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Real-Life Applications to Navigating Economic Theory with Peter Boettke


How can economics empower individuals? This week, Roger Ream is joined by Peter Boettke, Professor of Economics and Philosophy at George Mason University and former professor for TFAS Prague, to unravel the impact of teaching economics beyond mere equations. To illustrate economic theory’s relevance and its potential to shape a brighter future, Boettke covers a broad range of subjects including the significance of the Austrian economics tradition, the economic transformation of Estonia and the dangers of socialist policies. Peter also shares how his own career shaped his belief that economics can serve as a tool for the curious and a discipline for the compassionate.  

Peter Boettke is the author of several books, including “F. A. Hayek: Economics, Political Economy and Social Philosophy” and “Living Economics: Yesterday, Today, and Tomorrow.” Peter is also the co-editor of the economics textbook originally by Paul Heyne, “The Economic Way of Thinking.” Recently, he authored a substantial portion of the Fraser Institute series called “The Realities of Socialism.” TFAS’s high school division, the Foundation for Teaching Economics (FTE), is turning that series into curriculum for high schools in the U.S. and Canada. Peter serves as editor of The Review of Austrian Economics and the associate editor of The Journal of Economic Behavior & Organization. He is the recipient of multiple academic awards including the Golden Dozen Award for Excellence in Teaching. 

Episode Transcript

The transcript below is lightly edited for clarity.

Roger Ream [00:00:02] Welcome to the Liberty + Leadership Podcast, a conversation with TFAS alumni, faculty and friends who are making an impact today. I’m your host, Roger Ream. I’m honored to have a man of many distinctions joining me today, Peter Boettke, professor of Economics and Philosophy at George Mason University. I’ve known Pete since about 1979 or 1980, when he was an undergraduate at Grove City College in Pennsylvania. He is the author of several books, including “F. A. Hayek: Economics, Political Economy and Social Philosophy,” “Living Economics: Yesterday, Today, and Tomorrow,” “The Political Economy of Soviet Socialism: The Formative Years, 1918-1928,” and “Why Perestroika Failed.” Pete is also co-author of the great economics textbook originated by Paul Hayne, “The Economic Way of Thinking.” Recently, he authored a substantial portion of the Fraser Institute’s series called “The Realities of Socialism.” Our high school division at TFAS is turning that series into curriculum for high schools in the U.S. and Canada to use in the classroom, and we’re training teachers to teach students about the realities of socialism. He is the recipient of multiple academic awards, including the Golden Dozen Award for Excellence in Teaching, the Charles Koch Distinguished Alumnus Award from the Institute for Human Studies and the Association of Private Enterprise Education’s, Adam Smith Award and Clark-Kent-Aronoff Award. Pete serves as editor of the Review of Austrian Economics and the associate editor of the Journal of Economic Behavior and Organization. And to round it out, Peter was professor at TFAS academic program in Prague. Pete, thanks so much for being with me today.  

Peter Boettke [00:02:04] Thanks, Roger, for having me. It’s a thrill to be here with you.  

Roger Ream [00:02:07] Pete, you’re a highly acclaimed economist who’s taught hundreds or thousands of young people in your career. Who was the spark that got you interested in the science of economics?  

Peter Boettke [00:02:19] Well, I mean, everything that I do in terms of my professional career starts at Grove City College, with Hans Sennholz. Hans Sennholz also was a fantastic principles of economics teacher and then a mentor developed and introduced me to books as well as then to a set of ideas that are in those books and then to people. So, I got connected through, Dr. Sennholz to the Foundation for Economic Education, which is where I first met you, and through Bettina Bien Greaves, who became kind of a mentor to me and the rest of the people: Paul Perreault, Brian Summers. Brian Summers was second in command at the Freeman when I was an undergraduate, and he wanted to talk ideas. I would send him things that I had in mind, and he would help me. So, eventually I published in The Freeman, and that was the biggest thrill of my life as a young person to be in the Freeman. And then through my involvement with Bettina, I eventually then also got sent from Hans Sennholz and Bettina to Walter Grinder, who’s also a Grove City graduate, and Walter was at the Institute for Humane Studies and then the Institute for Humane Studies also had Leonard Liggio. So, as a very young person, I was sort of brought into that community and steered for my graduate work to George Mason University, where I work with Don Lavoie, very closely. And he further developed me and mentored me and pushed me along the way. And then at George Mason, as you know, we just had an amazing array of economists. So, I was exposed to Jim Buchanan and Kenneth Boulding and Gordon Tullock and Bob Tolleson, but then, of course, in the Center for Study of Market Processes: Don Lavoie, Jack High, Richard Fink, Tom DiLorenzo. These are all very informative and very valuable inputs into helping me become an economist.  

