Matt McCaffrey Uncovers Frank Fetter's Lost Book

[music] This is the Human Action podcast where we debunk the economic, political, and even cultural myths of the days. Here's [music] your host, Dr. Bob Murphy. >> Matt, welcome back to the Human Action Podcast. >> Thanks so much for having me, Bob. I appreciate it. >> Sure thing. Yeah, nice to see you. So, you're here in your capacity uh to talk tell us about this new forthcoming book. I think it's my understanding is it's like literally at the printers right now uh on Frank Fred Feder's work. So what what happened? What is this project? Tell us about it. >> Well, so the the book we're talking about today is actually the first of two volumes uh that are forthcoming uh that contain a variety of rare and uh previously unpublished works by Frank Federer, the great sort of American Austrian economist. And the book that we're talking about today specifically is an unpublished volume on the history of economic thought. So it's a book that covers uh uh as the title says the development of economic theory from Adam Smith to John Stewart Mill. So roughly 1776 to 1848 that crucial period of classical economics before the marginalist revolution and before people like Manger began to to really revolutionize the way that we thought about economic theory. Yeah. And this is great. I know. I was really eager when I saw that this was coming out that uh so for people who are interested in like the history of economic thought like one of the fun things is when you see like an old giant like like Shumpeter's history like I just loved reading that just to see like oh some guy that you respect but also who lived a long time ago to see from that person's vantage point what they said about you know earlier economists because they don't you know they they came from a different tradition. So I was really interested to see this. Maybe before we dive into the contents though and you know summarize some of the main points that you found in this just to get give people a little bit of a a grounding here. So Federer I think a lot of people to the extent that they know who he is via the Austrian channel it's because of his work on the on interest theory capital and interest theory and I know Mises and Rothbart were were big fans of his work and in what's called the capital his capitalization theory the idea of um you know interest is not due to the productivity of capital. He thought that was just a category error that no you you look you like to evaluate a tractor and and what's its current price you look forward and see what are the rents that it's going to allow the owner to acrue over you know in the future as a flow over time and then you discount those future income items to the present using some kind of subjective discount rate that we could call time preference if you want and then that's how you would do it. So for him the idea that interest flows from the the productivity of capital he just thought was you know category error. So anyway that he was essential in the development of what Mises would call the pure time preference theory of interest. I just wanted to explain to people this is the guy we're talking about but here Matt it's not his writing so much on capital interest theory per se but more his discussion of the history of economic thought. Yeah, that's exactly right. And Federer made many contributions to economic theory over the course of his career, but one area where neither he nor many of the early Austrians contributed at least explicitly consciously was to going back and sort of re-evaluating the history of economic thought. Obviously you do have Bomba's capital and interest volumes the first one which you know is a a vast historical survey of previous theories of capital and interest but for the most part the Austrians the early Austrians at least weren't consciously thinking about themselves as historians of economic thought and neither did Feder for most of his career until that is he undertook this project the project that became this uh this this book that's soon to be published uh which in a way for him is kind of a retrospective on a lot of what he and what the Austrians had done uh via looking back at classical economics because as Federer got older and after he retired from his his uh his regular teaching and research duties, he began to uh go back and look more at the history of economic theory. And what he realized pretty quickly was that there were a lot of old uh errors um that had emerged in the classical period. but that had continued on way past the marginalist revolution um which was always a sort of incomplete revolution and they survived into uh what was then contemporary economic theory in the 1930s and 1940s and one of the reasons he wanted to write this book was to to take a look back and see what economists got right in the early days and also what they got wrong. >> Okay, great. Let me just give some guidepost here for the listeners so they don't get lost. So when you're talking about like this is just big picture stuff folks like classical economics what we mean is you know Adam Smith uh David Ricardo David Hume I guess would be in there. Um and then the the marginalist revolution is also sometimes referred to as the subjectivist revolution but that occurs in the early 1870s. You know a big one from an Austrian point of view is 1871 with Manger's uh treatise um where the the transition was like how do you explain value and the interaction with subjective value with