Hi everyone, it's MJ the fellow Actree and in this video, I want to go through an exam question That seems very relevant at the moment. I mean here we are. We're literally talking about pandemic stemming from unknown viruses So before we get into it, this paper was set all the way back in 2010 You know things were a lot simpler back then and it's for the subject enterprise risk management Now, I know a lot of the actual exams have been cancelled because of corona But enterprise risk management because it's a specialist subject It's still gonna go ahead and you're gonna be writing it online. So Using the shutdown the lockdown the social distancing whatever is called in your country to focus and to study and to yeah Let's let's all make sure we can pass this exam. So what I want to do in this video is go through this corona virus exam question Now the question starts off quite easy. I mean that is very much book work Question two, isn't that difficult? It requires a little bit of thought and the question three is a little bit tricky But let's start with question one Well question one is very much book work question two is saying how is the corona virus? I'm just gonna call it the corona virus instead of pandemic How's the corona virus going to impact a life insurer and then part three is saying since we don't have any Information on this virus. How can we use our model in reverse to try and gain insights? So like I said, these are the three parts of the question So what I've done is I have written out some of my some of my answers And I thought let me show them to you because very very important for this exam is your layout You know, especially now that it's gonna be an online exam and you're gonna be typing you want to set your work out Almost how I'm doing it where you have what I call structured lists So you use bullet points and you use indentation It makes it nice and neat for the examiner and you're almost basically telling them each little point should be a mark So first question is explain what is meant by stress testing sensitivity analysis and scenario testing What I like to do for a question like this is have a general for each I like to just say, you know, these are techniques to analyze deterministic models. I'm just stating what they are I'm saying why we use them We use them so that we can see if our strategy is alright if we need to redesign it And then I say, you know, if we do redesign it, we need to redo this analysis kind of talk about how this is a Continuous thing that needs to be done And I mean just by having that general statement You could end up getting a nice solid mark for saying it and of course ending sounds always good to have a little bit of examples So the right example I give on why you want to redo the testing after you've done it and change your strategy is Because maybe your previous strategy was managing one risk, but not the other one Now you've changed it to manage this other risk and you've left that previous risk vulnerable And so that's why you would want to redo testing after you've done it Anyway, let's look at stress testing sensitivity analysis and scenario testing stress testing Essentially, you're changing one parameter at a time by a large amount and seeing how the output changes We're doing this to see how robust our strategy is to an extreme movement And like I said, it's always nice to give examples if you want to get those extra marks So here we can say well, what if inflation was to triple You know, would we still meet our investment objectives and because it's an example I can make it very specific to say investments I can also want to give maybe a little bit of a weakness of each of these tests So the weakness of stress testing is sometimes we don't know how likely the extreme movement is And so we require subjective judgment to determine the extent of the stress I mean inflation to triple that does sound incredibly extreme But we have observed specifically in Zimbabwe and Venezuela, hyperinflation is a thing But how likely is it going to happen for our life insurer in whatever country it's based in? This is the weakness of stress testing we don't know Then we have something called sensitivity analysis Here again, we're only changing one parameter at a time But this time we're doing it by just a small amount and we want to see how the output changes So we're testing to see how reactive the output is to each parameter For example, if inflation was to increase by just say 1% or 0.01% You know, what would we expect our return of our investments to do If they decrease by more than 1% then well, we can say Okay, this strategy is very very sensitive to inflation Of course, there is a weakness It is unlikely that a small movement in a parameter will change by a small amount in isolation Because like let's say inflation was to drop a little bit We could see an increase in foreign currency exchanges Or we could see an increase in assets that hedge inflation or something like that So that's why in order to do sensitivity analysis We do something called scenario testing Where we change a few parameters at a time in a coherent way And see how the output changes Important that you tell the examiner that you're changing these parameters In a coherent way Coherent means a logical and consistent way You're not just taking random parameters and randomizing them And saying, oh, what's going to happen You're actually setting a possible scenario Where you don't want to have inflation and interest rates increasing at the same time That might be unrealistic You want to maybe do it in a way that they're coherent And we do scenario testing to test possible future realities For example, if a pandemic was to strike It would cause a few parameters to change And we can see, you know, would the investment strategy be robust if the scenario occurred? Of course, the weakness here is that there's an unlimited number of possible scenarios So how does one balance their time testing the plausible and extreme scenarios? Now look, this question was only for three marks So in order to get your full marks You needed to list six points because you're getting half mark per point So you want to have six points in total And at least one for each of these things I think, you know, the change in a few parameters, change in one parameter You know, those statements you definitely want to have And then you want to maybe fill up the rest so that you have six points But this question could very well have been worth eight marks in the exam I've seen it, it pops up quite often in these exams So very, very important that you know your book work very, very well Okay, let's get to the other part of the question Where part two says A life insurer company specializes in writing term assurance and income protection Specifically on the health side for business It is concerned, sorry A life insurer company specializes in writing term assurance and income protection business It is concerned about the impact that a pandemic event could have on its business And it is developing a series of pandemic scenario tests to evaluate its exposure A critical fact in developing a pandemic scenario Is the recognition that the single event could trigger losses from many different risks List six different risks that should be included in the test And explain how these risks could result in losses from a pandemic Now what I'm doing is I'm telling the examiner This is now my answer I'm saying I'm going to give you both answers at once I'm going to give you the risk And I'm going to give you the explanation And again, look at how I'm doing structured lists So just focus on how I've structured the answer I'm making a point I'm giving my risk And then I'm indenting it And I'm giving a explanation I'm now using the number bullets Instead of just the picture bullets Because I want to make sure that I have six points In the exam you give six Because this is the memo I've gone in and I've included 12 Okay, just so that I can be a little bit more exhaustive Than the solutions that they provide you with these exams But one of the big things that I've seen when I've been marking some of the students Is they'll maybe take mortality and morbidity risk And they list it as two separate risks Which I would rather combine them Because together they're an actuarial risk There's the probability that your claims are going to increase Well, anyway, let's read through it So I've combined mortality and morbidity risk as one But like I said, some of the students have split this up into two And I'm worried about doing that because you can only list six risks So you want to try and pack in or impress the examiners With six risks as possible You're going to see I'm a little bit sneaky How I've thrown in a few other risks within my explanations But let's go through mortality and morbidity risk I think this is the main risk, okay The idea here is that term assurance pays out If a person dies within a specific period And income protection pays out If a person gets sick within a specific period The pandemic will increase the frequency claims for both products And may even increase the severity of the income protection As people may stay sick for longer This depends very much on the nature of the disease Thus the firm can expect to make more benefit payments Which will impact profits and reserves negatively The big thing here, and this is like I said I gave this to some students to do And the one thing that they said Is that it would increase all claims severity Sometimes with term assurance the benefit is defined It's fixed So you could only see a severity increase on the income protection But what you're going to see with the term assurance Is an increase on the frequency of claims And then very important to link it back That this is going to have a negative impact on profits Because that's kind of what the question is asking Results and losses from the pandemic Then another one is operational risk, okay The increase in claims will put the workload stress on the employees You know, so employees are going to have to like Figure out and do a lot more Some of the employees might themselves be sick Also a lockdown might force employees to work from home So there's going to be more work less staff And less communication Which means we can see our operational mistakes will increase We're also going to have much higher dependency On communication and other IT systems And so a failure in one of these Is going to lead to