Roger Ream [00:04:26] Well, don’t leave me out, because I think we were in a class together taught by Tom DiLorenzo.  

Peter Boettke [00:04:32] Yes. We were.  

Roger Ream [00:04:33] Well, speaking of great teachers, you began by talking about Hans Sennholz at Grove City College. He really was remarkable in terms of the students who he influenced into pursuing either academic careers in economics or careers in trying to promote liberty in other ways. We don’t have to recite a lot of other names, but what was about Hans Sennholz you think that inspired so many people to pursue that career direction? 

Peter Boettke [00:05:09] So, let me just start by giving a fact about Hans Sennholz. Sennholz retired after teaching at Grove City for 30 years. And they decided to have a retirement party and honor him with people writing papers to contribute into a festschrift to give to him. Grove City is in a remote area of Pennsylvania. The closest airport is Pittsburgh, and they had this conference at Grove City in late winter, early spring, which is not the most hospitable time to be at Grove City. 300 former students paid their own way to go to his retirement dinner. I just want that to sink into everyone. That’s an average of ten students a year.  

Roger Ream [00:05:58] I was there and while I wasn’t a formal student at Grove City, I consider myself a student of his from all the seminars I attended. I remember that event you’re talking about. It was it was an amazing.  

Peter Boettke [00:06:11] It’s amazing that he was able to do that. Now you ask the question. So, normally when you would have a teacher of that kind of impact, you would think of like Robin Williams in the Dead Poets Society, a teacher gets up on the chair and inspires everyone to read like that. Hans Sennholz wasn’t really like that. He wasn’t warm and fuzzy. He wasn’t that kind of teacher, but he just was such a powerful advocate for the market and the way he communicated the power of the market and the tyranny of political control in his speeches. Now, I say speeches because as you know, Sennholz traveled around the country a lot doing public lectures. So, his teaching wasn’t like the normal teaching, it was his public lectures that he was giving, but he would have readings that would go with it. So, you would read, you start with Bettina’s basic free market reader, and that would have various aspects. I didn’t mention earlier, but Leonard Read played this huge role in my life because when I went to FEEI, I met him, and he was very elderly at the time. You know, this is in the early 80s. But he sent me a copy of the path of duty, which is one of his last collections of his essays. And he sent it to me, and his main theme was always self-education, but he the inscription in that tells me that the world needs educators like you. He wrote that to me, and I knew that his main thing was the only education is self-education in some sense, but he wanted to encourage me in that. I remember I was so excited. I think I might have sent a $25 contribution, that’s all I had to fee at the time or whatever. But all those people played such a huge, important role in pushing me in this direction. Hans Sennholz, when I went to FEE the very first time, I was still an undergraduate when I came back, Bettina, I think, must have talked to him because Sennholz pulled me aside, and then I was the only undergraduate that was part of his graduate seminar that included people like Alex Chaplin and, Eduardo Zimmerman, Steve Thompson, these were all people that were from Argentina that had come over and studied with him through the International College. So, as a junior, he put me involved in all of them.  

Roger Ream [00:08:48] But he recognized something in you as an undergrad.  

Peter Boettke [00:08:50] And he took me under his wing and sort of said like: “here, learn what it’s like.” But again, he wasn’t warm and fuzzy. Sennholz retired from Grove City. He took the job at FEE as president. I was at NYU at the time, and so I got to interact with him a lot then. I always referred to him as Dr. Sennholz. Never called him Hans. I always held him with reverence, and I owe so much to him, and I think that teachers that can excite the imaginations of an 18- or 19-year-old are sorely needed in the world, and he was one of them.  