objective market price and the idea was in the marginalist revolution that's where the name comes from. It's oh it's not that to use a colloquial example why does do diamonds have a higher market price than water like a unit of diamonds versus a unit of water you know pound of diamonds versus a pound of water a gallon of diamonds versus a gallon of water and it's you know it's not because of their objective usefulness as a class but on the margin like you know for most people one additional pound of diamonds is going to be worth a lot more than an additional pound of water you know that kind of thing. So that's what we mean by referring to these broad periods of classical versus marginal. Um and and and the classical economists tended to have like an objective cost or labor theory of value and to explain market prices. When you just went and looked at their actual explanations, like what explains this regularity in the market, their explanations tended to go towards things, well, it takes this many labor hours to make a stage coach and that's why blah blah blah blah as opposed to starting out with, well, people like the taste of oranges and that's where we start to understand how come, you know, the farmers plant more oranges. So anyway, that's what we're talking about. Um, before we get too deep into it though, Matt, can you explain so why why are you here talking about like how did was Feder's manuscript just sitting around and then you discovered it or what happened there? >> Yeah, so I I've been working in and around Federer for a number of years now. I've always found him just to be a particularly interesting economist, not least because he is very neglected even by contemporary Austrians who I think have a lot to to learn from him. So I've been working uh on various projects relating to Feder for a few years and that included looking at some of his unpublished papers and lots of his correspondence and things like that. So I published a few papers about Federer and his relationship to the Austrians and some of his contributions to economics. But as a part of this larger project uh amongst his unpublished papers, one of the things I discovered was this uh largely drafted volume on the history of economic thought and it's something that he had been working on in his later years. So starting he sort of officially retired in the late 1920s, but he he lived until 1949. He died when he was 86. So he lived to a ripe old age and he was very productive right up until the end. And one of the last things he was working on was this much larger project, as I say, a kind of a retrospective project looking back at the history of economic thought in light of all of the progress that had been made by him and by the Austrians and others uh closely related to them. So he'd had this long he had been working on this project for a number of years and uh at least the first part of it was nearing completion. It was mostly drafted. uh but then he uh he he passed away and so was never able to put the finishing touches on it or or finally see it uh see it published. In any case, I came across the manuscript amongst his papers and started to read it and I very quickly realized that this was uh a bit of a hidden gem and I thought it really deserved to be read after all these years because I I think it's extremely interesting. It offers a unique perspective on the history of economics and a unique perspective on people like Adam Smith and David Ricardo and Thomas Robert Mthus and and and many others. >> Mhm. >> So I undertook to transcribe and edit the manuscript and and prepare it for publication. And it's taken me a good many years, but uh finally it's uh I think it's uh I'm hoping it's going to uh it's going to pay off u because people will finally get to to read this uh this kind of hidden gem. Were was his original was it handwritten or did he had it typed? >> Uh it was a bit of both. So if you look through the chapters, the manuscripts for the chapters, um some of them had been revised multiple times, typed, corrected, typed again, and so on. others. Some of the later chapters were in earlier stages. There's really I think only one chapter that was truly incomplete. Um but most of the others had attained at least one full draft and most of them had been revised at least once or twice. So there's a whole range. So, you've got some typed ones and you've got many many hundreds of pages of handwritten manuscripts which took me way way too long to uh to interpret and to uh and to transcribe properly. >> Well, that's why I'm asking because I know like the further back you go, it's like the guys would would write the stuff out then give it to a secretary who would type it up and everything. So, I'm just wondering if that's where you Yeah, >> exactly. Exactly. I mean, if you look at some of these uh manuscript pages, they're just an absolute mess of lines that have been crossed out and arrows pointing here and there suggesting where things would be moved. So, it's it's like archaeology in a way. It's like going through you have to try and figure out >> which pen or pencil he was using at each stage so you can figure out the order of the revisions and figure out what the final version was supposed to be. And uh it took forever. This was uh uh basically my uh COVID lockdown project if you want if you want an indication of how long I've been working on it. >> Okay, great. So, we uh salute you for your service. But that partly explains why this has remained hidden