an even longer period of disruption You can imagine if your computer fails And you're working at home You don't have the IT person to say Hey, can you turn it on and off again You know, there's going to be these Knock-on effects of working at home And operational risk can be expected to increase Although very difficult to translate that into a model Because this is one of the things about operational risk It's very difficult to quantify So that is something that you want to just be mindful of When looking at your model Now, because this is enterprise risk management You always want to try and look at it A little bit of an upside risk Although the question is focusing on the losses So I'm being sneaky by introducing an upside risk But you're going to see how I'm going to tie it in And how it could actually end up being a loss So what I'm saying is There's potentially some upside business risk With the pandemic More people might demand insurance out of fear People are like, oh, I don't need insurance Suddenly everybody's getting sick around them They're going to be calling up and say Hey, Mr. Broca, I need as much cover as I can get Although we want to link this up with being a negative risk And what we could see is something called anti-selection risk As the most vulnerable people to the disease Will be the ones most likely to apply for the insurance So let's say you've got a normal insurance business And you give out insurance according to Search and underwriting principles And now this coronavirus hits And it's infecting, let's say, all the old people All the old people are now going to be calling in And wanting to buy insurance And you might need to update your underwriting rules In order to factor in this coronavirus How it affects the older people more Maybe change your premiums But you need to do this at a time When your staff are already under so much stress Just handling the current claims Now to try to make them change the underwriting point of view You know, it's going to be difficult And you don't exactly want to turn away business Because we're going to see later that you're going to have a liquidity problem So you want to try and get as many premiums as you can into the business But now this is a terrible thing about humanity Is some people never let a good crisis go to waste And so we might see an increase in fraud People might try to use the pandemic to their advantage And pretend to be sick in order to either get off work And then claim the income protection benefit And they might think, oh, because these insurers are overloaded with claims That they're just going to be allowing them all through And they can just submit a claim And because specifically with, say, coronavirus There's not enough tests to test everybody And there's a shortage You know, they might just say, I'm sick And the claim writers might say, well, we can't actually test it Let's just pay this person out So we could see fraud could increase However, an insurer might need to combat this With stricter claim analysis However, that's going to cause even more demand on the employees Who are already currently stressed and overloaded With dealing with just the number of claims Now you're telling them to spend more time on each claim They might say, hold on, I myself am also sick So like I said, crazy, crazy, crazy Then there's also the market risk A pandemic is likely to cause panic in the market And shock asset prices Okay, we're seeing this The stock market is dropping like 10% every day Then it's up 5% Then it's down 20% It's just chaos It's absolute chaos And we're seeing equities getting smacked And property Real estate investment trusts are getting destroyed Why? Because they're locking down shopping centers And people thinking, how are they going to get rent? And, you know, is there any future? So we're seeing these asset prices fall, fall, fall, fall Look, we are seeing the dollar is rising Because people see it as a safe haven But with everyone selling equity and selling property And trying to hold dollars What we're seeing is this demand in dollars Increasing the price of the dollar Which is then stuffing up the exchange rate For all the other local currencies So we're seeing currently the rent here in South Africa D value relative to the dollar Just because demand for the dollar has increased So overall coming back to the question The life insurance might see a decrease in reserves At a time that they need at most You can imagine, all these claims are coming through And the money that you've set aside And you've put in the stock market To try and make some money And you've just lost money there So you've lost money on the market Now you're going to lose money with claims It's not a fun place to be in But fortunately there's re-insurance But that could also be another source of risk Okay, because this is the idea The life insurer is not going to be the only one Impacted by the pandemic Think about it, this coronavirus is worldwide So all these multiple insurers all around the world Might start claiming from their re-insurer Now re-insurers are global organizations And they think, oh they're diversified across the world You know, what's the likelihood That everyone's going to claim at the same time They're like, oh it's very low Coronavirus is like, mm-hmm, think again So what we're going to see is the re-insurer Is going to be incredibly stressed And this means there's a small counterparty risk Before, I mean normally re-insurers Are really highly rated But this is going to stress them as well So there is now this counterparty risk That the re-insurer might not be able to handle all the claims And this is going to leave the life insurer To deal with all the risk by themselves So this is another thing that could freak everybody else Is we could see a failure of a re-insurer So now this comes down to solvency risk With markets crashing and claims increasing The insurer's risks are going to be stressed To such a point that they might actually fall Below the required solvency And this is going to hurt profits Because it means there's going to be no retained earnings For this year, for the life insurer All that extra money or profit that they might have made Will be going to the reserves Any future profit in the long run Some of that is going to be going into trial And you know, refill the reserves That have been heavily depleted Look, two little bit of positives to pick in And this is something that the ruin models Don't necessarily take into consideration Regulators might be more lenient during the pandemic They might not say, oh, you've fallen below the solvency ratio That's it, we're taking away your license We're shutting your business down They will be very lenient, I think, during these situations And I mean, we are seeing this happening now Government is providing bailouts Because if they don't, then the economy might just collapse And then it's, we basically become Mad Max situation Or they don't write Mad Max situation in the exam Where were we, yeah So government might provide a bailout If the situation gets extreme So that's a little bit comforting Of course, let's maybe talk about this political risk And you know, this impact it'll have on, let's say, the economy So speaking of government, lockdowns and other extreme measures Might be put in place That could lead to social instability And damage to the economy Now, a recession might result in high unemployment And so people might start lapsing on their insurance And again, we're going to see anti-selection at play As the healthiest people are going to be the ones most likely to lapse You can imagine if I'm a healthy young person And coronavirus has shut down everything So I've now lost my job I might say, you know what? I'm not going to pay for health insurance anymore Because I might believe that maybe the disease only infects all people That's one of the rumors going out there So we might see the healthiest people Or the people less likely to get infected by the pandemic lapsing And that's going to be really detrimental to our book in the long run So again, we can see how anti-selection and lapse risk Is going to be popping up when government starts taking action Now we could even see moral hazard You know, people who are covered Especially with, say, income protection one They might not respect social distancing And other safety recommendations As they feel that if they get sick They won't have to work And they're still going to get paid And we're seeing this from some people There's some people out there who underestimate this pandemic You know, there's that guy at spring break He's like, oh, nothing's going to stop me from partying Or I think there was even someone here in South Africa Who got arrested because on Friday night During the lockdown, he was having a party with 100 friends Saying, you know, oh, this is nothing more than the common flu And we might see people's behavior Specifically those who have income protection Might say, I don't need to obey social distancing Because I'm covered And this might actually increase the rate of the pandemic So there is even a moral hazard that we could be seeing in Then coming in, we could even see a reputational risk I mean, this pandemic will cause chaos People will look to institutions for stability Now if this life insurer delays paying our claims Because they either can't afford it Or they're waiting on their reinsurer Or they just don't have the manpower to process the claims Then the public's going to get quite upset with them And especially now with social media They're going to say, hey, this company's not paying up my claim Then somebody else, Mary Jane's going to be like, oh, they're not paying up my claim Corrin's going to be like, they're not paying up my claim John's going to be like, yo, why aren't they paying up my claim And they could become this whole social media storm That can damage the company's brand And if there's a decrease in their reputation This is going to hurt future business in the long run So amongst all this chaos There might even be this liquidity risk So to try to boost the reserve The insurer might be forced to sell its less marketable assets Like let's say shopping centers At a fraction of its previous price And this lack of liquidity is being caused by all the claims And what we're going to see is that if this liquidity risk isn't settled Because they're using all the money to pay the claims They might not have enough money to pay