Roger Ream [00:09:29] Could you explain for listeners, what distinguishes the Austrian School of Economics from other schools? What is Austrian Economics all about?  

Peter Boettke [00:09:40] So, like with most, scientific labels, the Austrian school got given to the set of economists because they taught at the University of Vienna in Austria, and they were in opposition to, both classical economics of the British Classical and the German historical school. And it was the Germans who said: “Oh, those are the Austrians,” and sort of pooh poohed them, and the Austrians especially: Karl Menger, Von Barbaric and Visser, they were the founding fathers, Karl Menger being the main one, at the University of Vienna. They were developers of early neoclassical economics, which neoclassical economics is most famous because it repaired a problem in the value theory of classical economists. So, there is an old paradox called the diamond water paradox, which is that if water is so precious for human life, how come diamonds are more valuable than water? And one of the main things about the neoclassical revolution was the focus that individuals choose, not all the water in the world versus all the diamonds in the world, but the next unit, or on what’s called technically on the margin. So, the next unit of decision. So, since water is relatively abundant, the next unit of water is priced very high, whereas the next unit of a diamond which is relatively scarce is going to be more valuable. So, if the choice is on the margin, then the individuals, rather than choosing between the whole class, if it was choosing between the whole class of all the water in the world or all the diamonds are well, clearly water would be essential for human survival, it would be more valuable, but it’s not precisely because we make choices not on the oils or nothing, but instead on the margins. The other thing that the Austrians really emphasized was that that valuation that individuals have is in the individual’s subjective assessment of the goods and services. So, the way to think about that is if I drew for you a picture with paint on canvas, it would have the same, physical characteristics that Picasso did, and I could draw that. Maybe it would take me the same amount of time that Picasso did it or whatever, but what it isn’t is it’s a Picasso is different than a peak. So, if I draw that, the value of that is less than a penny. Picasso draws randomly on something, it’s worth millions, right? And that’s because people have a subjective evaluation of the value of a Picasso. So, what we worry about is then as economic science, we’re going to advance our ideas. The more we focus on this issue of choice on the margin against the constraints, so, it’s choice against constraints and the choice on the margin, and that the valuations that guide those choices are based on the subjective evaluations of individuals. So, again, that forces us to think about individual decision making rather than collective decision making like the society chooses. Instead, it’s individuals that make up the society. So, that’s the like first level core of the Austrians.  

Roger Ream [00:13:05] So, let me jump in with a couple follow ups there. The subjective value theory was something that really discredits what Marxists believe is the labor theory of value. That’s why apple pies are priced more than mud pies. So, now, in mainstream economics, aside from the Austrian school, they accept, of course, the marginal theory of value. Do they fully accept this idea of subjective value?  

Peter Boettke [00:13:38] No, that the thing that has been sort of displaced. And the reason for that is because the very idea of choice on the margin, sort of in many ways lends itself to what’s called marginal analysis lends itself to formalism. Right? Because think about the relationship between average test scores and marginal test scores. As the average test scores are falling, the marginal test scores must fall faster. When the average test score starts to rise higher, the marginal test score, the next test score you take must be rising faster. So, that’s true whether you’re talking about students taking tests in Virginia or taking tests in Korea, right? It’s also true whether I’m talking about students in Oxford in 1850 or students in Oxford in 2050. So, the idea was, is that we could mathematics these relationships. And when these relationships are in equilibrium, that is where all the gains from trade have been exhausted, the objective and the subjective are one and the same, right? They would line up. Think about that in terms of costs or whatever. The subjective evaluation, the cost and the objective establishment of the cost would be identical. So, if I’m working in this equilibrium mindset, I’m not going to think about the subjectivity aspects as much. So, it gets drained. But that was a huge mistake that Mises and Hayek really spent. Those are the next great Austrians. So, Menger and Visser and then the next great Austrians. Schumpeter is in there as well, but then the next great Austrians would Ludwig von Mises, and Friedrich Hayek. They were the major developers of what we now call modern Austrian economics, and they became increasingly frustrated with the way neoclassical economics had evolved. So, they were in the neoclassical framework, but they were frustrated with the way it had evolved. And that’s where you get the stronger opposition in Misses and Hayek to the methodological thrusts of mainstream economics and the analytical thrust of mainstream economics. If you follow their methodological issues and their analytical issues, that also has social, philosophical aspects that are involved. So, a lot of what happened in neoclassical economics was a drained economic life out of our study of the economy and what the Austrians in the hands of Mises and Hayek, but also even Schumpeter wanted to do, was breathe life back in. That’s why Schumpeter and the creative destruction of the entrepreneur. The entrepreneur had been lost in economics because in equilibrium, there’s no need for an entrepreneur. It’s only out of equilibrium that you get the entrepreneur really doing things.  