to the world until now. Like it there was a lot of rehabilitation that had to be done to bring this thing to make it available to us in a book form. >> Exactly. Um, so before we get into some of the contents, I know you have some thoughts here on like maybe the things we can highlight for the listeners to give them a taste and you know this episode serving sort of as a commercial for them to go get the book of course. Um, but some people might be intimidated say wait a minute this is a professional economist at the end of his career writing up like is this really technical? So I guess like what who what audience would you say is appropriate for this book? So, in general, I would say that this is for someone with an intermediate level of experience, at least that you should have at least a little bit of reading of Austrian economics under your belt before you undertake this. Um, so this should probably not be the very first book you ever read in economics. Uh but uh if you have studied some Austrian economics and you know maybe a little bit about the history of economics in general, you know who Adam Smith was and you know he opposed mercantalism and uh you know that uh you know David Ricardo uh discovered what we now call the law of comparative advantage. Maybe you know some of these basic background facts but uh but not much beyond that. um then this is a very I think a good place to start reading in the history of economics and it's a good way of understanding if for instance what you're looking for is a way to understand a little bit better what came before Manger and the Austrians uh what made and why they were really different then this is I think a particularly good place to start because it's a very systematic treatment it tends to go very slowly and methodically through key chapters of Smith and Ricardo and Mphus and others Uh so it's a good way to learn a little bit more about exactly what those men thought about many specific topics in in economic theory. >> And I guess even now as you were answering it occurred to me that even though Federer as a professional economist is writing on other economists you know back in the day it still would be accessible to the lay person the lay reader because economics wasn't highly mathematical you know back then. So you know it was all verbal exposition anyway. So >> exactly and a lot of the classical economists were kind of trying to feel their way through these topics for the first time as well and try and figure out the basic definitions of terms and things like that. So Feder talks a lot about those kinds of things. So it's accessible in that sense as well [clears throat] >> because those classical economists they didn't have a lot of prior knowledge to build on. They were originating a lot of these ideas themselves. So in the sense that the story starts there, it's uh it's not a bad place to to sort of pick up a lot of these threads. >> Uh so maybe one last sort of housekeeping item for people just to get the context if somebody has already started or gone through like Rothbird's history of thought like do you have any thoughts on you know how does how does Feder's history compare to Rothbart's if we're talking about the same period of of who they're the topics they're covering? >> Absolutely. So I I think Federer is actually a really nice compliment to Rothbart in the sense that uh they each each one sort of fills gaps that the other leaves. So the the scope of Feder's book is very different from Rothbart. So Rothbart's project he wanted to survey all of economics >> and plus a lot of political philosophy and history and biography and so on going all the way back to the ancients right up to the the present time. Federer's ambitions were were smaller. He focuses in this volume just on classical economics but the way that he writes is very different from Rothbart. So obviously Rothbart is a very uh you know he's a very exciting writer. He likes to he likes to be controversial. Um uh he likes to criticize and again he's across multiple disciplines some economics some political philosophy uh you know criticizing people for not being free market enough and these kinds of things. So a lot of that broader context and the biographical details so on you won't get from Feder from him it's a more focused concentrated economic discussion focusing on a lot of these fundamentals of economic theory. So with Rothbart you get the big sort of sweeping narrative of economics as he as he saw it. With Feder, it's more specific, you know, it's it's looking more closely at the the key chapters on value theory in a book like Smith's Wealth of Nations, for example, and going careful as carefully as you can through what Smith actually wrote about the division of labor or the theory of value or what have you. Uh, and doing that for a lot of these main a lot of the principal texts of classical economics. So you get this is something that you don't get so much in Rothbart who tends to take a more of a a kind of a general survey approach. Um you don't see a lot of detailed textual analysis in Rothbard's book. Um he you know often times he'll sort of skip straight to the conclusion. Um or he'll just give you a sort of a general idea what the arguments were. Uh so Federer is is so is much more focused in that sense and he gives you a much better sense of how these men wrote and how they thought and and so on. >> Okay, great. Um maybe just in terms of and you alluded to this a little bit already, but like what