their staff At a time when they need them most So you can imagine your employees are working super super hard And now you might get to a situation where you say, oh, listen here guys We can't pay you for this month Do you think they're going to continue working the following month And you can imagine the operational disaster That will then cause Then finally, this one is very actuarial Is there's also going to be a liability risk If the pandemic slows down the economy The central bank might take action and lower the interest rates We've seen that share in South Africa I think it's happened in the US as well Interest rates have been cut But now what this means is that your future long-term liabilities And look, we're dealing with term assurance So the liabilities aren't that long But you could have a term assurance that say 20 years So it will still be significant But these future long-term liabilities will increase As they're going to be discounted at a lower rate And this is going to put even further stress On the insurer's solvency position And long-term profit and loss You can imagine your solvency is how much reserves you have For how much potential liabilities Now not only your current liabilities Manifesting themselves with higher claims But your future liabilities are also increasing Because of this reduction in the discount rate Which means the time value of money doesn't reduce it as significantly And you're getting to the stage where you know People might be lapsing and doing all of these things It's absolutely chaos So in summary, in your scenario testing You might want to increase claim frequency You want to increase claim severity You want to maybe increase claim payment delays Increase cost from operational mistakes How you exactly do that is a little bit difficult Increase lapse rates Increase new policy rates Increase cost from fraud Moral hazard in the election Decrease asset values Increase probability wrencher of failing Decrease interest rates Which will increase your liabilities Now this pandemic We know it's going to cause these shocks and these movements But by how much we don't really know And this is where you really want someone Who's been working in the business for 40 years And where experience plays a big role Essentially this was for six marks Was this for six marks? I put down the marks I think this was six marks So you wanted to get three marks for listing your six risks And three marks for explaining How each risk could result in a loss Look, I did mention 12 And I'm sure there's a whole bunch more So let me know in the comment section below If you're thinking of some other risks And also give the explanation That it's being caused from this pandemic The final question was probably the hardest one It says much of the risk from a pandemic Stems from currently unknown viruses and diseases Meaning that the additional impact on mortality and morbidity Cannot be estimated with any degree of accuracy As such, the usual approach of building a model To forecast losses based on inputs Does not work because the inputs are not known Accordingly, the life insurer company Has decided to use this model in reverse It'll choose a total loss amount And then analyze the inputs and processes That would produce it Now we are told to explain the insights That the insurance company should gain From using the model this way So this is a hard question Because we've been taught to build models From what's your assumptions What's your input, your calculations You get your output, you have your conclusion This question is saying, you can't do that Because we don't know what the inputs Are going to be from this virus We don't have enough information You're going to have to use this model in reverse It's not saying that's in the notes This is not a book work question This is a higher order question Fortunately, it's only for two marks So, I mean, if you're stressed for time This is the exam question that you skip But if you've got the time And you're going for that 100% You can give it a go But essentially, using the model in reverse You're basically saying What is the worst total loss that we could handle So you kind of say What is the worst case scenario A little bit of a scenario analysis You're saying, okay, we can handle 100 billion loss Our reserves used to be 200 billion But markets has halved it How much of a total loss can we handle And once we have this total loss We can reverse engineer the model To see, well, what input would have caused that So we can see What is the maximum number of claims That we could handle within a given severity And what is that? Is that like 80% of our book? Is it 90% of our book? Is it 100% of our book? If we can handle 100% of our book Then we're fine If we can only handle 10% of our book And we're dealing with a pandemic Then maybe it's time to start freaking out We can also look at how much stress Could our investment strategy for our reserves take We can see, well, okay If we've got 200 billion Is it foreseeable that we lose 100 million Well, if we've got 90% in the US dollar We're going to be fine If you've got 90% in a CFD For some super risky share That's not even in the top 500 Then you have a little bit of a problem Although regulation probably means That you're not that reckless And then you could also look at a combination Of various claims, reserve stress, other factors And to see what are possible scenarios That cause your company to be absolutely ruined And then once you have that information You can say, okay, how do we use this information To make ourselves more prepared It might be too late to make a different investment strategy Or depending, let's say, if you're a life insurer And the pandemic's really crazy in the overseas markets You might have a little bit of a window But normally you might not have enough time To change your investment strategy Or you might change it a little bit too late But I guess better late than never You could look at various reinsurance treaties Assuming that the reinsurers are still open for business And that they haven't been ruined by the pandemic But you can also look to changes to how we handle claims And other operational activities So you could say to all your employees Listen here, we're going to take two weeks To pay out every single claim And in normal situations regulator might be like Whoa, you're not treating customers fairly But you might need to say, listen here We need to give ourselves this delay If we're in order to stay alive You know, the model might show that If we can just delay claims by two weeks This might lower liquidity risk by a significant amount And like I said, regulation becomes very, very interesting During this time It's a reason why you want to have such a good relationship With the regulator So if this ever occurs You can explain to them This is the extreme action we're taking Even though it might go against traditional rules So you might want to look at that Also you can look at your expenses And just cut out things that are not essential You know, you no longer need to be stocking The Nespresso machine with that high quality coffee You can go back to Jacob's coffee You know, you can cut out all these Unessential expenses And really streamline the business Maybe look at, you know, if we had to cancel all bonuses Although you might not want to freak out Your star activities at a crisis where you need them most So it's important to understand What the residual impact is going to be Of each of these things Anyway, I think I have I think that's enough for two mocks And I see I have been speaking for quite a long time This is a question that should have taken you What, it's six mocks plus two mocks plus three mocks So I think that's, if my maths is correct That's 11 mocks in total So you're looking at spending 20 minutes on this question Maybe even less 18 We did give a little bit of a higher explanation In this video So hence why it's a little bit longer But hopefully this has helped you in a way to What I want you guys to focus on Is how I've answered the question Remember my structured lists And yeah, I think otherwise If you do the book work and you think things through You're going to be fine in this exam Anyway, thanks so much for watching And like I said, let me know If you came up with any other risks In the comment section below Cheers


Welcome back friends. Thank you for joining me again and tuning in to Rhythm's Riddle. This is Tons Gauntlet with you again as usual, and I wanted today to continue to extend my playlist entitled Fresh Letters, the one where you'll find excellent poetry and literature from the world over. I'll be reading again from Jorge Luis Borges right now. This is the Widow Ching pirate, and for more information on this collected fictions of Borges translated by Andrew Hurley, please go to the info section. The Widow Ching pirate by Jorge Luis Borges. The author who uses the phrase female corsairs runs the risk of calling up an awkward image. That of the now faded Spanish operetta with its theories of obvious servant girls playing the part of choreographed pirates on noticeably cardboard seas. And yet there have been cases of female pirates, women skilled in the art of sailing the governance of barbarous crews, the pursuit and looting of majestic ships on the high seas. One such woman was Mary Reed, who was quoted once as saying that the profession of piracy wasn't for just anybody, and if you were going to practice it with dignity, you had to be a man of courage, like herself. In the crude beginnings of her career, when she was not yet the captain of her own ship, a young man, she fancied, was insulted by the ship's bully. Mary herself picked a quarrel with the bully and fought him hand-to-hand in the old way of the aisles of the Caribbean. The long, narrow and unpredictable breach loader in her left hand, the trusty saber in her right, the pistol who failed her, but the saber acquitted itself admirably. In 1720, the bold career of Mary Reed was interrupted by a Spanish gallows in Santiago de la Vega on the island of Jamaica. Another female pirate of those waters was Anne Bonny, a magnificent Irish woman of high breasts and fiery hair who risked her life more than once in barding ships. She stood on the deck with Mary Reed and then with her on the scaffold. Her lover, Captain John Rackham, met his own noose at the same hanging. Anne, contemptuous, emerged with that harsh variant on Aisha's rebuke to Boabdil.  