Roger Ream [00:16:31] Then in the next generation, after Hayek and Mises and Schumpeter, it brings you to right great teacher Israel Kerzner, who put that stress on the discovery process of the entrepreneur and entrepreneurship. He was a colleague of yours at NYU, right?  

Peter Boettke [00:16:47] Yeah, I had the great fortune after I finished my PhD with Don Lavoie to then go and study, to be an assistant professor with Israel Kerzner at NYU. I did that for eight years, and it was just a wonderful experience. I don’t know if I’ve ever told you this. This goes back to your point about teachers. Israel Kerzner had been teaching an advanced course to undergraduates, on capitalism for years. And when he came into the office, to teach that course, he would put up a sign outside of his door that said: “Professor Kerzner is preparing for class, please, do not disturb,” and you would hear him working away in there on perfecting the notes that he had been doing for all those years. I mean, what a amazing scholar and teacher he was. We had our seminars every Monday, and he would come in and that paper that was for the seminar would have read from the first page all the way through with his comments and criticisms and everything. He was a role model. I ended up by editing his collected works for Liberty Fund and I hope some of your, listeners go and look at the collected works, because they’re just amazing what Israel Kerzner did.  

Roger Ream [00:18:15] I think it’s a shame that he has not been awarded a Nobel Prize in economics for the work he did.  

Peter Boettke [00:18:21] Yeah, I agree with that 100%. The other person that was huge in that generation, of course, is Murray Rothbard. Murray Rothbard’s “Man, Economy, and State,” is a monumental achievement in economics. It still pays for students to read that book. After that, he wrote a book on America’s Great Depression, which is also very good, and it gives you, a sort of a thumbnail sketch of the Austrian interpretation versus the monetarist versus the Keynesian. So, they’re back to your compare. He did a great job in that. After that he devoted a lot of his efforts to things outside of economics, including scholarly interest in ethics and other things, but mainly in more popularizing, libertarian philosophy and an important book for my development was his book for New Liberty. It persuaded me, the kind of version of libertarianism that I wanted to pursue as a young person, so I still think very, very highly of that book. So, he was the other towering figure of that 1950s, 60s, 70s generation.  

Roger Ream [00:19:41] You wrote this piece for this journal on the family tree of the Austrian tradition. I thought it was a great piece, because you went through the first generation of Menger and Visser and then Hayek, Mises and Schumpeter and then Kerzner, Rothbard. Sennholz really was part of that, I think, because he got his PhD under Mises, if I’m not mistaken. And then from there it was Don Levoie also at NYU and Jack High and Richard Fink and maybe some others. But then came Pete Boettke and the students of Don Lavoie. What’s remarkable, Pete, is the influence you’ve had and some of the others of your generation on two more generations, really, of course, because Anne Bradley, our Academic Director, was part of that, getting her PhD at George Mason and, Adam Martin and others: Ben Powell, who’ve taught for TFAS, some of in Prague with Don and you teaching our students and as teaching assistants. And now they’re teaching courses for us. So, I applaud you for what you’ve done at George Mason, you and your colleagues there to continue to develop economists who study theory, who are great teachers instead of just mathematicians.  