what Feder's big picture theme is in this I think it'd be helpful to remind listeners of this notion of what's called the wig theory of history wig of whi and and how and so can you explain what that term means because that gets thrown around a lot just in case people are afraid to ask and look dumb but what does that mean exactly and then is that what feder is doing? Does he adopt that view in this history of thought? >> No. Oh no, certainly not. So the wig theory of history as applied to economics at least is generally the idea that the history of economics should be looked at as a history of upward linear progress where every generation fixes some problems from the previous generation, adds its own insights, and there's a constant sort of building and refining of economics where we're constantly making progress and improving and so on. And this kind of way of looking at history has been used uh to sort of to justify disregarding the history of economics because if what we have right now is all present and correct and it's the best we possibly could have there's really not much reason to go back and read the classics or or care much about what Smith or Ricardo said. >> Yeah. >> Can I stop you Matt just for a second? >> Yeah. when I was in grad school and I can't remember who said this to me, but I know like I heard this and it's almost going to sound like it it's a like a straw man or like a like I'm setting up a someone to knock down or something, but no, this really somebody actually said he was wondering why like Austrian types like why we cared about the past. And he he used the analogy he said that'd be like if you went to MIT to learn physics and they had you read reading Isaac Newton like they don't do that like just you know what I mean? So again, this idea that all you need to do is look in the like the last 10 years in the economics journals and the top journals and whatever was published there, that's the best theory we have to explain, you know, apartment rents or wage levels and business cycles because anything in the past that economists came up with that was a good idea, we would have retained and anything that they came with as a dumb idea, we would have falsified and and I mean that was literally he he didn't understand why would So anyway, so go ahead. [laughter] >> Yeah. No, but it's it's it's a good point and a lot of economists do think this way and I think it's because of the difference between uh it's a confusion of sort of the methods of the natural sciences and the methods of the social sciences and this is a theme that obviously Austrians have written about quite a lot over the over the decades. uh but just very quickly in natural sciences if we proceed by hypothesis testing experimenting and so on then it makes more sense to think that we would constantly be making progress and discarding errors and making making new discoveries and so on. But of course things are not like this in the social sciences. We don't have the same kind of uh uh the same kind of empirical methods uh are not relevant as in the national as in the natural sciences. And therefore we do you know the history of economics uh contains many examples of very intelligent sometimes well-meaning economists making errors uh and those errors persisting over time or dying out and then coming back like economic zombies and so on. Um so it's by no means the history it's the history of economics a history of sort of steady upward progress you know towards towards the promised land and so on. Uh it's it's rather a history of you know errors uh sometimes compounding sometimes reappearing and so on. uh but it's a it's a constant battle and in a way this is a a part of the the big theme of uh one of the underlying themes or motivations of of Feder's book uh is this constant change in economics and uh the way he puts it is that he he in the first chapter of the book he frames it as a constant sort of battle of replacement between the old political economy and the new political economy. So basically as he points out that ba in every generation since Adam Smith and even before people had talked about an older political economy for Adam Smith that was mercantalism and then the new political economy uh of someone like Smith comes in and overthrows the old and replaces it but then in the next generation the cycle repeats and there's some new body of ideas that comes in. though uh so the new becomes the old and then a new or new replaces it so on um so it's a a bit of an endless process or or cycle uh and Federer pointed out that in his time as he was drafting this book in the 1940s it was the new political economy so-called uh of canes that was overthrowing a lot of what were viewed as older uh ideas in uh in economics so he he noted this cycle over and over again. And this is one of the reasons why he wanted to go back to the history of economic thought precisely because a lot of the ideas that were perceived as new were actually just really the old ones but just kind of dressed up in new clothing, you know, for the for the 20th century. So he wanted to go back and kind of correct the record a little bit and show that, you know, a lot of ideas in, you know, then modern economics could be traced back to Ricardo or maybe to Mus or to some of these older thinkers. Uh, and then he in turn wanted to examine those ideas and see if they were actually correct and uh and and worth keeping or not. Um, and the punch line is that many of them weren't in fact correct or