Another woman pirate, but a more daring and long-lived one, plied the waters of far Asia. From the Yellow Sea to the rivers on the borders of Anam, I am speaking of the Doughty Widow, Qing, the years of apprenticeship. In 1797, the shareholders and the many pirate ships of the Yellow Sea formed a consortium and they chose one Captain Qing, a just though strict man tested under fire to be the admiral of their new fleet. Qing was so harsh and exemplary in his sacking of the coasts that the terrified residents implored the emperor with gifts and tears to send them aid. Nor did their pitiable requests fall upon deaf ears. They were ordered to set fire to their villages, abandon their fisheries, move inland and learn the unknown science of agriculture. They did all this and so, finding only deserted coastlines, frustrated invaders were forced into way-laying ships, a depredation far more unwelcome than raids on the coasts for its seriously threatened trade. Once again, the imperial government responded decisively. It ordered the former fishermen to abandon their plows and oxen and return to their ores and nets. At this, the peasants, recalling their former terrors, balked. So the authorities determined upon another course. They would make Admiral Qing the master of the royal stables. Qing was willing to accept the buy-off. The stockholders, however, learned of the decision in the nick of time, and the righteous indignation took the form of a plate of rice served up with poisoned greens. The delicacy proved fatal. The soul of the former admiral, a newly appointed master of the royal stables, was delivered up to the deities of the sea. His widow, transfigured by the double treachery, called the pirates together, explained the complex case, and exhorted them to spurn both the emperor's deceitful clemency and odious employment in the service of the shareholders with a bent for poison. She proposed what might be called freelance piracy. She also proposed that they cast votes for a new admiral, and she herself was elected. She was a sapling, thin woman, of sleepy eyes, and a smile that carried a riddle.  Under Mrs. Qing's calm command, the ships launched forth into danger and unto the high seas. The command. Thirteen years of methodical adventuring ensued. The fleet was composed of six squadrons, each under its own banner, red, yellow, green, black, purple, and one, the admiral's own, with the emblem of a serpent. The commanders of the squadrons had such names as bird and stone, scourge of the eastern sea, jewel of the whole crew, wave of many fishes, and high sun. The rules of the fleet, composed by the widow Qing herself, were unappealable and severe, and their measured laconic style was devoid of those withered flowers of rhetoric that lend a ridiculous sort of majesty to the usual official pronouncements of the Chinese. An alarming example of which we shall encounter shortly. Here are some of the articles of the fleet's law. Not the least things shall be taken privately from the stolen and plundered goods. All shall be registered, and the pirate received for himself out of ten parts only two, eight parts belonging to the storehouse, called the general fund. Taking anything out of this general fund without permission shall be death. If any man goes privately on shore, or what is called transgressing the bars, he shall be taken and his ears perforated in the presence of the whole fleet. Repeating the same, he shall suffer death. No person shall debauch, debauch, or at his pleasure captive women taken in the villages and open spaces and brought on board a ship. He must first request the ship's purser for permission and then go aside in the ship's hold. To use violence against any woman without permission of the purser shall be punished by death. Reports brought back by prisoners state that the mess on the pirate ships consisted mainly of hard tack, fattened rats, and cooked rice. On days of combat, the crew would mix gunpowder with their liquor, marked cards and loaded dice, drinking and fan tan, the visions of the opium pipe and little lamp filled idle hours. Two swords simultaneously employed were the weapon of choice. Before boarding, the pirates would sprinkle their cheeks and bodies with garlic water, a shirt charm against injury by fire, breathed from muzzles. The crew of a ship traveled with their women. The captain with his harem, which might consist of five or six women and be renewed with each successive victory. The young emperor Chia Qing speaks. In June or July of 1809, an imperial decree was issued, from which I translate the first paragraph and the last. Many people criticize its style. Miserable and injurious men, men who stamp upon bread, men who ignore the outcry of tax collectors and orphans, men whose small clothes bear the figure of the phoenix and the dragon, men who deny the truth of printed books, men who let their tears flow facing north, such men disturb the happiness of our rivers and the erstwhile trustworthiness of our seas. Day and night, their frail and crippled ships defy the tempest. Their object is not a benevolent one. They are not and never have been the seamen's bosom friend. Far from lending aid, they fall upon him with ferocity and make him an unwilling guest of ruin, mutilation and even death. Thus, these men violate the natural laws of the universe where fences make rivers overflow their banks and flood the plains. Sons turn against their fathers, the principles of wetness and dryness exchange places. Therefore, I command thee to the punishment of these crimes. Admiral Quo Leng, never forget, clemency is the emperors to give. The emperors subject would be presumptuous in granting it. Be cruel, be just, be obeyed, be victorious. The incidental reference to the crippling ships was, of course, a lie. Its purpose was to raise the courage of Quo Leng's expedition. Nine days later, the forces of the Widow Qing engaged the empires. Almost a thousand ships did battle from sun up to sun down, fixed chorus of bells, drums, cannon bursts, curses, gongs and prophecies accompanied the action. The empire's fleet was destroyed. Admiral Quo Leng found occasion to exercise neither the mercy forbidden him nor the cruelty to which he was exhorted. He himself performed a ritual which our own defeated generals choose not to observe the committed suicide. The terrified coastlines and riverbanks. Then the 600 junks of war and the haughty Widow's 40,000 victorious pirates sailed into the mouth of the Zhu Jiang River, sowing fire and appalling celebrations and orphans left and right. Entire villages were raised. In one of them, the prisoners numbered more than a thousand. 120 women who fled to the pathless refuge of the nearby stands of reeds or the patty fields were betrayed by the crying of a baby and sold into slavery in Macau. Though distant, the pathetic tears and cries of mourning from these depredations came to the notice of Qing, the Son of Heaven. Certain historians have allowed themselves to believe that the news of the ravaging of his people caused the emperor less pain than did the defeat of his punitive expedition. Be that as it may, the emperor organized the second expedition. Terrible in banners, sailors, soldiers, implements of war, provisions, soothsayers and astrologers. This time the force was under the command of Admiral Ting Kui Hu, the heavy swarm of ships sailed into the mouth of the Zhu Jiang to cut off the pirate fleet. The widow rushed to prepare for battle. She knew it would be hard, very hard, almost desperate. Her men, after many nights and even months of pillaging and idleness, had grown soft. But the battle did not begin. The sun peacefully rose and without haste set again into the quivering reeds. The men and the arms watched and waited. The noontimes were more powerful than they and the siestas were infinite. The dragon and the vixen. And yet, each evening, lazy flocks of weightless dragons rose high into the sky above the ships of the imperial fleet and hovered delicately above the water, above the enemy decks. These comet-like kites were airy constructions of rice paper and reed, and each silvery or red body bore the identical characters. The widow anxiously studied that regular flight of meteors and in it read the confused and slowly told fable of a dragon that had always watched over a vixen. In spite of the vixen's long ingratitude and constant crimes. The moon grew thin in the sky and still the figures of rice paper and reed wrote the same story each evening with almost imperceptible variations. The widow was troubled and she brooded. When the moon grew fat in the sky and in the red-tinged water, the story seemed to be reaching its end. No one could predict whether infinite pardon or infinite punishment was to be let fall upon the vixen. Yet the inevitable end, whichever it might be, was surely approaching. The widow understood. She threw her two swords into the river, knelt in the bottom of a boat and ordered that she be taken to the flagship of the emperor's fleet. It was evening. The sky was filled with dragons. This time, yellow ones, the widow murmured a single sentence. The vixen seeks the dragon's wing as she stepped aboard the ship. The apotheosis. The chroniclers report that the vixen attained her pardon and that she dedicated her slow old age to opium smuggling. She was no longer the widow. She assumed a name that might be translated as the luster of true instruction. From this period, writes historian, ships began to pass and repass in tranquility. All became quiet on the rivers and tranquil on the four seas. People lived in peace and plenty. Men sold their arms and bought oxen to plow their fields. They buried sacrifices, said prayers on the tops of hills and rejoiced themselves by singing behind screens during the daytime.