Peter Boettke [00:21:14] There’s a great article that was published a year ago by Brian Author, and it’s called Economics and Nouns and Economics and Verbs. He’s a guy at the Santa Fe Institute, and his argument is that neoclassical economics is economics in nouns, which is just the economics of a situation. Right? But economics in verbs is about activity, about life. And this is what I mean by breathing life back into economics. I think if you’re a young student, what you really care about is that you must teach economics as a tool for the curious. So, your girls go off to college and they’re learning, they’re curious. They’re naturally curious. They’re natural learners. We as educators are the ones that squash down their natural curiosity. Think about a little kid. Why is the sky-blue right? They’re always going to be asking questions. So, we must see economics as a tool for the curious. But the questions that the curious are asking are about like life and blood things, not like just static states. So, to me, I think the real defining characteristic of why it is that we’ve been able to get good teachers who have then inspired other to want to be teachers is precisely because they’re teaching economics as a subject that’s alive, that’s relevant. Relevance is a virtue, not a vice. So, I can use these set to eyeglasses from economics to understand things in the world, and this of course has played out tremendously in the great opportunity that you give people over in Prague, because back in the day, there was a roughly around 120 students from all the different former communist countries or whatever, that you’re now getting a chance to talk to them about basic economics in the most beautiful of environments in Prague. You’re there with them for 2 or 3 weeks or whatever, spending four days or five days a week in deep conversation with them talking about this stuff. It’s just a great program. I’m so thrilled that now Adam Martin is involved in it, and he was my student. So, to put a bow on what you were talking about, one of the things that’s most fascinating to me is that, now I am old enough that I have, not only, students of students, okay, but I’m now getting students, of students, of students. It sorts of freaks me out a little bit because I’m like: “Man, I can’t be that old, right?” So, I had Pete Leeson, for example, he worked with Claudia Williamson at WVU. Claudia Williamson now has her students. We get her students to come back and want to study with us. So, it’s amazing.  

Roger Ream [00:24:06] You touched on something that Anne Bradley in the courses she teaches for us, and in other talk she gives, she quotes you and I won’t have the quote exactly, but what economics does is it gives us a toolbox that we can use, for analyzing things, not just public policy, but other thing. So, you’re now the co-author of Paul Hayne’s great textbook, “The Economic Way of Thinking,” and David Prychitko, I know, is involved in that, too, and others. That book is widely used. It’s been one of the most popular textbooks for the last 30 years in the economics. We often refer to the economic way of thinking in our high school programs. Paul Hayne was a big influence in developing the foundation for teaching economics programs that we run. How would you describe what is the economic way of thinking? Is this toolbox that economics gives something we can use in everyday life? Or is it narrowly confined to when we go to the grocery store or the department store? Talk a little bit about that topic, if you would.  

Peter Boettke [00:25:10] When people ask me about the book, which was a great honor to continue to keep it alive. Paul Hayne was a fantastic teacher of economics. Like Sennholz, one of the things that he always stressed was teach the first class of economics, like it’s the last class a student will ever take, and it will be the first of many. If you try to teach it as a watered-down PhD class, it will be the last class that they take. So, you teach them sort of the basics. So, I had been teaching Paul’s book for many years, and I knew Paul, and unfortunately when he was diagnosed with a terminal illness, he called me and asked me if we would keep the book alive. And of course, you know, that’s a great honor to be asked to do that. So, it was like, yes, yes. And then nature took its course, he passed away. About six months later, Prychitko dumps his book in front of me and says, revise it. And it was one of the hardest things I ever did because I was like: “Oh my God, I’m going to paint a mustache on the Mona Lisa, how do I do this?” So, my main thing that I always want to stress is that this is Paul’s book. Dave and I have tried to be as faithful in the revisions of that book as we could be to Paul and try to stick to his main lessons, which is that the economic way of thinking is all about recognizing the tradeoffs that we face. It’s that life is full of tradeoffs, and again, back to the margin idea tradeoffs on the margin. And then the question. So, we live in a world of scarcity. Scarcity implies tradeoffs. Tradeoffs need to be negotiated by us. Within a commercial society, the way we negotiate tradeoffs is that we rely on property prices and profit loss. Outside of the commercial society, say in political society, we must find some substitute for property prices and profit loss, and that could be the motive. So, what we do is we systematically study the tradeoffs or the ability of individuals to engage in accurate accounting of the tradeoffs in various institutional context. And that was Paul’s great strength, making economics relevant not only to the grocery store, but also thinking about the macro economy, the nature of the market and competition within the market, rivalry, pricing of movie tickets. And Paul gives examples of all of that. So, we tried to do that. I want to mention one thing which I don’t know if you’ll remember, but I remember very, very fondly, is that I was at the Central European University in Prague in early 1990s, it was in January. It was over the winter break. And you must be in Prague for the Foundation of Teaching Economics, because you guys were developing teaching program. So, Tom Hazlitt was going to be teaching, Paul Hayne, I think either the book or he was going to be teaching there. You introduced me to Jerzy Schwarz at the Liberal Institute, and I remember we went to this fantastic restaurant off old town square there.  

