for the Division 1 AAU National Championship tournament last spring. After winning our first 3 games, the Rapids proved too tough and we fell behind and could not catch up. I was very proud of the boys in the way they competed throughout the tournament. The SDAE meetings were stimulating this year and attracted some important thinkers to the group, such as Brian Arthur, David Colander, and Barkley Rosser --- congratulations to Roger Koppl for organizing the sessions. I also found the presentations of Paul Lewis and Emily Chamlee Wright to be first rate. I was also very impressed with the presentations of Chris Coyne and Peter Leeson, who won the Don Lavoie Memorial Graduate Student Essay Contest. The SDAE dinner highlighted awards to Vernon Smith for best paper for his article in the AER on Ecological versus Constructivist Rationality and to Bruce Caldwell for his book, Hayek’s Challenge. In addition, a lifetime achievement award was given to Karen Vaughn for her service and scholarship to Austrian Economics and in particular her efforts at founding the SDAE. Steve Horwitz gave a fitting and wonderful tribute to Karen. Finally, Roger Garrison gave the presidential address. As I returned to Fairfax I was able to reflect on my time at the London School of Economics. The opportunity there probably ranks in my top 3 professional highlights --- getting the job at NYU, winning the National Fellows award from Hoover, and being named the F. A. Hayek Memorial Lecturer for 2004. My lecture was well attended (with about 200 or more people in the Old Theatre) and well received from the number of emails I received from those in attendance congratulating me on my lecture and asking me follow up questions. One of the things that most struck me during my stay at the LSE was the physical plant of the Lionel Robbins Bldg and how conducive it is to building a research community, whereas how our physical plant at GMU is built to almost hinder research communities. It is amazing that as much collaboration as goes on here at GMU actually goes on because we are so spread out and isolated from one another. The LSE physical plant was not only fantastic for research professors, but also for graduate students to work in a collaborative manner with each other and with the professors.
Richard Wagner recently wrote a paper about the Virginia School tradition in its manifestations in Charlottesville, Blacksburg and Fairfax, and argues convincingly that Fairfax has not lived up to the intellectual environment provided in the other two places. We really need to address these issues of physical plant and learning/research environment at GMU if we are to continue to be an innovative and thriving place for research and graduate education. While I was in London, I was able to enjoy visits to Oxford, Cambridge and University of Buckingham. I also spoke at IEA in London. It was my second visit to Oxford, where I gave two talks, and was able to walk the campus again in between the two speaking engagements. It was, however, my first visit to Cambridge and the campus like Oxford is stunning. I also had wonderful visits at Buckingham and IEA. In fact, I think I can say in all honesty that I did not have a single bad experience during my stay in London and visits elsewhere.
October 2004 Red Sox's versus the Yankees As everyone knows by now, the mighty Yankees were defeated by the dreaded Boston Red Sox in the American League Championship Series. The Yankees had taken what seemed like insurmountable 3-0 lead only to lose 2 extra inning games, and then 2 additional games there were rarely in doubt. And to rub salt into the Yankee wound, these last two games were played at Yankee Stadium. For the first time in post season play, a team that was down 0-3 in a 7 game series was able to comeback and win the series. Well congratulations to the Red Soxs and their fans --- including Ed Stringham, Ben Powell and Russ Roberts. How can a Yankee fan be such a good sport?, you may ask. Well, there are a couple reasons. First, I wasnt in the US during the playoffs and thus didnt see the series but had to watch it from long distance and via the internet and reports from friends (and the foes as several of my former students are Red Soxs fans and delighted in giving me updates). However, my distance from the events prevented me from putting my special hex on the Red Soxs that has worked in the past such as with Bucky Dent, Bill Buckner, and Aaron Boone. Second, I have been concerned about the Yankees chances this year since April. Despite winning 101 games this year two concerns have been on my mind since the beginning of the season. Age and pitching. World Series teams need pitiching, the Yankees staff was suspect after the post-season. And, unfortunately, even super stars age. Chris Coyne and I discussed this all season. Chris, I should point out, is a native New Jersey resident like myself and is a diehard Yankee fan. He grew up in the era of "Donny baseball", where the Yankees went without a pennant, just as I didnt see a championship throughout my childhood and the era of Bobby Mercer, Roy White, Gene Michael and Mel Stottlemyre. Both of us did see championship come to the Yankees as we passed from childhood to adolescence and young adulthood. I dont remember if I have ever talked to my colleague Tyler Cowen about the Yankees, but there is sometimes a strange thing that happens in NJ --- a phenomena called a Mets fan emerges (and if you go to south NJ there are actually Philly fans) --- but I might have to question Tylers usually impeccable judgment in things of culture, sports and NJ if he does not share the love of the Yankees that Chris and I do. Back to some analysis of the Yankees and their woes --- I promise to get to an economic point eventually. The current crop of stars associated with the great Yankee teams of the 1990s and early 2000s consist of Derek Jeter, Bernie Williams, Jorge Posada, and Mariano Rivera. Only Jeter is still what he once was, and in fact, every year his stature grows. The catch during a mid-season series, the comeback from a batting slump, etc. all signal that Jeter is here to stay and is one of those rare stars whose presence on and off the field transcend sport and convey professionalism and class. In my opinion, Jeter personifies everything that is good in baseball the same way that Joe D did to my Dad's generation, or Micky did to my brothers. I also have nothing but the greatest respect for the other three players and what they have done for the Yankees and the game of baseball over the years. But there can be little doubt that in the cases of Williams, Posada and Rivera that their most heroic performances are behind them. Now comes the economic puzzle which is the real reason for writing this entry. A year ago or more I read the Michael Lewis book Moneyball: The Art of Winning an Unfair Game and am a huge fan of it and often think about how to apply the ideas to academic life. The key idea as I read the book is the acquisition of under-priced assets in the market. Obviously, everyone is looking to buy low and sell high so finding under-priced assets is not that easy. And especially in small market areas, baseball teams cannot afford highly priced assets (superstar players) and yet they must be competitive in order to keep their fan base. So how precisely does a team that can not field superstars, compete with the superstar laden teams? By finding players who are slightly off the radar screen of the professional scouts and baseball men because they dont fit the profile of a typical superstar, but who are productive on several