worth keeping. >> Yeah. Yeah. So I'm my understanding is right that's a theme of this work that in particular saying even though you know primmaaccia writing from the vantage point of you know the 1930s and 40s one might have thought oh yeah everyone has any trained economist knows who Mouthus is and Ricardo but their ideas have long been discarded and and you're saying or Feder was arguing that no actually you can still see like there's a through line and and those you know some of that that Malthusian and Ricardian tradition is alive and well even though ostensibly everyone knows there were errors with that and we were supposed to have moved on yet it's persisted. Can you just elaborate a little bit on that? First of all, is that did I get it right? Is that is that what he's saying? That is what fed that is what Feder is saying and basically what he wanted to do was try and uh criticize a broader idea that had become popular in economics in the early 20th century. Um and in fact some even some Austrians embraced versions of this view uh which was based on the idea that um since Manger and his contemporaries had sort of begun to revolutionize economics that we'd made a lot of progress and you know by let's say the 1920s or so pretty much all economists agreed you know there weren't really even distinct schools of thought very much anymore. Most people agreed on the the essence of economics. Uh and that was based on you know the new marginal utility theory from Manganger and uh Jevans and Fra and others who who developed it. So Federer is kind of critiquing this view in a way and saying actually despite all the good work that people like Manger and the others did they hadn't really thoroughly [snorts] revolutionized economics. their ideas hadn't fully taken hold and in fact there were many ideas in economics in Feather's time and even to some extent today in the 21st century that you can still trace back to ideas from the classical economists and in particular some of their uh some of their their uh bad ideas um related to for example cost of production or labor theories of value and the kinds of things that Manger and others have worked so hard to overturn. turn. Um, but again, Federer points out that many of these things had had survived in economics, sometimes in slightly different phrasing, you know, dressed up slightly differently, uh, but they had continued. And in his view, that was a big negative for for economics because it was holding back progress and it was basically preventing economics from becoming a better, truer social science. >> Yeah. I mean, the obvious thing is, of course, Malthusianism is alive and well in the environmental camp, you know, like like a lot of people like that's that's still there. I mean, you could you could argue, well, yeah, but those aren't that's not the economics profession, but certainly Mouthys found a home elsewhere even after he was officially uh falsified and you know, we should have discarded his views. Um, so how do you want to take this? I know we just don't have too much time left here. I know um you had mentioned to me that like this guy Lord Lauderdale, do you maybe want to talk about him? >> Yeah. So Lord Lauderdale is one of the major figures who studied in the book who I think is probably likely to be unknown by virtually anybody listening to this. >> So he uh his name was James Mland, but he was the eighth Earl of Lauderdale. And he was uh not quite a contemporary of Smith. He wrote a uh a couple of decades after Smith published the uh the wealth of nations, but he was an an early political economist who's an extremely interesting eclectic figure in economics. He's very interesting personally too amongst other things. He uh uh he was famous. He fought a duel with Benedict Arnold over free speech. Uh I'm not sure who was defending free speech in the in the debate, but um he was a very eclectic oddball sort of a guy, but he produced uh a lengthy essay on political economy that Federer talks about across two chapters in this book. And one of the reasons I say it's eclectic is that in the the first chapter Federer talks about Lauderdale's value theory which in a way is sort of protosubjectivist. It kind of it it touches on a variety of themes um that are critical of say of Adam Smith for example and Smith's versions of the the labor theory of value and kind of proposes some some new more subjectivist alternatives. So in this sense, in this chapter, Lauderdale comes across as being kind of a a bit of a protoostrian and uh and a good guy. And then in the very next chapter, Federer looks at Lauderdale's more macroeconomic writings uh which are very distinctly protoanesian basically um all about the the glories of deficit spending and things like this. So uh Lord is a very odd figure. You don't get very many people like this in the history of economic thought uh who uh are pretty good on some issues and then astoundingly bad on on other issues. So he's a a very interesting figure and those chapters I think are well worth reading especially because I I doubt very many people will know who he is. >> Okay. So, speaking of um Adam Smith, I know uh as you do too, of course, M Rothbard is is pretty vicious in his own history of thought visav Smith and I and then I know some people are geez Rothbird, you know, what the heck, you know, he's just and I think some of it might be I'm just curious your take, Matt. Um I think some of it's like when people say they hate the Beatles and it's like you