Roger Ream [00:28:34] I have this recollection of us deciding to rendezvous under the statue of John Hus in the old town square in Prague.   

Peter Boettke [00:28:42] Exactly. But what amazed me at that time was how important that was for Paul Hayne’s work to start spreading in these newly developing market societies. So, as you know, Ed Dolan and other people were involved in Russia at the time, and when I was a visitor at the Academy of Sciences, one of the things that was most fascinating to me is to go through bus stops, and they would sell books and the bus stops and you would see “The Economic Way of Thinking” translated into Russian, and it’s like, wow.   

Roger Ream [00:29:19] We were contacted very recently by people in Slovakia because they want to bring back the FTE programs there after many years through the Hayek Institute. They’re hoping to do more teacher training. 

Peter Boettke [00:29:33] They’re good people there.  

Roger Ream [00:29:38] Came to mind was something I think Tom Sowell has said, which is there are no solutions, are only tradeoffs.  

Peter Boettke [00:29:44] Yeah. Sowell is also in the same genre as Paul Hayne. The history of the Paul Hayne, and this is probably a little bit too insider baseball, but Armen Alchian and Bill Allen wrote this fantastic book called “University of Economics.” It was meant to be the first real challenger to Paul Samuelson’s economics book. But the problem with that book is that it’s very subtle. So, it kind of missed the basic market because it was too advance for most undergraduates to capture. It became a cult classic among graduate students and faculty who just loved the book, even to this day. Liberty Fund just republished a version of it called “Universal Economics.”  

Roger Ream [00:30:25] I’ve got a copy. 

Peter Boettke [00:30:27] So, Paul wanted to try to fill in the missing market that Alchian and Allen had missed. So, he tried to instead make it all the way down to its basic elements, which he succeeded at doing, but as a result, many people thought it didn’t teach enough models and things like that. And so, it became kind of a very one semester introduction to economics book that was used in a lot of colleges or AP high school book, as opposed to the main micro, macro principles book. But I think that you could use that book in MBA classes, you could use it in any class, public policy classes where you must learn sort of the basics of economic reasoning. I think a similar thing with anything by Thomas Sowell. My favorite book of Thomas Sowell is “Knowledge of Decisions,” and knowledge and decisions a little bit more like Alchin and Allen. It’s a little bit more complicated than average people could do, but it is exactly as you just said. It’s all about the implications of the tradeoffs that we face. But I love the very last paragraph of that book and I think it’s an important message, and it ultimately is one of the major divisions that are dividing points between someone like you and I and a lot of other people in our intellectual culture. And that is that at the very end, what he stresses, is that ordinary people, if given the freedom, can do extraordinary things. Whereas in the progressive ideology, extraordinary people, if given extraordinary powers, can accomplish extraordinary things. I think it really does at the end of the day, as Sowell says, a conflict of vision. I think it does come down to that at some level, which is, do you believe that ordinary people can recognize the wonderful benefits of mutually agreeable exchanges and discover fewer cost technologies like unleash the Julian Simon in all of society, right. The ultimate resources, the human imagination and the creativity, cleverness and resourcefulness resides not in the economic theorists, but in the people that the economic theorist is studying, as opposed to that it’s only extraordinary people that must be put in charge, that given extraordinary powers, that we can solve extraordinary problems, and there you would then put it all on the economist.  

Roger Ream [00:32:53] Let me ask you about some extraordinary people with extraordinary power who did horrible things to ordinary people. And that is this Reality is of Socialism project you’re working on with the Fraser Institute. We were hired by the Fraser Institute to partner with them on developing activities for high school teachers to use in high schools. On that project, we’re training teachers now in the United States and Canada, to use the realities of socialism material. Much of it I know, you’ve done on, Poland, Estonia, there’s a section on Sweden. I think Singapore is coming. I just want to ask you about that project that the Fraser Institute is that you’ve been working on. What have your contributions been to that project?  