margins that matter for winning a baseball game. The result, players that might not look like superstars, but can play close to that level of proficiency when push comes to shove and thus they win games. To move back to academic economics for a minute, this would mean in this walk of life to look for economists who work in fields that are not quite respected by the top departments but who are extremely talented in that field. For a small research oriented department like George Mason University, the secret is to be the best weird place to study economics. We cannot be the best place to study conventional economics --- we are not of that size, we are not that rich, and we are not that established of an institution of higher learning. For example, when I taught at NYU there were 45 faculty members in the economics department of the Graduate School of Arts and Sciences, and an entire other department over at the Stern School of Business, at Stanford, where I spent one year, there were economics faculty all over the campus in the business school, law school, political science department, school of public policy, Hoover Institution, and the economics department. We are much smaller at GMU and only have a faculty in the mid-20s range, though there are some economists in public policy and also the law school. We cannot compete across the board with the top research universities and across the board in economic research simply because of this issue of size. But, we can compete with the very best institutions in the world in our areas of expertise --- Austrian economics, law and economics, public choice, experimental economics, cultural economics, religion and economics, and history of economic thought precisely because these fields are undervalued by the profession of economics and we have faculty who are among the best in those respective areas of research in the world. As a result, we get outstanding students who otherwise would pursuing their graduate careers elsewhere but for the fact that they can get an in-depth education in these rather odd-ball fields of economic research. Obviously, the odd-ball status of some of these areas changes over time so, for example, both public choice and experimental economics are more mainstream now than when Jim Buchanan and Gordon Tullock started writing in the area, or Vernon Smith started conducting experiments. The very success of these scholars in pursuing their science resulted in wide spread recognition of their work --- as evidenced by the Nobel Prize to Jim and Vernon. Nevertheless, they bucked the trend in their career and pursued their science at universities that existed at the edge of the professional gates of legitimacy rather than at the Harvards and Yales and MITs. In fact, I highly recommend everyone to read Jim Buchanan's What Should Economists Do? collection with Liberty Fund to get a dose of great economic reasoning, and also the desperate state of the discipline at the time he wrote those essays (1970s). Reading Buchanan can be inspiring and make you realize that his motto of "dare to be different" could be his most important imprint on the scholars and students who work at the department of economics at GMU. Economics as a discipline has gotten so much better since the time Buchanan wrote those papers, but the reason why it has gotten so much better is because the profession has moved in his direction --- he did not move in their direction. Back to baseball. Team sports created the sort of loyalty that Chris and I have for the Yankees because we identify not just with a team, but also with the players. These are our guys out there competing. But to be our guy they have to do more than just wear the uniform. This is obviously less true today than it was before free agency (not that I am against free agency mind you). This means that players must stay with a team and perform heroics and be part of a winning tradition. We identify team success with heroic individual performances. But at the same time, we want our team to win, and in order for our team to win you have to put on the field the best players. As stars age how do you deal with that? This past year the Yankees had a chance to deal for Randy Johnson -- arguably even at the age of 40 the most dominant pitcher in baseball. But to get him they had to give up one of their star players. The Yankees could not trade Jeter --- he is the heart of this team, but Posada. Baseball people will tell you that you have to be strong up the middle --- catcher, pitcher, short and second and center. Posada has been an excellent catcher and key to the Yankee success this past decade. But as catchers go he is getting old and now would be the time to trade him to get the most value out of his marketability. Williams will not bring much --- he would be like Willie Mays going to the Mets (though I am not suggesting that Bernie has had a Willie Mays type career --- however great he has been he has not had even close to that sort of career). Rivera is still an effective closer, though not what he once was. Still you don't trade your top closer even if he isn't quite what he once was. But the Yankees had to get some pitching to help them out and Johnson was on the trading block for the right player and the right money and the Yankees had both but were unwilling to make the deal. Ptiching is what killed the Yankees this year. There was not a single member of the staff this year that you thought would be a "money" guy. Torre has made few mistakes in his career as the Yankee manager (a hall of fame managing career no doubt), but perhaps letting Kevin Brown pitch game 7 after what he had done this year was a bad one. But who else could he call on? There wasn't anyone who could be relied on --- unlike in the past he did not even have someone like David Wells who could be counted on to give the Yankees a special night every once in a while when the occassion was big enough. So here is my economic puzzle --- how do you build the loyalty around players and yet treat players as assets that must be reallocated to keep the team winning? I am not sure that much support for a team can be drummed up if you just go out and hire the top 15 players in the world and go out there and try to win a championship. The joy for many last year was precisely that the Lakers didn't win with four hall of famers on the court, not that they got to the finals. Similarly, if George shuffled the deck completely every year, the Yankees would be formidable, but not necessarily likable. The reason why this last Yankee run of championships and pennants has been so enjoyable is because many of the players were around for awhile so you grew to view them as Yankees more than as hired guns. The Celtics were a great basketball dynasty and have never recovered from Larry Bird's back or Len Bias's death from cocaine. They managed the loyalty of the Celtic assets (Bird, McHale, and Parish), but missed the opportunities to trade those assets to get the new blood needed to keep the winning tradition alive at the time when they would command top talent for their skill. The Yankees made the same mistake this year. But at the same time, who can blame them? Fans want the organizations to be loyal to the players, and win championships. These are consistent goals when the players are in their prime, but not as their talents begin to fade with age and injury. But once age and injury have set in, what you can get for them is not the deal to bring new talent and promise. So Red Sox's fans can enjoy their historical
redemption for the moment. They are back in the World Series.