hate the Beatles or it's just you think they're overrated, you know, that kind of thing. So anyway, so can you maybe comment on that just to be fun, but you know what you think about Rothbart's treatment, but also how how does Feder, you know, does does he hold up Adam Smith as the father of modern economics or so forth? >> Yes, exactly. So in the case of Rothbart, one of the things that you always need to remember is that on Rothbart's side, he really enjoys winding people up, right? And if if there's a controversial way to say something, he's going to say it that way rather than the the blander, more balanced version, right? So Rothbard perhaps infamously, uh I think he calls Smith an ineterate plagiarist, right? Um so >> not just a plagiarist, an ineterate plagiarist. That's the worst kind. [laughter] >> Exactly. So what what he ultimately means by that and and which is not in dispute among historians of thought is that Smith did borrow ideas sometimes liberally from other thinkers without attributing them uh in what [clears throat] we would regard today as the proper way. Right. >> Right >> now it's worth pointing out that standards for these kinds of things and authorship and so on were regarded very differently in Smith's time. So whether or not plagiarist is entirely fair, you know, I'll I'll leave for others uh leave for others to to judge. But that's Rothbart's approach. Federer's approach is also critical of Smith and most of the other classical economists. But he is a good deal more fair and balanced I would say. So he when he goes through the details of things like value theory and so on, he he is critical of Smith and he says Smith is vague here. he's confused. He contradicts himself and so on. And so he will he does make a number of these kinds of claims. At the same time, he's also uh he gives credit where credit is due and says, "Look, Smith was ultimately an advocate for commercial freedom. That's what his fame is mainly based on. He did a lot of he, you know, his work had very good effects in that sense. Smith was a an opponent of monopoly and special privileges for business and so on. This is something that Federer really really cared about by the way. Um so it makes sense that again he would pay tribute to Smith in this regard. And he points out other things like the fact that Smith was in a great writer and the wealth of nations is a very well-ritten book. It's a classic of the western cannon and all of this kind of stuff. So he is critical but he is perfectly willing to >> [snorts] >> uh to to give credit where credit is due essentially. Um and so he does. Uh so in that sense maybe it's not quite as fun as reading Rothbart's account of it. uh but you will get you will get a different uh a different picture of it even if on a lot of critical issues. Feder and Rothbart agree. Um, and then is is Feder also like I know Rothbart and other a lot of modern Austrians who care about the history of thought will say just to continue this theme that part of the reason they don't like this idea of holding up Adam Smith as the father of modern economics is then that kind of solidifies you know like the the English you know British tradition as the as where we get economics from as opposed to going via the French and that that's more you know subjectivist marginalist in terms of Yeah, if you have to go back in the day and pick some early economists or writers on political economy, it's the French guys that are way better than the the English writers in in terms of like modern Austrians think is that does that carry through in Fed's view too? >> Yes, for sure. So the only French economist he talks about at any length is Sean Baptist but he gives say three three chapters of his book and [clears throat] he in in Feder's view say was basically the greatest of the classical economists uh and was marketkedly different from uh Adam Smith but also from his contemporaries like Mthus and Ricardo and he talks at a good deal of length about how se's value and distribution theory were really again kind of protos subobjectivist or we could say protoastustrian in that sense uh in the sense that se did have a firmer grasp than any of his contemporaries on the subjective elements in value um that generate the system of of market prices. So he he is uh he he heaps a lot of praise on say uh in that in that regard. And he also has an excellent he begins his three chapters on say with an excellent survey of history of economic thought texts from his own time uh and their treatment of SE and shows that they were extremely unfair to uh to SE and had really slighted most of his contributions especially in areas uh on sort of value and price and distribution and these kinds of things where say really excelled. um in those areas uh [clears throat] he had really been unfairly treated in the history of economic thought. Happily today that attitude towards say has has changed a little bit but in in Feder's time it was a very common thing to say that say wasn't really original. He was just a popularizer of Adam Smith. That's a phrase you'll see many many times in the literature and Federer I think does a really effective job of showing why that's not the case and why say was was really an excellent economist. Yeah. And just to underscore, and I know you, you know, this is consistent with what you just said, but just to make sure people didn't miss it, that uh a lot of modern economists to the extent that they know anything about say at all will say, "Oh, it's