The archive.

Economic theories address people who can learn those theories and change their behavior accordingly. This feedback is central to Oskar Morgenstern’s examination of what economics can describe, predict, and prescribe. In this article, reprinted in 1976 from its 1972 publication, he brings the perspective of game theory and axiomatic utility to bear on the limits of both aggregate measurement and predictive success. Stock-market regularities that disappear when exploited and mixed strategies that remain effective when understood sharpen the question: which economic propositions survive their own application? Morgenstern’s commitment to formal rigor accompanies a concern for expectations, institutions, and historical change. Readers can discover why a successful forecast need not validate a theory—and how theory can guide action without choosing the ends that action should serve.

How did a promoter of government-business cooperation acquire a reputation as the defender of laissez-faire? Murray N. Rothbard’s essay locates the answer in Hoover’s uneasy position between voluntary industrial coordination and compulsory economic planning. Reading Commerce Department activism alongside Depression-era wage agreements, farm price supports, and business lending, Rothbard argues that Hoover helped build the apparatus Roosevelt would expand. His distinctive target is not intervention alone but the use of federal authority to organize producers and restrain competition. The revealing tension comes when Hoover rejects the Swope plan for compulsory industrial organization after years of encouraging cooperation under government auspices. Readers can examine both Rothbard’s case for continuity between Hoover and the New Deal and his explanation of how resistance to further planning could obscure an interventionist record.

When Nixon suspended the dollar's convertibility into gold in August 1971, most observers saw a diplomatic problem to be solved by renegotiated parities. Sennholz reads the collapse of Bretton Woods as something deeper: evidence that money managed by governments is inherently unstable. Writing from an Austrian, market-centered standpoint, he derives exchange rates not from national aggregates but from individual cash balances, expectations, and purchasing power, and contrasts the classical gold-coin standard—an international order requiring no treaties, since coins were valued by weight—with a managed system that concentrated discretion in central banks. Balance-of-payments crises, he argues, are simply people fleeing depreciating money; the dollar's fall traced to domestic deficits and credit expansion, not foreign malice. His remedy is a return to gold, beyond the reach of political manufacture.

Market forces tend to establish the parity between the purchasing powers and thus their exchange ratios.

What could children's liberation actually mean—perhaps, Rothbard suspects, little more than a right to kick adults in the shins on a guaranteed income from long-suffering parents? Beneath the joke, his 1972 essay puts a genuine puzzle to libertarian theory: the infant is neither a full self-owner nor an owned object. His move is to shift from vague "freedom" to jurisdiction over property. Parents may set household rules as conditions of residence on their own property, but may never own the child's body; every child must therefore hold an absolute right to run away, forced return amounting to kidnapping. The parent is trustee-owner and guardian, morally bound to rear and educate yet not legally compelled to do so. Rothbard extends the logic to a market in guardianship and against compulsory schooling and child-labor law, liberating child and parent alike from the State.

Therefore, the child must always be free to run away; he then becomes a self-owner whenever he chooses to exercise his right to run-away freedom.

Envy, in Hazlitt's diagnosis, is not the mere desire for what one lacks but resentment of another's advantage—and because its object is comparative status rather than need, no concession can satisfy it. This 1972 essay argues that redistributive politics is often driven either by envy or by the fear of it, and that forced equalization can only level downward, destroying the abundance from which wages and relief flow. Steep progressive and confiscatory inheritance taxes, he contends, punish the rich symbolically while injuring the poor by starving capital accumulation. His objective test asks not whether a policy favors equality but whether it pursues equality at the expense of abundance. Reaching for Tocqueville on pre-revolutionary France, he warns that appeasing resentment provokes more of it, and that a government paying social blackmail invites the collapse it fears.

Envy is implacable. Concessions merely whet its appetite for more concessions.

The arithmetic is deflating: confiscating every after-tax income above fifty thousand dollars in 1968, Hazlitt calculates, would have yielded barely a hundred and twenty dollars a head, and could never be repeated once those incomes ceased to be earned. That figure frames his survey of redistribution's schemes, from equal division, guaranteed income and the negative income tax he once favored to land reform, progressive taxation and one-time leveling. Each, he argues, mistakes wealth for a fixed surplus rather than a flow produced by work, saving, investment and secure property. Near-confiscatory marginal rates raise little revenue while draining the capital that becomes machines, productivity and higher wages, so they injure the poor more than the rich. Following Irving Fisher, he predicts any equal division would dissolve at once through differences in ability, luck and thrift.

Any attempt to equalize wealth and income by forced redistribution must destroy wealth and income.