But they have been their before -- 1967, 1975 and 1986 come
to mind. Yaz, Carelton, and Bill all provided defining moments
for Red Sox's fans. But alas no championship. Now they play
the Cardinals --- remember 1967!!! --- and they have a chance
to finally banish the curse of the Bambino. But remember I
return home from London on Wed (October 27th) so I will be
back for some of the series and I might just bring my hexing
powers with me out of spite of ruining the Yankee autumn I
was hoping to return to from London. I am currently in London at the London School of Economics, where I am the F. A. Hayek Visiting Fellow for 2004. My office is in the Lionel Robbins Building and I am housed in the Suntory and Toyota International Centeres for Economics and Related Disciplines (STICERD). Tim Besley is my faculty host. I will be giving a public lecture on October 19th entitled "Hayek and Market Socialism: Science, Ideology and Public Policy" and in that lecture I will try to argue that Hayek's scientific contribution as developed during his debate with the market socialists is less appreciated than what is should be, and that its relevance for the pratice and policy implications of economics are profound and radical if they were understood. In addition, I will be giving 3 lectures to the students at the LSE on Mondays throughout October (11, 18, 25) and these will touch on the topics of Austrian economics, new development economics, and anarchism as a progressive research program in political economy. I will also be giving talks at Oxford, Cambridge and University of Buckingham.
September 2004 As an undergraduate student at Grove City College we were required to take a year long sequence in the history of economic thought as part of our course work to major in economics (we also had to take a course in symbolic logic, but not calculus!). I became intrigued by the teachings of economics from my principles of economics course, but it was in studying the history of economic thought that I became completely hooked on the discipline. To this day, I learn economic ideas best when I can contextualize someone's ideas within the broad debates that define our discipline. Smith and Hume are as much a part of my work-a-day knowledge of economics as Stiglitz and Shleifer. In other words, I think historically about issues in method, methodology and policy for good or bad. Well, when I decided to pursue my PhD in economics one of the reasons for attending GMU was because of the respect given in that graduate program to the history of economic thought (we still do as is evidenced by David Levy's Summer Institute in the field). I took an overload of courses during my first year so I could take history of thought while working through the standard course sequence. The first readings in the first course in history of thought taught by Karen Vaughn were George Stigler's "Does Economics Have a Useful Past?" and Kenneth Boulding's "After Samuelson, Who Needs Smith?." Boulding's article completely blew me away, and explained to me my growing discomfort with the way that modern economists reasoned and erred in dismissing the ideas of older economists. See to me, then as now, Mises and Hayek wrote economics that was consistent with the best teachings in the long line of the history of our discipline, but were dismissed by modern thinkers who were not advancing that science because of a false belief in the "god" of formalism and scientism. The puzzle was how could that be. I understood the Stigler argument that if ideas were value added there would be a strong pressure within the scientific community to incorporate them into the current teaching. If Stigler was right, then all that was good in Mises and Hayek was already absorbed and all that was bad was discarded. No need to revisit their writings. Science progresses upward and onward one tombstone at a time. But Boulding argued the opposite --- there can be detours in intellectual progress. What was once known can be lost. The whig theory of ideas was wrong because there are (a) "failures" in the market place for ideas due to the lack of a pricing system in that 'market', and (b) issues revolving around the "extended present" where the evolutionary potential of an idea can far outlive the natural life-span of an author. Upon reading Boulding's article I became a fan. So I read more, such as The Image and The Reconstruction of Economics. Then in 1986, Boulding joined the faculty at GMU as a Robinson Professor and Dave Prychitko and I literally camped out at his door. Boulding was a professor's professor. He was in his late 70s at the time, and he was here away from family so he actually spent an amazing amount of time with us talking about ideas, the profession, and the sheer joy of intellectual pursuits. What an amazing experience Dave and I had with him. We took his course in Great Books in Political Economy. We even got him to write a piece for The Market Process, the newsletter for the Center for the Study of Market Processes at the time, and in typical contrarian fashion Boulding wrote a piece on "The Pathologies of the Market." Anyway, when Boulding passed away a few years after we graduated Dave and I were given the opportunity to write a paper in honor of Boulding and titled our essay "Mr. Boulding and the Austrians" --- taking the title of Frank Knight's article that had made Boulding's career back and enabled Boulding to establish a first-class research and teaching career without ever earning a PhD (a promise he often told us would have killed him) Just think how lucky we were to have been exposed to him --- a master teacher, a first-rate scholar, a John Bates Clark Award winner who eschewed the formalism of the profession, and instead who encouraged interdisciplinary and iconoclastic thinking. And in Dave and my case we had the good fortune to study with not only Boulding but James Buchanan and Gordon Tullock as well as Don Lavoie --- all scholars who encouraged wide reading, interdisciplinary scholarship, and original thinking.