This is Jeff Deist and you're listening to the Human Action Podcast. Ladies and gentlemen, welcome back to another episode of the Human Action Podcast. It has been a little hiatus over the last couple of weeks that we've done some live seminars and other things. But as promised, we are back and we are going to work our way through next. Murray Rothbard's famous treatise, Man, Economy and State. Now, if you'll recall, a lot of you joined us in reading through Human Action. A lot of people downloaded the book from our website. A lot of people purchased it from us. A lot of people just read along with the HTML and got a lot of feedback that people had enjoyed that. And it's a difficult book in many ways and it was helpful to people to have sort of a support group or a weekly podcast to listen to to encourage them to get through that book because a lot of people like the idea of Human Action, but it was a little bit daunting to read. So I think this book falls very squarely in that same category. For me anyway, as a non-economist, it was actually a little bit tougher read as I've been through it a few times in my life. But I want to just set the stage very briefly before we introduce our guest, Patrick Newpin. Joe Salerno posits that there are four essential treatises in the Austrian tradition. So we've been through three of them to date and we've been through a lot of other great books over the last year and a half or so on the podcast. The first of those is, of course, Karl Manger's Principles, which was the book that really founded the Austrian school. The next was Bamberwerk's second volume on Capital and Interest, which lays out a lot of ideas about value and elaborates heavily on Manger. And the third, of course, is Mises' Human Action. Now, I will say as an aside, there are people like Dr. Guido Halsman, who don't necessarily agree wholly with Salerno's four main treatises, but for the moment we're going to go with his program and so we're going to get into man economy and state. And, of course, you will have an opportunity to purchase this book at a discount using the code HAPOD for Human Action Podcast on our site. You can get a beautiful hardcover scholars edition, much like our Human Action Scholars edition for, I believe, $20 with the discount. Beautiful book. And we also have a very inexpensive print version that has in paperback that has little tiny print and you can get that, I believe, for $10 with the discount. So I want to encourage you to do that, but if you go back to our series on Human Action, you'll recall that we started out with Dr. Sean Rittenauer from Grove City College just having sort of a fun introductory podcast where we made the case for lay people to go read that. And that's what we're doing today. We're joined by Patrick Newman, who many of you know as the editor of Rothbard's Progressive Era and also his Conceived in Liberty Volume 5, which was sort of a loss volume of Rothbard's historical account of colonial America. And so Patrick is a true Rothbardian. He has read Rothbard deeply and also studied Rothbard's personal papers and a lot of his background in history and personal life. So he is, I think, the perfect person to join us today and make the case for you, the intelligent layperson who wants to understand economics just to improve yourself in life, should read this book. And so Patrick, welcome to the show. Thank you so much for having me on. Well, Man, Economy and State. Wow. Written Between About 1952 and 59 by Murray Rothbard. Tell us, I guess, where was he in his career at the time? How did he come to write the book? Why? How did he make a living during this time? Give us a little background. So Rothbard had completed his MA at Columbia University in 1946. And he was very trained in the economics of the time period in the 1940s. And he was basically introduced to Mises and his human action in 1949. And it sort of instantly converted him to an Austrian economist, or at least a Misesian, where he was very deeply well read in these works. And he believed in what the arguments Mises was making. And so he was asked to write basically a textbook of Mises' human action. So sort of making it simpler for the average layperson to understand Mises' human action. Because Mises assumes a lot from the reader. And he also can kind of bounce around between economics and philosophy. I mean, it's really like a huge book in political economy. And so this was through the Volcker Fund, which was a very important institution in Rothbard's early career. And so Rothbard was basically working on this book in the early 50s through a Volcker Fund grant where he initially started off as a textbook while he was also sort of editing his dissertation on the Panic of 1819. It's a whole different story basically as to why that got delayed. He got his PhD really like 10 years after he got his MA. And there's sort of an interesting reason why through no fault of his own. But he was basically working on a man economy in state or sort of finishing up his PhD. And he initially set out to basically write a simplified version of human action to make it easier to understand for the average reader. Yeah, but the project morphed into something much larger than that. Yes. Famously it obviously morphed into this huge treatise where early on from about 19 when Rothbard really started working on the book full time, you could say in 52 and 53. And he by that time period by the end of 53, he had worked on what you could call basically chapters one through four. So of the man economy in state, this is of the fundamentals of praxeology. He goes through direct exchange, supply and demand, money, and then he goes through prices and consumption. So supply and demand with money. And he was adding his own original insights in there regarding a value scale approach, criticizing indifference, basically explaining a lot of Mises and sort of the older Austrians on price theory. Guys like Carl Manger, Bamba Virg, Frank Federer, a lot of these guys. And then he started working on his chapter on production theory. And this is a very sort of standard neoclassical chapter. I actually a couple of years ago, this is published in the quarterly journal, Wall Street Economics. I edited it and I also wrote a paper on this where he realized that a lot of this was wrong. And in order to do so, this, he would have to sort of write a whole new production theory, some stuff that Mises really didn't talk about. And by early 1954, he decided that he was going to write this huge treatise. So it wasn't just going to be a textbook. It was going to be a treatise that Explained presented a lot of new information to design both for the layman and as well as the sophisticated economic economist. So give us, from your perspective, the difference between a treatise and a textbook. What's a treatise in econ? So a treatise is, you think of it, it's like a systematic overview of a subject. So it starts off from the basics and it sort of builds step by step. So a great phrase of Rothbardian used from time to time. And I just, I just love it as it's architectonic edifice, right? So it's sort of this giant, this is a classic Rothbardian phrase. It's this giant sort of building block structure. You think of it as building that really covers everything in it. A textbook sort of presents things in a sort of a condensed form. It obviously might have like questions or a little sides. It's not necessarily trying to present new economic theory. But a treatise is supposed to, in a sense, take you from the beginning to the end. And if it's written well, it's something that, you know, someone who is just sort of getting started or knows a decent amount about economics can learn something from as well as the actual economic theorists. So it's really a much more systematic overview of a given subject. And it's supposed to sort of, this was really the way the profession actually initially communicated with each other. And it stopped, you know, really in the 1920s and then kind of in the 1930s. But it was really back in the day. So like something like Bombavar's Capital of Interest was a treatise. And, you know, then it moved into just shorter books and really papers or academic journal articles. And nobody writes treatises today. No one writes treatises today. You sometimes will get books on and like some monetary theory books or other things that could cover or talk about these new ideas or really just presenting ideas that were really published in papers. But it's sort of different where the new insights of economics now, and it's been this way since, you know, really Rothbard's was kind of one of the last, at least to really embrace this tradition, was you would publish your new ideas in papers and then you might have a book later that sort of systematized, you know, just kind of presents it or might just really be sort of a collection of papers or just some other ideas, but it's really partially the way in which the profession communicated with each other. In books, in some professions it still is like history is a book culture, but economics is not. It's a narrow journal culture, basically. So Rothbard writes this book in his mid-thirties. Pretty ambitious. Yeah, exactly. I mean, it's really incredible when you think about how, I mean, he really was a one-man army in a way where he was someone who was incredibly gifted and knowledgeable about the material and he just had an incredible ability to really just absorb and process it and just present it in a way that was extremely clear. And so he was writing this, you know, really, you know, in his, you know, exactly when he was young in his late 20s, early 30s, he was born in about 1926 and then so he became 30 about 1956. He's really writing this earlier on and he really was a product of sort of the early 50s. So, you know, he kind of had the basics of the book done in about 1956. He was still kind of working on it after, but, you know, the book was sort of officially completed in 1959. So it's someone who, especially the fact that human action came out in 1949 and that was sort of the product of someone who spent their entire life on economics. You know, you think of Mises' first book was in 1912, you know, the theory of money and credit, you know, the first significant book. You know, Rothbard was really coming out straight from the, you know, right out from the gate, so to speak. Well, I will mention that Guido Halsman considers Mises' theory of money and credit as one of those foundational texts of the Austrian school and I think Mises was about 30 when that was published, so a tad younger, but still. You know, there were some critiques of the book, obviously even within free market camps. I think Mario Rizzo at NYU thought it might be that it represents sort of a rehash of human action. So talk about the book's reception. So, I mean, when it initially came out in the 1960s, it wasn't really well received and that's just because the profession, you know, Rothbard was trying to sort of rescue the profession. He wasn't deliberately trying to use this sort of Austrian label of saying, hey, I'm going to do something heterodox, something different. And, you know, he was trying to still sort of communicate to the profession, but it just didn't really have a strong reception among mainstream economists. I mean, Mises praised it very highly. He wrote a very nice review of it and even in other sort of less well known comments or remarks. I mean, he really considered Rothbard the next big thing, which is unfortunate because I think a significant part of the Austrian school modern day sort of views Rothbard as kind of like a splinter sort of, you know, left turn or he's kind of doing his own thing. In reality, I mean, I said this at a presentation I gave a couple of weeks ago. I mean, man, economy, state and human action, they are complements. They're not substitutes. You know, you have to really read both of them in order to understand them.  