"Optimum" sounds like a clear concept and is nothing of the sort. Responding as a discussant to Abram Bergson and Jan Tinbergen, Morgenstern presses two objections that unsettle the confident vocabulary of welfare planning. First, productivity, so intelligible for physical output, becomes one of the weakest ideas in economics once services dominate national income, leaving comparisons across systems on shakier ground than they claim. Second, an optimum invoked rhetorically is not an optimum proven to exist, and recent theory had produced cases where none does. From there he argues that society cannot in principle be fully formalized, that imposed equality raises the unanswered question of what keeps equal incomes equal, and that identical physical circumstances can sustain rival stable orders. Choosing among them, he concludes, is an ethical and political act, not a scientific result.

There is no scientific reason why one system should be preferred over the other.

Persistent payments imbalance, when it will not soon correct itself, is best met by realigning the exchange rate rather than by controls, reserve losses, borrowing, inflation, or deflation — so run these two Horowitz Lectures. Machlup distrusts the notion of a single equilibrium rate, since money, wages, productivity, and capital flows shift too continually, and prefers to speak of alignment and disalignment. The first lecture reduces the choice to its essentials: adjust supply and demand to the rate, or adjust the rate to supply and demand, counting deflation's unemployment and inflation's distortions as the real costs. The second is political economy, explaining why governments delay until a small early move becomes a wrenching late one, and defending crawling pegs, wider bands, and temporary floating.

Currency speculation is a function of disaligned exchange rates that are expected to undergo adjustment by large jumps.

Today's self-styled liberals, Hazlitt notes with relish, would be astonished to learn that the father of the welfare state they admire was Otto von Bismarck, the antiliberal apostle of blood and iron. That genealogy opens this 1972 essay's account of how relief and social insurance never stay within their original bounds—expanding in coverage, benefits, taxes, deficits, and expectations. His sharpest charge is semantic: Social Security was presented as old-age insurance, yet it redistributes across generations and income groups while preserving the language of earned entitlement, leaving OASDI an unstable hybrid that is neither honest welfare nor genuine insurance. Because beneficiaries are concentrated and costs dispersed, expansion always outpaces restraint; unfunded promises are covered by fresh paper money, making inflation a concealed tax. Unemployment compensation, he adds, blunts the incentive to keep an old job or find a new one.

This has led to chronic deficits that are met by printing more irredeemable paper money, and so to the almost universal chronic inflation that marks the present age.

Two classic claims for socialism — that it produces more efficiently and distributes more justly — organize this pointed commentary, in which Machlup largely concedes Bergson's empirical comparison of Soviet and Western performance in order to train his fire on Tinbergen's case for income equalization. Egalitarian welfare economics, he argues, cannot smuggle equality in as a technical result: it rests on ethical postulates that can be assented to but never proved, on an implausible welfare thermometer of interpersonal utility, and on a neglect of incentives, envy doing much of the work solidarity is supposed to do. Push Tinbergen's logic to the globe, Machlup adds, and it demands a redistribution between rich and poor nations no wealthy electorate would ratify. His closing witness is Stalin, quoted condemning wage-leveling.

In a worldwide referendum I would expect a majority to vote for radical redistribution, so that the poor can share the wealth with the rich—with the result that all would be equally poor.

Poverty can be conquered but never abolished—that distinction governs this brief 1972 essay, since some dependency is inseparable from childhood, sickness, age, and misfortune. From it Hazlitt draws his Paradox of Relief: the richer a community, the less it needs relief yet the more it can provide; the poorer, the greater the need yet the smaller the means. Relief therefore presupposes a productive surplus it cannot itself create, and government relief, he argues, prolongs the very disease it treats by dulling the incentives to work and save. Against a roster of false remedies—land reform, guaranteed income, minimum wages, union privilege, steep progressivity, socialism—he sets the individual cure of work and saving, generalized through property, prices, profit and loss, and competition into the capitalism he credits with lifting mankind out of mass poverty.

Those who truly want to help the poor will not spend their days in organizing protest marches or relief riots, or even in repeated protestations of sympathy.

Economic Man — homo oeconomicus — stood accused of materialism, greed, and a degraded picture of humanity, and Machlup treats that hostility as the real subject of inquiry. Sampling the denunciations of Barton, the Historical School, Carey, and Ruskin, he grants that economists often described the construct badly, equating wealth with material goods and maximization with selfishness. But poor descriptions of a model do not refute the need for one. Reconstructing the methodological quarrel among Mill, Senior, Bagehot, Cairnes, and Wicksteed, he argues that maximization is not egoism and that Economic Man is no portrait of the whole person but a premise within a hypothetico-deductive system — a homunculus, not a man, built to explain how agents react when prices, incomes, and costs change.

The ‘bogey’ to whom this essay will be devoted is Economic Man.