Well, in September Dave and I had a chance to revisit the importance of Boulding once more as Dave and Lenore Ealy organized a conference around Boulding's work in Indianapolis, IN. The conversation at the conference was very high level and we explored the nuances of Boulding's work with special reference to his work on the "grants economy". Boulding was way ahead of his time in terms of economic and social science thinking, but ironically he was also a man grounded in classical political economy and the sciences humane. Rereading his works after basically filing them in my head so long ago was a great pleasure, and it made me realize again just how lucky I was to count him as one of my teachers. At the end of September I went to Carleton University in Canada to give the first annual lecture at the Center for European Studies on the EU. I spoke on the different scenerios relating to the prospects for entrepreneurship and improved economic policy making with regard to the new members from East and Central Europe. The lecture was well attended and my host were gracious. Ottawa is a beautiful city and the campus was quite attractive.
August 2004 The month started with a family vacation at the North Carolina beach. We had a great week with our entire family at the beach and the house we stayed in was amazing.
When Rosemary and I were first married we lived at my grandparents house in Point Pleasant, NJ about half a mile from the beach. It has been a dream of ours ever since that we would be able to have a house at the shore. We both love the beach and the water. In fact, we particularly like the beach not only during summer season, but also in the fall and winter. One of the reasons it was so difficult for us to move on from my NYU years was to pick up our roots from the NJ shore as we were living at that time in Middletown, NJ and belonged to a beach club in Sea Bright, NJ. I remember when I came back from giving a series of lectures at Hertford College at Oxford University people asked me where would be my favorite university to teach at and I said "Oxford provided it was at the NJ shore." I passed on some great job opportunities because of my desire to stay in NJ. I don't have any regrets because GMU is a wonderful intellectual environment for me, but I do miss the shore tremendously (as does Rosemary). So if the folks at Oxford do plan on opening a branch campus on the NJ shore (or after visiting there I would accept the NC shore), they should definitely contact me!!! After returning from NC, things started turning toward getting ready for the school year. Rosemary accepted a 6th grade teaching position at Mosby Woods Elementary School in Fairfax, VA. I also started to focus on finishing up a series of writing assignments (much of this is collaborative work with Peter Leeson and Chris Coyne). In addition to working with Pete and Chris, I am thrilled that Frederic Sautet is now working with me at the Mercatus Center in the Global Prosperity Initiative. Frederic is one of the most subtle thinkers about entrepreneurship I have ever encountered and he will be indespensible for the success of the GPI research program. In an ideal world, Frederic, Pete, Chris and I would have a chance to form a research team in Austrian economics, and in particular one focusing on institutions, entrepreneurship and economic development, and be able to coordinate a research and teaching curriculum within a PhD program. Not sure that will happen, but along with my house on the beach it serves as a nice dream of mine. Oxford really ought to think about developing that branch campus and setting up the Israel M. Kirzner Center for Advanced Study of the Market Process. I'd even let Chris with his experience at JP Morgan run it if there are doubts about my administrative and business abilities. As the month came to an end, my son Stephen and I became focused on the Olympics and in particular the US basketball team's failed effort to win the gold medal (though Stephan for some reason unbeknown to me also found the women's beach volleyball competition transfixing). I have my own theories about why the US team ran into problems. There are of course the standard theories about the players who didn't go and the selection process. But I also think there are major differences in the way the game is taught and the way players develop in the US as opposed to in Europe and elsewhere that are important and explain the poor overall shooting skills that were displayed. At one point during the tournament an announcer pointed out that among the men's team the best free throw shooting performance was 77%, and that 9 women's teams had a higher percentage in the tournament. This is a consequence of the way the game is played on the men's side --- which is above the rim. The best players in the US get involved with AAU basketball early on and AAU rewards aggressive play and also play that emphasizes attacking the rim. During AAU tournaments, the referees are asked to referee games all day long and there is a tight time schedule. As a result their incentive is to swallow the whistle and let the players play. Our players learn to attack the rim and to contest every shot on defense. The Europeans didn't try to leap with the US players, they instead stood their ground and took charges. They also packed in their zone and forced the US players to beat them from the outside --- which they couldn't. When other teams matched up man-to-man, the US team dominated. It was the zone which killed them. Finally, they played very poorly against the pick and roll and by constantly going underneath the screen the shooter was left wide open from 20 feet. It was also the case that the referees let the non-US players to get away with moving picks all tournament, and they confused flopping with actual contact and in the process put Tim Duncan in foul trouble too often. But the bottom line is that while we had absolutely wonderful athletes, the team did not play as well together as the Argentinians. In fact, ever since the 2002 world games where the Argentinas upset the US team I have been a fan of Manu Ginobili and I have really liked Pepe Sanchez since his Temple days. I did cheer for them in the Gold Medal game, and I was very happy to see the US team play hard in the Bronze medal game. Watching the Olympic basketball event made me antsy to get back in the gym with the boys on my AAU team and get working on the fundamentals. In addition to basketball, I was thrilled to see the swimming events, certain track and field events, and of course I didn't mind watching all the coverage of women's beach volleyball either. As the semester starts on August 30th I take on new duties as the Director of Graduate Studies. Good luck to all the students who have to rely on my guidance.