Peter Boettke [00:33:45] I think this is one of the more important educational initiatives that I’ve been involved in in recent years. I think if you if you go to that website, Realities of Socialism, you’ll see when they did polls that a lot of young people have, changed their opinion on socialism. When we talk about the realities of socialism, it’s like for them watching a Charlie Chaplin film, right? They don’t have any touchstone to that reality of that existence. So, Jason Clemens and others, you know, obviously in partnership with you and others, they decided to do this Realities of Socialism, which is to do these documents, which dig deep into the history of the socialist experience. I wrote two monographs with Matt Mitchell and Konstantin Zhukov. One is on Poland, that is called “The Road to Socialism and Back,” and the other one is on Estonia, which is called “The Road to Freedom.” The Estonia one, is more recent, just was published at the very end of the last year. I’m very proud of both books. They return me to a sort of genre of writing, which is across disciplines, aimed at an interdisciplinary set of scholars that are teaching at the level that you’re just talking about, that I did with my book called “Why Perestroika Failed,” which is about Russia, and Soviet Russia and Gorbachev’s efforts there. And so, I very much appreciated working with Matt and with Konstantin to dig into that the great opportunity. But one of the things that Fraser does is they also create this tremendous number of infographics based on the information that we dug into. So, if you look, you can see tremendous statistical illustrations, precisely the points that we’re trying to get across. So, in Poland, for example, if you look at the trend line, life expectancy was declining. So, if we would have got to 1989 and continued to go, life expectancy would have been declining. Instead, what happened was you had the Balcerowicz reforms and life expectancy increased similarly with per capita income. Their per capita income in Poland would have been about $14,000 a year per capita now. And instead, after the reforms, we’re now over $30,000 per capita income. Even though Poland has had some political upheavals in recent years, we end the book in 2019 for Poland. Nevertheless, there per capita income is now knocking on the door of Great Britain. Right? So, that’s how successful the Polish economy has been because of Balcerowicz robust reforms, I would argue, which, were amazing. The Estonia story is even a more amazing, inspiring story from Mart Larr, who I got to meet through a TFAS program. I mean, it was amazing opportunity, but Mart Larr was influenced by Milton Friedman. He introduced these policies where they just did it, as he put it. We’re just going to do it. And Estonia is now one of the freest economies in the world, but also one of the freest personal economies, the world. If I could just sort of stress something to the readers here. Is that the reason why this history is so important for both Poland and Estonia is that these two countries were torn apart by the two biggest collectivist experiences of the 20th century, Nazism and communism. They were suffered horrible losses under the yokes of these two tyrannical regimes. It’s important to realize when people think about socialism to understand the organizational logic of the dream, because nobody in 1950 thought to themselves, let’s have a socialist government and kill everyone, right? They thought they were delivering mankind into the greatest of social harmony and burst of productivity. That was the dream aspiration. They were going to be beyond, in the modifiers, for example. People nowadays say: ” I want socialist, but I want democratic socialism.” Well, in Russian the term Bolshevik is majority. The term Menshevik is minority. Why? Because they were a faction within the Social Democratic Party that was pushing through the Marxist-Leninist strategy. That’s the Bolsheviks. So, all these governments thought that they were advancing human freedom. But the tragedy this is why Hayek writes “The Road to Serfdom.” The tragedy is that the high ideals are smashed up against the hard rock of reality, because socialism cannot work, and when socialism cannot work, the socialists don’t abandon their power. What they do is they rely on other assessment tools, and those assessment tools, as we talk about in the book, they rely on controlling your citizenry. And that’s why as a part of the core ideas, you have a control problem. You have a knowledge problem; you have an incentive problem. And the control problem requires that your government, those in charge of planning, are going to have to force the citizens to conform to the notion of the plan. And that’s where all the system starts to unwind, and that’s why the tragedy occurs. And both in Poland and in Estonia, that it’s a miracle they were able to throw off the yoke of that tyranny and breathe freedom. It’s a very inspiring story, and I hope that young students read the whole history of these countries. I’ll say one last thing. Estonia is very cool because of the also the way that they became free. So, Estonia, like in all these Soviet bloc countries, the Soviets tried to impose a unified culture. The Estonians had a self-identity that was embedded in their dress, traditional dress, the songs that they sang, the traditions that they conveyed, and they were subject to Russification. They were trying to suppress the Estonian culture and impose Russian culture on them. And in 1988, they decided that they were going to protest that, and at the folk festival that year, they sang Estonian songs and challenged the regime and everything like that. So, they refer to this as the Singing Revolution, and I would really, recommend people to look in our book, the discussion of the Singing Revolution, but look broader, look at a documentary dancing around. It’s just an amazing act of defiance, and then what they also did in response, in 1989, to the illegality of the Stalin-Hitler pact from 1939, is they joined the Lithuanians, Estonians and the Latvians clapped join hands to make a human chain across all the Baltic states in protest of Soviet occupation. So, it’s a nonviolent, amazing act of political defiance.  

