George Selgin Keeps Dancing Around the Facts
In his post a few days ago entitled “Don’t Ask George to Dance,” Bob Murphy referred to George Selgin’s “pugnacity” in denying that he is an Austrian. Now neither George’s pugnacity, nor his quintillionth public profession of his non-Austrianism, is sufficiently interesting to warrant comment. What does deserve comment, however, is George’s less than ingenuous explanation of why he is not an Austrian. George writes:
I don’t want to belong to any economic school of thought, or to “do” any sort of economics. I just want to “do” my own sort of economics. And what sort of economics is that? I can’t tell you — I’ve never thought much about it. But perhaps that’s just it: I don’t “think” about writing any “sort” of economics. I don’t want to have to think about whether what I’m up to qualifies as “praxeology” or not, or whether Mises would mind my using terms like “money” and “inflation” the way most contemporary economists use them, instead of the way Mises himself used them a century ago.
The implication is that those of us who pursue a research program within the praxeological paradigm continually sweat and fret about using terms or formulating concepts in exactly the same way as Mises did “a century ago.” But let us examine George’s assertion with regard to the terms “money” and “inflation.”
Let’s take the term “money” first. In Human Action (pp.429-31), Mises presented a relatively narrow definition of the money supply that is basically equivalent to the monetary aggregate that today is known as M1. Mises even refused to include saving deposits redeemable on demand in his concept of money. Yet Rothbard did not slavishly follow Mises on this issue. In fact Rothbard radically departed from Mises (pp. 727-40) in identifying the items that should be included as money, greatly broadening the definition of the money supply. Later, I refined and elaborated Rothbard’s broader definition of the money supply and criticized what I believed to be Mises’s overly narrow definition (pp. 70-73, 115-130). I also debated the issue with monetarist Richard Timberlake (425-28) whose preferred definition of the money supply was basically the same as Mises’s. Today many Austrian writers adhere to some version of the broader non-Misesian definition, variously known as TMS (true money supply) or AMS (Austrian money supply). I might add, by way of contrast, that George’s fellow free banker Lawrence White prefers a narrower monetary aggregate that is very similar to the one Mises proposed.
What about the term “inflation”? A century ago, Mises indeed defined inflation, like most other monetary economists of the time, as an increase in the money supply that is not offset by an increase in the demand for money so that a decline in the purchasing power of money must occur. Perhaps George forgot that Mises wrote much more on the topic and that his thought evolved beyond his century-old book on money. For instance, in Human Action, originally published in 1949, Mises wrote that “inflation and deflation are not praxeological concepts created by economists, but by the mundane speech of the public and politicians.” He went on to deny that these terms were useful for theoretical research, although allowing that they were useful for historical or policy purposes.
So which of Mises’s uses of the term “inflation” do Austrians stand accused by George of slavishly mimicking? In fact, Rothbard in his strictly theoretical work used the term “inflation” in its original 19th-century sense of an expansion in the supply of money; in his writings on economic history and in his popular articles, he often distinguished between “monetary inflation” and “price inflation.” Thus, neither of Rothbard’s uses of the term accords with Mises’s earlier or later terminology. Most Austrian economists writing today, including myself, acquiesce in current convention and employ the term “inflation” to denote an increase in overall prices while using terms like “monetary expansion,” “loose” or “inflationary monetary policy,” etc. to indicate an increase in the money supply. Oh yeah, the only “Austrians” who adhere to Mises’s “century old” definition of inflation are his fellow free bankers.
Now George is a scholar of no mean ability or reputation. But no matter how many times he is called to account for his many equivocations, omissions, and errors, he does not relent in his single-minded quest to prevent “the 100 percent crowd” from “hijacking the ‘Austrian’ brand name.” George just keeps madly dancing round and round.