July 2004 As anyone who has looked at my web site will know, I have a passion for sports forged from a youth in which sports dominated my life. Basketball is my favorite sport, but my other sports passions are the NY Yankees and tennis. During the Yankees series with the Boston Red Sox's to end the month of June, the play of Derek Jeter was inspired to say the least. In the first week of July the sporting world is forced to pay attention to tennis as its greatest tournament -- Wimbledon -- takes place. The US Open in August/September is a great tournament as well, but it doesn't have the same appeal that Wimbledon does. But this year the tournament took on a special appeal as we saw Maria Sharapova and Roger Federer take the game to new heights. I tend not to watch women's tennis much, but Sharapova is an exciting new talent that will do much to help the women's game. (As an aside, I do believe that people are bing tremendously unfair to Anna Kournikova -- yes she is stunning and yes she did model quite often when she could have been practicing, but she also won several Grand Slam doubles tournaments and she also got to the semi-finals of some of the major events in singles as well prior to injuries and a changing nature of the women's game --- Kournikova was ranked as high as #8 in singles in 2000 and #1 in doubles in 1999). However, Sharapova is a legitimate contender to be number 1 in the world and she is a stunning beauty as well. Roger Federer seems to me to be a cross between my two favorite players of all time --- Borg and Sampras --- and as such has raised the game of tennis to new heights of athletic accomplishment. During the 1990s it was often argued that the equipment had negatively impacted the game --- serves that are too fast, ground strokes that were too deep and heavey to generate ralleys. Some, such as John McEnroe, made interesting suggestions to restrict the equipment (like major league baseball) and force the players to go back to wooden racquets. But I always thought this was similar to an Olympic committee trying to move back from fiberglass pole vaults to wooden ones and would be just as mistaken. However, until the players caught up to the speed of the game made possible by the new equipment the game would go through a transition period. It seems that time has come and the match between Andy Roddick and Roger Federer was just such an example. The players matched power with touch and took the game of tennis to a wonderful new level. Federer is a beautiful athlete to watch play this great game and I just hope that he stays clear of injuries and other obstacles so that young people will be attracted to this great game.
June 2004 The month of June concluded the AAU season for my Fairfax Stars U13 team. The AAU National tournaments for our age group are being played at the end of the month. Good luck to all the teams from the Potomac Valley AAU. I gave lectures at Brown University on the topic of globalization on June 14th and 15th. The occassion was a seminar run by the Institute for Humane Studies and in attendance were student from throughout the world. John Tomasi of Brown's political science hosted the conference and I was thrilled to get the chance to meet with John again and discuss his plans for his new Political Theory Project at Brown. Upon returning from Brown, I then had the opportunity to lecture at the University of Virginia as part of the Social Change Workshop. This workshop gathers top graduate students in the social sciences to meet for a weeklong intensive research seminar. This years theme was rationality and institutions. The discussion was at a very high level and I was quite impressed with the quality of the students. After giving my lectures, I then joined a small group of scholars, led by Douglass North and Barry Weingast, at the Boar's Head Inn in Charlottesville to discuss John Nye's manuscript War, Wine and Taxes -- which discusses the pattern of economic relationships between France and Britain from the 17th to 19th century. This is the 3rd such meeting I have been involved with dealing with book manuscripts from among this group of scholars --- Doug North's Understanding the Process of Economic Change, and Avner Greif's Institutions and Analysis manuscripts were the first ones in 2002 and 2003 respectively. These workshops are among the most intellectually rewarding activities I've been involved with in recent years and the discussion on Nye's manuscript certainly lived up to expectations in this regard as well.
May 2004 P. T. Bauer challenged the received wisdom in development economics throughout his career. Despite publishing widely in the field and holding prestigious academic appointments at Cambridge and then the LSE, Bauer was not so much rediculed for his iconclastic views but ignored by the mainstream of economics. In this regard, Bauer had the misfortune of spending his entire career during the ascendancy of Keynesian economic policy and the belief in development planning aided by foreign assistance. In recent years, the failure of development planning and foreign aid programs has become obvious to all. The failure is most evident in the tragic record in Africa. At Princeton early this month there was a conference honoring PT Bauer and his contribution to understanding the process of economic development. The collection of speakers was truly impressive and included 3 Nobel Prize winners. A highlight for me was the panel with James Buchanan, Israel Kirzner, Amartya Sen and Basil Yamey. Kirzner's talk, in particular, emphasized the need to stress basic economic reasoning in economic policy analysis and he praised Bauer for understanding this. Buchanan made an impassioned endorsement of Kirzner's point about basic economic reasoning.