SE's law." And they'll say, "Oh, what does that mean?" They say, "Oh, supply creates its own demand." And that's obviously stupid. No, it doesn't. Say thought recessions were impossible. And if you go and read, I'm not talking to you, man. I'm talking to the if you go and read the chap like the you know the the the part of his essay where that comes from and you read it and I was like show me a sentence in there that you think is false. You know what I'm saying? Like in other words, it's the way it gets condensed into the thing that then Kanes, you know, knocks down in his general theory to say, "Oh, the class, you know, all the my orthodox free market friends believe in Se's law." And, you know, he gives some mathematical version of that's clearly not true. And then says, "See these idiots walking around, they don't think recession." And it's it's I know I'm going off on a soapbox rant here, man, but it's part of what Se is doing in that essay is explaining, hey, we all know that there's downturns in business and I want to say to you it doesn't really make sense to say it's because of a lack of money or just an unwillingness to spend and here's why. Right? So to say didn't believe that recessions were possible doesn't make any sense. His whole point was to say a popular explanation for why this periodically happens in the business world doesn't make sense if you think it through. Blah blah blah blah, you know. Anyway, okay, I'm done ranting. Um, do you want to say anything before we move on? No, no, just that it's uh that say is uh is one of those economists who really deserves to be rehabilitated and that's one of the nice things about this book is that it it provides uh some really solid foundation for doing that. So >> yeah, ironically I think there's actually a William Hut book called a rehabilitation of S's law. So there's a good book folks you should go check it out. Um, okay. Well, maybe I don't want to put you on the spot here, but are you able to without having it in front of you, give us a taste because I know part of what he does here is really dig deep into Ricardo and not just kind of give a thing you'd get like in a survey undergrad class of and Ricardo believe, you know, when it comes to rent and it was like the, you know, the surplus land and blah blah that he he digs deep and kind of shows like, oh, Ricardo believed in a labor theory, but then he's got his rent theory and and the tension. Anyway, do you can you give us a taste of that? Like I said, I don't mean to put you on the spot. >> No, that's quite all right. So, this is by far sort of the biggest chunk of the book or the theme that recurs most often is this issue of the theory of value and then related to it, the theory of rent. So between Mthus and Ricardo, Feder has, I don't know, eight or nine chapters devoted to systematically unpacking these topics and explaining why they matter and where they got it wrong and so on. So he he there's, you know, over the course of a couple of hundred pages, he pretty systematically goes through their texts. he develops amongst other things he tries to explain what Ricardo's labor theory of value was because um for those of you who don't read in this literature that in itself is one of the most debated questions in the history of economic thought because nobody can seem to agree on what Ricardo's theory of value actually was. So Federer tries to he offers his own sort of interpretation on it. Like I say, he sticks very close to the text um and also draws on a number of other sort of supporting writings of Ricardo as well. So he tries to show what this labor theory of value is that Ricardo believed and what the problems with it were. And then related to that is the big question of the theory of rent. So this is another thing that today I think people know a lot less about because it doesn't get discussed as much. But in the 20 in the the 19th century the theory of rent was an incredibly important component of economics of political economy precisely because of the way that Maltus and Ricardo had discussed it. though in their system I can't explain the entire thing but suffice it to say rent is is crucial a component of their explanation of how economic growth happens and ultimately how economic decline happens and how you end up with sort of stagnation and so on that's the very pessimistic side of mthus that that uh that people do recognize and Ricardo kind of partially believed this as well but the relationship between the two things is that if you have a labor theory of value where the uh you know there are many different variations but whether it's the sort of the uh uh the quantity of labor hours but you know in the used in production or something like this um no matter what version of it is if you ultimately believe that labor is what is what is the ultimate determinant of a market price in some way then you have to be able to explain how other things don't influence market price. And one of the really big things for Ricardo and for Mus and for others was showing that uh the price of land the say rent income from land was not a part of the of how prices were determination. So in their own ways they developed some pretty a fairly complex sophisticated wrong but sophisticated theory of rent to try and explain how [snorts] uh rent doesn't influence prices uh in the same way that uh that labor would um because people like Ricardo they recognized that if you allow rent to enter into price as they would say um then you don't