And it sort of got relegated to, okay, it was just, you know, the society thing and it never really took off and extremely unfortunate. Well, what was the economics profession like in the 1950s? I mean, Keynes and Marx were somewhat in the rearview mirror at that point in terms of their largest works. And so Joe Salerno in his introduction to this scholars edition describes the 40s and 50s and 60s as kind of a dead zone for economics. Yeah. So, you know, the short answer for what was economics like in the 40s and 50s was not good. Where you had these new books that you had something like Hicks's Value in Capital, Stigler's The Theory of Price, Samuelson's Foundation of Economic Analysis, where you had these, it was basically the neoclassical economics, you might say, was sort of a collection of Martialian short run equilibrium analysis, very partial, Wall-Raysian general equilibrium, very mathematical analysis, and then the Keynesian sort of holistic analysis. And this was, it was really a sea change. If you look at, say, what the profession was like from 1900 to 1920 or 1930, then you compare it to 1930 to 1950 or 1960, I mean, totally different. You know, real sort of downhill slide. And it was, it was very mathematical, it was very partial analysis where you didn't really have any of these systematic works anymore of someone's now an agricultural economist or I'm a labor economist. You know, Mises talks about this in human action. And, you know, Rothbard in a way was trying to go back to the earlier tradition and unfortunately, obviously, the profession said no. Well, Rothbard mentions in the book is hyper-specialization, which I think is something that is still the mainstay today. Yeah, exactly. I mean, you know, obviously some of the theories have changed and there's been new things that have come out since the 50s, the 40s, 50s and 60s. But, you know, the basics of the analysis, the basics of really economics is it's very mathematical, it's very partial. History of economic thought is more or less completely neglected. And this is an important thing where, you know, back in the day when Rothbard was learning, you would at least write, you know, around when Rothbard started to learn, you would learn economics by going back to the great thinkers of the past. And even when Rothbard started to study economics, that was already changing where there was one time, I believe, in a lecture he was speaking about, he asked one of his professors what he thought about William Stanley Jevons. He said, why read Jevons? It's all in Marshall, Alfred Marshall. So you already started to see this where you would basically, you know, history of economic thought is sort of like an aside and even nowadays it's increasingly being relegated to a minor elective that's not even required or not even offered for both undergrad and, you know, graduate economics programs. And I mean, it's really, it's almost like, well, don't even learn about that, just take more statistics and calculus courses. Well, in our new graduate program that we've created at the Measons too, we actually have two required courses on economic history. Yeah, so in terms of the, yeah, the history of economic thought, yeah, there's two and I mean, that's very important, you know, especially because one of the things Rothbard, even in the 50s, this was something he later described in his two volume history of economic thought works was that, you know, economics didn't begin with Adam Smith, right? So there's a whole, you know, basically tradition of economists, many of them were proto-Austrians that, you know, that sort of got somewhat shunted or derailed by Smith and Ricardo and those guys. And so in many ways, you know, it's like, you got to have two because even the, even when I took a history of economic thought course and read, you know, the books on this that, you know, nowadays appreciate economic, history of economic thought like more blog or blog, et cetera, is that usually like, well, you know, he starts at Adam Smith. You know, he's the comet, he comes out of, you know, and he was a very important economist. You absolutely have to read him. And I mean, he, I mean, it is one of those very significant works. Mises wrote something a little intro to like a Smith book, et cetera.  But that's a, you know, it's a very important aspect of Rothbard's thinking is the history of economic thought. Well, we will post to Dr. Joe Salerno's introduction to this scholar's edition because that's an HTML file. You can read it online. And I think it really will wet your appetite if you're wondering whether you want to read this book. It'll make you want to read it, which I think is the purpose of a good introduction. But Joe, it takes pains to point out something you alluded to earlier, which was Rothbard wasn't trying to be an Ostropunk. He wasn't trying to create a new heterodox school with this book. He drew from not only what we, what you and I would today call an Austrian tradition, but also sources outside of that tradition and that he was actually pretty broad-minded in the book and was primarily interested in sort of realigning economics with its methodological, praxeological roots and away from the positivism that had taken over the profession. That was sort of an underlying goal. Yeah, exactly. So Rothbard is, without a doubt, the best expositor of Mises' praxeological analysis where the ideas you start off from self-evident axioms and you deduce from them to get basically realistic theories that you don't need to test or you can't even test in the real world. So this was like the very important aspect of Rothbard's work. And he was trying to look at other economists around that time period who were still kind of using that analysis a little bit. It might not have been consciously and only in some of their works. So yeah, Rothbard was citing other economists that some of them influenced him to move away from the very partial equilibrium analysis of the firm and instead to the capitalist entrepreneur, which is something that Austrian economics really emphasizes is very important. It's that all the firms are interrelated and instead you just don't analyze one isolated firm, which is very prominent in a traditional microeconomics course. You look at the manager. And so there were some economists who wrote some papers in the 50s on this and Rothbard approved of them. They were great. I mean, they might not have been self-conscious, conscious disciples of Mises using this, explicitly using this method, but they did have some correct analysis that Rothbard was incorporating in. So that's what he was trying to sort of bring the economics profession back to instead of the current positivist, well, one, you just need to make things operationally meaningful or they have to be testable, or even like the Friedman, well, the assumptions don't even matter. It's all just about the predictions and things of that nature, which was something that Rothbard really strongly disagreed with. And he wrote some articles on method in the 1950s criticizing this approach. And speaking of texts, Samuelson was the 800-pound gorilla at the time and Salerno mentioned Samuelson in his intro, if I recall. But he also brings up a quote from Samuelson whose MO was sort of like, well, you look at the data and you try to fit the theory to the data, which is opposite of praxeology in a sense. But even Samuelson found, he sort of acknowledged or admitted that this was sometimes wholly unsatisfactory. Yeah, exactly. So this is the idea that, okay, nothing is ever, don't need to get into the murkiness of the Carl Popper and stuff like that. But it's the idea that nothing is ever sort of truly known and you have to test it. Again, you have to ape the physical sciences. So we're all just, the only things of economics that really matter are the things that you can sort of mimic a laboratory experiment in or try and conduct a laboratory experiment. This even goes into the current era of all the behavioral economics where they're trying to show all these flaws of the market and et cetera. And of course they're getting these conclusions by having these extremely partial and isolated experiments in these very unrealistic settings. But yeah, so that was even sort of Paul Samuelson sort of mentioned that it's on a page too of Dr. Schlerner's introduction, which is very revealing quote and it really shows the differences between the method of Rothbard and Mises versus the method of say Samuelson and Friedman. But I just can't get away from this feeling, I'm just struck by the idea a guy in his late 20s, early 30s writing this treatise, the familiarity and depth, the familiarity with the literature and the depth of knowledge he would have to have from various sources to write this is pretty incredible. Yeah, I mean it's incredible and then it's incredible when you even working on looking through the archives you see he was also writing other things during this time period. So he was doing various reports for the Volcker Fund, reviewing books. He was working on America's Great Depression. He got a grant to do that in 56, 57. So I mean he was in obviously he had his Panic of 1819 dissertation which is something that is easily Rothbard's most professionally acclaimed book, it's still well cited if various historians are talking about the downturn etc. Yeah, and it really is quite incredible when you look at his productivity and his ability to read and sort of master various fields especially at such a young age which can definitely be intimidating. But I mean it's really breathtaking when you look at how well learned he was and how just of a great and productive mind it must have been to