An interesting discussion also took place between Buchanan and North later in the conference about the issue of the politics of economic reform. Buchanan had stressed what he thought was a tension in Bauer's work. Bauer believed strongly in the power of the average person to achieve economic betterment if left to their own devices, but he did not trust the average person to vote for public policies that would in fact generate betterment. In short, Bauer was trustful of markets, but distrusted democracy. Buchanan and Sen found this to be a weakness in Bauer's thought. But as Douglass North pointed out, the last decade and a half of economic reform experience in transition economies as well as the underdeveloped world has taught us how difficult it is to build a winning democratic coalition for economic policies that generate prosperity. The problem isn't democracy per se, but the complicated mix of social/cultural, political/legal, and economic/financial institutions that must be adopted in society in order to realize generalized prosperity. In fact, North's work has drawn our attention to the issues of cognition and belief systems in a way that previous work in political economy has not, and while this complicates the analysis it also moves our work in the right direction. A productive future for political economy, in my opinion, will emerge in some paradigmatic framework that builds on Smith/Hume, Mises/Hayek, Buchanan/Tullock, Coase/North and some sprinklings of Schelling, Ostrom, Vernon Smith and Shleifer with an effort to construct analytical narratives of real-world phenomena. One of the reasons Buchanan is more optimistic about democratic discourse generating "good policy", in my opinion, is because he pushes the analysis to the constitutional level of analysis and then once at that level he takes a Rawlsian veil of ignorance move which in effect drains the constitutional discussion of the interest group manipulations that govern the political game given any set of constitutional rules. Of course, Buchanan is right in following Knight in pointing out that to point out a situation is hopeless is to point out that the situation is ideal. Buchanan correctly resists this step and maintains a reformists zeal. But it is not clear to me that he can be as optimistic about democratic reforms resulting in good economic policy --- what he refers to as politics by princple not interests --- unless he makes his Rawlsian move. In a fundamental sense Buchanan has tried to address this issue by (a) restricting simple majority rule by suggesting the adoption of super majority rules in situations where the political externalities with regard to individual rights are significant, or (b) restricting the policy space by the adoption of a generality norm applied to politics. All of these ideas are profound and interesting, but their ability to serve the intended purpose of effectively bounding political opportunism is problematic. As a teacher Buchanan always taughts us that the more questions we have unresolved at the end of our papers the more productive our research agenda will be --- you solve some problems, but that opens up other ones that must be tackled. Buchanan in indeed a fertile mind and the discussion at the Bauer conference simply reinforced that judgement. Robert Lucas one time wrote that once one starts thinking about development economics it is hard for an economists to think about anything else. The questions are that interesting and that important for the lives and well-being of humanity. When you have the good fortune to sit in a room and interact with minds of the quality of Buchanan, North and Sen and see them wrestle with these issues, Lucas's statement certainly rings true. How can we think of anything else once we start to think of why some countries are rich and others are poor, and what are the institutional pre-requisites for poor countries to make their way to being rich. And as this conference at Princeton highlighted, P. T. Bauer's work is essential reading for anyone who hopes to address the questions of development economics. My AAU basketball team continued in tournament play. At a tournament in Richmond we played an exciting double-overtime game (which we lost) on Saturday in pool-play, but won a close game on Sunday to earn the 3rd place trophy. We will compete in the state tournament in early June.
April 2004 The month began with a trip to the Association of Private Enterprise Education annual meetings, this year in the Bahamas. 
View from room at APEE 2004 The meetings were good. I was particularly excited by the work of Russell Sobel on entrepreneurship, economic freedom and economic growth. Sobel argues that while the work on Economic Freedom has clearly demonstrated the positive correlation between policies of economic freedom and higher levels of per capita income as well as higher rates of growth in per capita income, the indicies leave unexamined the precise mechanism through which economic freedom translates into better standards of living. I completely agree with Sobel on this point, and in fact have a series of papers with Chris Coyne which make this argument. Sobel is an empirical economist and his work draws on the Global Entrepreneurship Monitor, which says that something like 85% of the difference in economic growth between nations can be explained by the differences in environment conducive or detrimental to entrepreneurial activity. Sobel's research tends to focus on the innovative aspects of entrepreneurship and thus he looks at patents and trade-marks. I would prefer to look at start ups. As I argued in a paper with Peter Leeson published in Economic Affairs dealing with entrepreneurship and privatization in post-Soviet Russia --- it is not restructuring old state enterprises that matters, but the emergence of new firms. In other words, don't worry about putting old wine in new bottles, but focus instead on producing new wine. I fear that the focus on patents and trade-marks, like R&D expenditures, over emphasizes large firms and also the legal-political influence of market actors. But this is a disputable propositions and ultimately an empirical question. Sobel's work is engaging and exceedingly relevant, and I encourage readers to check out the Entrepreneurship Center he directs at West Virginia University. I think he has some great plans for that center in terms of research and education. The meetings in Bahamas also served to educate me on the phenomena of "beach week" of which I was completely ignorant of. Having fun in the sun were not college students, who I knew went on spring break -- though I never could partake in this ritual because of my commitment to the GCC college tennis team and thus our spring travel schedule through the south for matches and training. But running around drunk and wearing barely nothing in the Bahamas was not this generations version of my fraternity brothers but were high school students, and certainly not all of them were seniors. One boy broke his neck jumping off some rocks into the ocean while drunk, a group of 15 year old girls go sick throughout the hotel another night. There was not a single adult there to provide supervision. I went out on the balcony one night at 11:30 and asked the 30 or so kids on the balcony of the room next to mind if they could take the party elsewhere. To my surprise the boys were polite and said "yes sir, sorry that we were loud." But a young lady turned to me and said "Hey old man, I am just trying to have fun on my spring break." The kids charged all their drinks at the bar to their rooms, so I am pretty sure Mommy and Daddy had to pay for everything. I doubt they realize