have a labor theory value anymore. Then you have some kind of multicause theory of value and that was very messy. They realized that there were sort of logical problems, consistency problems with that. And so a lot of what Ricardo does and a lot of his influence in economics was based on his theory of rent which he developed essentially as a way to salvage the labor theory of value. >> Okay, great. Yeah, just to give people a a little bit more. So thank you for doing that, Matt. just to um give a hint as to in case you didn't understand the tension. So uh it's tricky like if I'm telling people about oh what a classical economist thought I might say oh he advanced a cost or ultimately labor theory of value and say well which is it Murphy and the thing is for some of them at least not I won't pick a particular person but just to keep this vague and abstract the idea was yeah in any given transaction you might say oh how come that stage coach traded for that many pigs and you could push it and say oh well it's a cost of production like you know what what would it how much would you have to hire like you have to have this many man hours and this much lumber and whatever to build the stage coach and so it would cost such and such and that's to raise the pigs and blah blah blah would cost this many land hour or man hours and so that's what but then you could say okay so that's not a labor theory that like that's the cost of production but then the point was you could keep doing that to each of the components and say oh but the lumber why did the lumber cost such and such you know to go into the cost of the stage coach and you say oh well cuz you had to hire some guys to go cut down some trees and and so at each stage when you keep pushing it back one component of the input into that thing would have been the labor power and so you could so I you know they so some of them had this view that if you just kept tracing it backwards ultimately the true scarce thing like the break you know B r a ke on output flowing in into human possession to serve as a satisfying you know wants and enjoyments would be the unwillingness or the you know the the disutility of working because the idea was that you know the soil doesn't lament shooting weed But to to get some guy to get off his butt and go, you know, harvest it, that's the thing that you got to induce him. And so, you know, nature's bounty is what it is. And it's not that that's an independent thing. You don't have to give incentives to the land to prod. Right? So, that was where they were coming from. And among other things, Bombber just said, "No, that's just wrong." That if you own land, then you in a sense, you know, withhold its product from the market because you can. It's scarce. And what are you talking about? Like, that's it's the fact that the land doesn't care, but the owner does. the owner could say, "No, I I don't need to sell it to you at a zero price, even if it doesn't quote cost me anything." So, anyway, just to give a taste on what Matt's talking about and Ricardo believing in some sense in a labor theory, but also being one of the famous expositors of explaining the rents that agricultural land gets in a marketplace. You think, doesn't he see that? I guess you're saying, Matt, that Feder spent some time showing Ricardo was kind of doing mental somersaults to try to keep those two things alive. >> Yeah, exactly. that and as I say this is a big theme uh in the book and it relates to a lot of other topics as well like the theory of population which is Thomas Robert Mulvis's uh attempt at a contribution to economics and so on. So there are a lot of these uh intertwined topics relating to value and price and the distribution of uh of income and so on. uh and I think that does a pretty good job of providing his own exposition of what the classical thought and also what's wrong with it and uh and why we should have a more uh modern Austrian view of things. Okay, great. Well, this is a good place for us to wrap up. So folks, uh we've been talking to Matt McCaffrey who is the editor and the person who brought to life to make it available to us the development of economic theory from Adam Smith to John Stewart Mill by Frank Feder resurrecting it from his manuscript. So Matt, thanks for spending years bringing this thing, you know, to to our uh ability to read it and thank you for your time here today. >> Well, thanks so much for having me, Bob. It's great to talk about this and yeah, I just if uh any listeners, if you're interested in these kinds of topics, uh please when the book is available, which should be in the next couple of months, please go ahead uh read it, buy it even if you want. Um but uh um but uh do at least ha have a look because I think it's really fun to read uh and it's a great window into all kinds of topics related to uh to economics. So um so so please do give it a read. Yeah, I think when it is available, I'll folks I'll do a, you know, an episode of the human action podcast where I'll grab, you know, something that is in my wheelhouse and and expound on that just to remind you and [music] give you a taste in another commercial for the book cuz this is important stuff. And Feder is a really clear writer, too. That's what he's great. Okay. Well, thanks Matt. Thank you everybody for tuning in. See you next time. [music] Check back next week for a new episode of the Human Action podcast. In the meantime, you can find more content [music] like this on mises.org. [music]