interact with him especially during this time in the 50s when he was working on all these classic books. You know you bring up the Volcker Fund it's funny because if you read some of Progressive Left Fin twit you know Janak Wasserman who is up at the University of Alabama who wrote a book on the Austrian school that came out just about a year ago Marshall Stein My Mothers the Volcker Fund is viewed as some sort of ominous thing it's kind of like the Cokes today they were funding these right wing ideologues to write these books and such but you know and obviously there's a partisan element to that but you know you've mentioned to me in the past offline an interesting point which is that this kind of deep academic work would be for someone to do if they are also a full-time professor at a university with a teaching load. Yeah exactly so I mean you know that is a very important aspect of Rothbard's career sort of understanding his academic career which is you have to have the right institution you know to provide that sort of support where in the 50s he was basically just being paid to do research in various forms either living off grants or just doing work but obviously everything is an opportunity cost so if you've got to teach especially if you've got to teach students who aren't maybe that interested in material etc that takes away time that you could be doing a lot of that other stuff and that was something that Rothbard definitely you know that that was a blow so yeah the Volcker Fund is basically any organization that funds any sort of free market thinking is treated as some sort of diabolical institution funded by the corporate fat but you know you could have a radical Marxist institution that's just totally fine or you could have the government just spending the taxpayer dollars to support all of these various sociologists and stuff but that's a whole different matter but I mean that was an issue I mean that basically sort of collapsed in the early 60s and then that he finally sort of hit that in the late 60s when he basically stopped working on what became Conceived in Liberty he had a grant about a four year grant for that and so then he kind of had to go into academia so I mean it's an important aspect that when you look at Rothbard's career Dr. Solano and I were talking about this I mean it's really you have sort of the network of scholars the institutions that can provide funding and other resources and obviously the creative genius which you know which Rothbard had but you know you really you really need all three to kind of really take you know really produce significant work and take yourself to the next level so to speak but I like to think about the person too I mean let's be honest his time with the Volcker fund his time at Brooklyn Polytech didn't have a lot of money. Yeah exactly I mean and that even shows at that time I mean like the biggest thing I would say at least is that the Volcker fund in other places provided him time certainly the money aspect was something you know he wasn't he wasn't living large so to speak unlike you know various other academics at the time or later academics I mean Brooklyn Polytech was not you know a great school he had tried to apply to various you know top level jobs in the northeast etc in the late 50s early 60s but they you know turned him down even even in like the history profession etc given a lot of the work that he was doing and so it you know it's unfortunate I mean even something like Nieces at NYU you know New York University is a fantastic university now I mean it's you know it's not quite an Ivy League but it's definitely you know up there you know back in the 50s it was not the school that it was it became later on in the 70s and especially 80s and 90s where you know it wasn't you know Nieces was teaching business school students it wasn't sort of prestigious you know it's known now so I mean it you know it's an unfortunate sort of picture of the state of Austrian economics around that time period well I don't think Murray Rothbard and his wife Joey were ever really sort of middle class comfortable until he made it to UNLV yeah I mean I I think I think that's a correct assessment I mean I know he was working you know he had various you know book grants or you know contracts etc but I mean in terms of having I mean he was he lived in a you know rent control department I believe it was very large so it could keep his volume as a library but you know it wasn't a you know if you think for someone if you never knew Rothbard and you only saw his works and you sort of imagine the situation he was in and then you know his teaching position his book contracts or you know the money he made etc it would be different than what he actually had you know it's unfortunate because you think oh wow this great mind you know and then he's working at Brooklyn Polytech and you know he's publishing these books with not like the top publishers of the time well a couple years ago at our 35th anniversary in New York City I remember I mentioned I held in my hand a stapled printed out copy of his bibliography and of course it was dozens of full length books hundreds of academic articles thousands of popular articles millions of words I mean it was it was pretty daunting and I think again Guido Halsman says there are some people who may have read every word Mises wrote or close to it but he doesn't think there's anybody who's read every word Rothbard wrote or close to it. Yeah I know I think that's a good description I guess there would only be one person that was Rothbard but that doesn't really count but I mean yeah I mean he he produced a tremendous amount and what is perhaps the most just literally mind blowing aspect about this and it's something that I think you know I always try to emphasize this because the average person today wouldn't really know about this especially a young person such as myself I mean he did this all before the internet he did this all before a word processor he used a typewriter so you know nowadays when you write something I do this I mean you go through multiple drafts you edit things you know you cut out entire things you know you just constantly revising and it's a lot easier to do do so I mean just technologically you can literally just type it in but I mean he's doing everything with a typewriter and the fact that he's able to do that I mean he edited his works and you know he had multiple drafts and stuff but the fact that he's you know able to do that using like the typewriter and he's able to produce you know paragraphs and papers and books and chapters and all the stuff that like really flow well you know I mean it was like it was in the mind and then it just kind of you know just sort of translated into just this you know very beautiful prose so I mean it's something that really needs to be appreciated especially when you're trying to understand how scholars operated you know before the internet in the late 90's when it really became a thing to access a source and have a footnote and an article you had to have that physical paper or book to access you know Lou Rockwell has a great story about being in Murray Rothbard's apartment in New York City one night late of course Murray and Joey were night owls stayed up and there were cigarettes and of course there were I think you know he liked vodka and some other drinks but Lou mentioned something to him one night you know Lou said he was always getting tired of bed and he just couldn't keep up with Murray despite Murray being older and he said one night he mentioned to Murray oh you know I'm looking forward to that conference next week and Murray said what are you talking about and Lou said remember this conference X that's coming up and Murray said oh my gosh I had forgotten about it so he goes into his office little area with the typewriter and you know one two in the morning lights a cigarette sits down and proceeds to bang out you know a ten page article complete with footnotes and everything like over the next couple hours while Lou's nodding off somewhere so I think that's you know just his sheer prolific writer I mean doesn't even begin to describe it oh absolutely I mean I've heard similar stories regarding that regarding other papers etc in what makes it more incredible is the fact that I mean he just wasn't an economist like he was more than an economist he was also an economic historian he was also a historian he did political science I mean you could have you could just publish only you know just look at only his popular articles and that would be a very you know it was a good career you know it might not have been in like always in like great you know publications and stuff but it was still you know very prolific you look at all the stuff he was talking about different events, elections you know just all sorts of things and then oh yeah there was also I think David Gordon once said that you know you might think there was actually like five Rothbard somehow like all living in the same apartment or something they're all just working the division of labor it's like all right Rothbard one you know works on economics Rothbard two is history Rothbard three is political science etc you know but there was actually only one and I mean it really is for something like that I mean you do need that obviously creative genius aspect I mean it's similar to you know you look at something like athletes so like a Michael Jordan you know is someone you know how do you how do you be like Michael Jordan well if you if you have to ask how to be like Michael Jordan then you can't be like Michael Jordan you know and it's similar where you know how do you be like Murray Rothbard well if you're asking about that you know how to do all that then like you know it's like you either got it or you don't got it kind of and it's just an aspect you know certain characteristics people have that really are able to just set them apart from the rest but you can imagine if an economist today tried to write a history of colonial America they'd be savage they'd be told to stay in their lane yeah yeah I mean and that would that's what would happen I mean one unfortunately the colonial America or even American history now is in a totally different state than what it was in the past and you know there's a whole different podcast for that but yeah I'd be told I mean even Rothbard had the same thing oh just stick to your profession etc but you know no one else is really working