what is going on. I no doubt sound like a social conservative, which I am not. But while I have radical ideas in politics, my personal life is very conventional. Nevertheless I do completely respect the choices of individuals and would not regulate their choice of what to do with their bodies in any way. However, I did leave the Bahamas wondering where are all these parents and what are they thinking? I also had to think about the changing mores (sexual and otherwise) of our youth. Perhaps at 44 I am the old man that young girl complained about on the balcony. April has been a busy month for my AAU basketball team. We played in the regional qualifiers as well as a few other tournaments. All in all, between March and June the AAU team will play roughly 40 games between Richmond and Baltimore. The competition in AAU is very tough and it is very good experience for the suburban boys that I coach as they get exposed to teams from Richmond, DC, Baltimore that otherwise they would never play. I am a big supporter of AAU basketball. When I was in high school, AAU was like the All-Star teams from across the state and there was one big tournament and then the champion of that played in the nationals. Now there are teams all over. Also when I was in high school the focus of AAU was on the 17 year old division, now it goes all the way down to 9 and 10 year olds. I do think the competition affords the boys and girls who want to work on their basketball game a great opportunity to continue to work on their games in the spring and summer. But the reality is that so much happens to a young boys body between the ages of 13 and 16, that the real hype should remain on the 16 and 17 year old level and not with these little kids. To read about the dark side of the AAU circuit see Sole Influence. On the other hand, I can attest to the great benefits of the program if you maintain the focus on fundamental skill development and deepening the knowledge of the game. And it is amazing to see how well some of these boys can play the game at such an early age. March 2004 March madness took over life as I watched one great game after another. The NCAA post-season had some tremendous games this year. Unfortunately, my pool was basically wiped out by the 3rd round. But the competitive level of basketball was great to watch. St. Joe's, U Conn, Duke, Oaklahoma State, George Tech, UAB all provided great memories to the fans. The George Mason Patriots had a great season. They lost a heartbreaker to VCU in the CAA conference championship by 1 point, but Coach Larranaga then took his team to the NIT and advanced to the 3rd round where they played Oregon and their standout player Luke Jackson on ESPN. Tip off was at 11:30pm, but I stayed up and cheered GMU on against the odds. GMU lost, but Coach Larranaga's squad established school records for wins and success in the post-season. Congratulations to Coach and the team for providing the fans with a great season. I for one cannot wait for next year. Besides basketball, I had a form of March Madness with dissertation defenses as 2 of my students successfully defended their dissertations in March. Christine Polek, who actually was a student of mine from New York University, finished her thesis dealing with the emergence on financial markets in East and Central Europe. Christine attended NYU after graduating from MIT and as luck would have it was assigned to work for me for her assistantship. Christine helped me with my large section principles of economics class and on several research projects at the time (I was just getting involved in development economic issues and she had worked on some economic growth projects at MIT). She was predisposed toward free market thinking and I reinforced that predisposition. However, Christine decided to leave NYU after writing an MA thesis under my direction to pursue a career in investment banking. The decision certainly made sense financially, but I told her to stay in touch and if she ever decided to return to graduate school I would try to help her get a fellowship, etc. In the meantime, I moved to George Mason University. About a year or two after I had moved to GMU Christine contacted me and told me she wanted to earn her PhD and in fact she was drawn to GMU because of the political economy and interdisciplinary research that was the trade-market of this department. Christine was awarded a fellowship and pursued her PhD studies. Along the way, she went back to work doing statistical analysis, got married to Gabe and had a beautiful baby boy Wyatt. Oh, she also taught money and banking, and finished off her thesis. Some people say women cannot have it all. I think that is wrong, women can have it all, but often times not at once. On the other hand, some women like Christine seem to cram an awful lot of success into a short period of time, and do it always with a smile and good nature. Christine was a joy to work with both at NYU and at GMU. Way to go Christine and best wishes for continued success and happiness.
Scott Beaulier defended his thesis which dealt with issues in property rights and economic development and contained empirical analysis of the method of privatization and economic growth in East and Central Europe, the economic history of the transition period in the Czech Republic, and an analysis of the economic success of Botswana. Scott did an outstanding job and in fact his thesis have been awarded the Israel M. Kirzner Award for Outstanding Dissertation in Austrian Economics at George Mason University. Scott will be getting married this summer, honeymooning in Alaska, doing field research in Botswana and then moving to Macon, GA. Working with Scott has been particularly fulfilling for a variety of reasons. First, Scott is just a great student -- smart, hard working, and genuinely nice. Second, Scott was an undergraduate student of my best friend Dave Prychitko (I would provide a link to Dave's website, but in typical Dave fashion he took his down when everyone got one!). I met Scott for the first time while he was still a student of Dave's and Dave recommended him for a program I ran at NYU on Austrian Economics. Scott then decided to come to GMU, over very attractive offers from both U of Georgia and Florida State. I was thrilled when Scott decided to come here and study Austrian economics and political economy with me. It was in many senses the realization of a vision that we (Dave included) all had at the Center for the Study of Market Processes back in the 1980s. The vision of what the Center had in mind for the advancement of Austrian economics within the profession is still the one that inspires me everyday I go to work and Scott is an example of the living realization of the 'feeder' aspect of student development that we all talked about. Israel Kirzner fondly refered to me as his "grandstudent" --- he was the professor of Don Lavoie at NYU, and I was the student of Don at GMU, and then went to work with Israel and Mario back at NYU. I am in fact very proud to be associated with Israel in that pedagogical and scholarly line. I hope Scott views his educational lineage half as proudly as I do mine. If he does, then the nights of late 20s anguish that Dave and I shared over our decision to become professors will have been dismissed and replaced with the reality that teaching and research is a good vocation in which to steer the best and the brightest and that Dave and I made the right choice with our lives. Good luck at Mercer Scott and go forth and multiple the students who believe that economic science provides truths that are essential for the understanding and maintenance of the free and prosperous commonwealth.
February 2004 By far the most exciting aspect of my job at GMU is working with the wonderful graduate students that decide to come here to earn their PhDs. Our students self-select in coming here because of the variety of programs we offer in Austrian economics, experimental economics, history of thought, law and economics and public choice. As a result they tend to be more excited about ideas than your typical graduate students in economics. They also tend to be more unconstrained in the topics they choose to work on and the way that they work on them. As a program we are committed to making sure these students receive a strong technical training in the methods of mathematical modeling and econometric testing. At the same time for those students who want to pursue a political economy program of research that bucks the standard model and measure appraoch or the ideological presuppositions dominant in our culture, our graduate program creates space for these students. And for the best of them, this translates into publications in professional journals, strong teaching evalutions, and innovative dissertations. This in turn translates into placement in solid academic jobs. In recent years, students from GMU have found jobs at strong liberal arts colleges such as Hillsdale College, medium to large size state universities like San Jose State University, or major universities like Florida State University. In my capacity as a dissertation advisor, it is always a pleasure to see a young scholar find their place in the world of academia and to achieve success. Scott Beaulier has just completed his job search and after a series of difficult (but exciting) decisions, Scott decided to join the faculty at Mercer University in Macon, GA. When Scott first showed an interest in Mercer University I was predisposed to like Mercer because the head coach for the basketball team, Mark Slonaker, is someone who I admired when I played high school basketball and then had the opportunity to work with him as a camp counselor at Lehigh Valley Basketball camp in the late 1970s. He was the first 6'5" high school point guard I ever saw and also the first player I remember watching who could dominate a game without scoring a basket. Now I have another reason to view the school with great fondness. Way to go Scott!!! January 2004 In 2002 I was invited to be involved with a project with IRIS at the University of Maryland dealing with introducing the insights of New Institutional Economics into the development aid project. It was an exciting venture to be involved with since no field of economics, or public policy, had been so confused as the field of development economics. I had published a book in 1994 under the title The Collapse of Development Planning, where I argued in the introduction that with the breakdown of the Keynesian hegemony in the economics profession and the collapse of the Soviet Bloc the time was right for a reassessment of the theory and public policy of economic development. In my work on transition and development economics from that time and throughout the 1990s I stressed the role of social/cultural, political/legal, and economic/financial institutions in the process of economic development. Work by scholars at IRIS had long been associated in my mind with solid microeconomic analysis, institutional analysis and political economy. So I jumped at the chance to join the working group at IRIS. But despite the solid work being done by scholars at IRIS, I came to the opinion that without the guiding influence of the late great Mancur Olson, the institutional and political economy focus was not as thorough as I had expected. In response I started talking to Tyler Cowen and Paul Edwards at the Mercatus Center about setting up our own version of IRIS (on a smaller scale) at the Mercatus Center and to try to steer some of our promising graduate students at GMU into doing field work in comparative political economy and development economics. From my work on the Soviet Union I was convinced that an important distinction existed between the de facto and the de jure rules which govern economic life in a society, and in particular, that in economies that exhibit perverse economic performance, that perversity can be traced to the conflict between the de facto and the de jure. In short, what is needed in any study of an economic system is a rendering of the political economy of everyday life prior to engaging in any other analysis or proffering policy advice. Once we recognize that economic life operates not at the de jure, but at the de facto level we can proceed in our analysis. But how do you access the de facto? Certainly not through government statistics. Instead, one must look for different forms of evidence, found in the memoirs of economic actors, travel diaries, business documents, on-the-ground reports, interviews with different agents, and in the general experience of "dwelling" within a society. My inspiration in this research came from the lectures of my teacher Don Lavoie, and the experience I had with Soviet studies, and also my time as a research fellow at Peter Berger's Institute for the Study of Economic Culture at Boston University. With the help of Mercatus we were able to pursue this project and last summer we put 3 teams of graduate students and senior researchers into the field. I told everyone who cared to listen that our goal was to give theoretical content to the work of de Soto and empirical content to the work of Kirzner. Actually, the goal was probably a little more amibtious than even that, including an eventual transformation of the methodology of empirical economics by merging an Austrian version of rational choice political economy with the ethnographic evidence gathered in anthropological investigation. We are certainly not there yet, but we do have our first documentary on our field work up on-line and I hope people will look at it and encourage them to send me feedback on what you think about this project and our approach to the issues of economic development. The documentary highlights Peter Leeson and Christopher Coyne --- and who says you cannot move from economics to becoming a film star!
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