on that stuff so that's why Rothbard said he you know he wanted to do it and he had you know he had insights he had things he wanted to talk about so he obviously put his pen to the paper and he was he was working on that and he he just displayed a tremendous amount of knowledge and you know it's even if you just look at like oh you just published a five volume four but he wrote five volume you know history of early America and then that's it it's like alright well wow that's great I mean that's worthy of a Wikipedia page basically and that's like no that was a side thing kind of well in human action Mises has a section right after his section on full socialism what that would look like he has a section called the hampered market economy now Rothbard elaborates on this section in his own section of man economy say called power and market which appears at the end of the book it starts out basically with a punch to the face I mean the opening section of that of that that part of the book is called defense services on the free market which is a radical a concept a radical statement in the 1950s people were talking like that so tell us a little bit about the background between the power market section how his original publisher objected to it in part and as a result it was published separately until the Mises Institute sort of integrated it once again yeah so the you know Rothbard initially there was really you can think of it there's three parts of the the book you know you got the man you got the economy and you got the state and the part three was him going through government intervention and just sort of demolishing the idea that one you know not using using value free analysis he wasn't bringing in his own you know should or you know the etc I mean he was just showing how economics can show governments more inefficient than markets etc and so he had this where he wanted to sort of have this very systematic overview of intervention and this is something that Mises didn't really have because obviously he was a minarchist and so a certain level of taxation a certain level of government spending you know you need to have the police you need to have the courts you need to have all of that provided by you know the coercive agency of the state you know that was necessary so you didn't have well not all taxation is bad because some taxation you need some taxation doesn't interfere with the market you know you could have like I guess it was described you know a neutral tax in Rothbard shows that that's not the case and you know he first talks about obviously defense services in the free market this is something that he later elaborated on and works you know on anarcho capitalism you know in for new liberty etc and then he goes through you know the three types of intervention I mean he shows how taxation is intervention it's a coercive exchange or it's a course transfer and I mean it's really you know much different and so what happened was this guy named Frank Meyer so who was a libertarian but it was you know in the 50s and this was also a you know libertarian of you know the Soviets or the bad guys you know you need you know this is how many libertarians were and this is really or they might not have called themselves actually libertarians but that's the side note this is one of the main reasons why Rothbard split away from the right in the 50s was because they had a very aggressive foreign policy and Frank Meyer basically advised when Rothbard is working for the Volcker fund and you know they were helping him trying to find a publisher etc and he was trying to get a publisher who says well you got to cut that and you got to condense it down into about a you know about a chapter which later became chapter 12 and obviously Rothbard was not too happy about that because Meyer said that well you're adding your own you know political analysis and it's not just the pure economics Rothbard said that no actually you know I'm trying to show how economic analysis can describe these things and so then that later got published as Power and Market which is a great book I mean stand alone it's obviously included and if you are daunted by you know man economy state you can always start with that because you know it goes through some of the basics of the market and then it just you know demolishes government intervention I mean it was an unfortunate thing that you know instead man economy in state I think that might have possibly had some effect on its impact that you know sort of one of the main punchlines of the book didn't get published in 62 so that you know obviously that that kind of hurt it in a sense What do you think about how this book is organized relative to how human actions organized? So there are I guess there's two types of people and the first group says that human action is you know you could say better organized than man economy state or and then the other group says the opposite I'm of the latter group I think this book is much more well organized especially from the perspective of economics so it really you know Mises obviously human action is a phenomenal book it's unparalleled you know he assumes a lot on the reader so and especially because he's you know oh look at my other works or like he talks about price theory and he's like oh yeah see this book by Bomberwerk I mean you know okay well that that could be a little bit of a dead end for a lot a lot of people you know Rothbard really develops everything step by step you know he you know not like holds the reader's hands but you know he walks you through he's building that architectonic edifice so to speak and I I think it's I think it's much I think it's organized in a much more clear fashion you know he starts off with the basics then he looks at the individual the man talks about you know the basics of then he goes to production theory then he covers monopoly and money then he goes to government intervention so I mean it you know it's really well organized well what strikes me also is that although this book came out a little more than a decade after human action 1962 versus 1949 it was in large part written just a few years after human action came out in the early to mid fifties by Rothbard obviously having already read human action but stylistically the tone I mean Mises is a man of old Europe born in the 1800s the Austro-Hungarian Empire Rothbard is decidedly an American born in the 1920s in sort of Jewish Brooklyn and I mean there's a real difference in the feel of these two books despite being pretty close together temporarily oh yeah and I mean you can definitely see that and especially I mean just also from the age difference of the two writers you know one of them is much younger the other one is older and yeah I mean there is a different feel and sort of style to it I think that sometimes has misled people into thinking that Rothbard was doing something different than Mises when in reality like the successor of human action is man economy and state and that you know they really work well together and you know you see how actually Rothbard sort of building on a lot of stuff Mises is using and inciting Mises and etc but yeah I mean they come from different perspectives human action was the product of a long career you know publishing you know great works socialism theory money and credit you know stuff on method etc I mean it even was in the sense of product of another book that came out national economy that really didn't go anywhere because of World War II whereas this was written a couple years later and you know one of the things Mises doesn't really do in human action he doesn't really cite that much literature if you look at the footnotes and you compare them to a man economy and state you know Mises has footnotes but sometimes like they don't even have you know citations etc so you know he's really kind of using a literature especially from the 20s in the early 30s in Rothbard in many ways was citing at least when he was writing this in the early 50s early mid 50s like the most up-to-date literature I mean he kind of mastered that that field well Patrick last question make the case for us why interested lay person should read this book should tackle it well I think it's the best book I've read I started reading it when I was in high school and finished it when I was early in college and I think it's something that really if you want to understand economics in a systematic way it's a book that you will really benefit from and you will continue to go back to so it's definitely a challenge but that's you know challenges are not without rewards and it's something that you know if you want something different than a traditional textbook or some sort of popular book you really want a systematic analytical book that really you know explains the essential points and sort of describes the you know the logical analysis of the market and of government look no further well there you have it ladies and gentlemen we are going to work our way through this book man economy and state all 1200 odd pages over the next coming weeks every Friday there'll be a new human action podcast we encourage you to read along to read ahead to tackle this book we will provide with today show some links to where you can purchase it where you can read it in a beautiful searchable html format for free if you prefer to just read it on your machine where you can download it to your kindle or other device and using the code h-a-p-o-d for human action podcast in our store you're going to be able to get a discount if you'd like to buy this beautiful scholars edition either in hardcover or tiny tiny little softcover phone book style I'm not an economist I was fortunate enough to be introduced to Rothbard in the early 1990s because I had a friend going to UNLV so I was able to meet him once you know and I will fully admit that this is a bit of a tough read for people who are an economist unlike human action it's got some equations and some graphs and some occasional numbers but for the most part like anything else like going to the gym or eating your broccoli you'll benefit from things that are not always so easy so that said ladies and gentlemen have a great weekend Dr. Patrick Newman thank you so much for your time thank you for having me on The Human Action Podcast is available on iTunes, SoundCloud, Stitcher, Spotify, Google Play and on Mises.org Subscribe to get new episodes every week and find more content like this on Mises.org