Roger Ream [00:41:31] I also recommend documentary “The Singing Revolution,” and I do remember, we had Mart Laar come speak to our programs, the first prime minister there and I remember him saying once that when he was living under communism, he learned there was such a thing as a banana, but he never had one. He wanted to have a banana, and that was kind of a motivation for him, but then when he suddenly became prime minister, he was an historian, and he said he’d read “Free to Choose,” and he just tried to implement everything that Milton Friedman recommended. And, boy, it took off. Thank you, Pete. I express my gratitude that in the “Dedication of The Road to Freedom,” I think it was, you dedicated it to the work you did, the opportunity to teach in our programs in Prague. We were grateful for that recognition.  

Peter Boettke [00:42:23] I can’t thank you enough for those opportunities. You know, if you think about the various individuals that you brought in to speak to the graduating students, what an amazing set of men of political commitment and conviction. So, even the guy from, Serbia, Zoran Đinđić, that later was assassinated. I remember asking him about the reforms and he said that he understood the risk that was involved, and they were going to there was only one choice, right? There’s only one choice. So, one of the things about economics is we tend to downplay individuals. I mean, in our standard modeling. But one of the things when you study political economy is you realize that there are pivotal people at pivotal times. That’s your entrepreneurs. But it’s also in the policy space, policy entrepreneurs in the world that you know about the Overton Window kind of idea and the ability to see that opportunity and seize it, and it usually is only for a very, very short period. And if you don’t grab it, it disappears. And it turns out that, for example, Balcerowicz was able to do that, and Mart Laar was able to do that and his crew. Like in Russia, they tried, and they missed, and now we have the mess in Russia, kind of thing. So, it’s a very tough thing pulling off these transitions.  

Roger Ream [00:43:58] Well, we’ve gone over time, and I wish we could continue going because I’ve really enjoyed this. And so grateful for you and all the work you’re doing. I know you have an opportunity cost. If we keep talking of missing a class, probably, or writing your next book, but thank you. We’re going to do our best to make sure that the work you did on this Reality of Socialism project gets into classrooms at high schools here. So, we can reverse these poll numbers that show way too many young people thinking that socialism is superior to freedom, free enterprise and free markets.  

Peter Boettke [00:44:34] If I could say one last thing, Roger. One of the things that I think is important to get across to young people. So, I think economics is best as a tool for the curious and a discipline for the compassionate. It doesn’t mean that you shouldn’t have that natural compassion that you do, but you must have effective compassion. So, the goals that a lot of young people have for a greater world or a repair a broken world so that we have more liberty, equality and justice is the same goals that classical. All economists have as well. It’s just that our means are different. It’s not the case that economics is a tool for oppression. It’s a tool for liberation. When you open an economy, you liberate, people. That’s why it’s called liberalism, right? When you give rights to individuals, you’re liberating them from the yoke of the previous oppressors. I think that part of our message to young people must be not that they are wrong to want and yearn for greater liberty, equality and justice, but that they’ve been taught the wrong means. And we need to teach them the relationship between the means and ends. There’s where economic way of thinking comes in. When we do it the correct way, we can unlock a lot of mysteries in the world for them. And I hope this series, in its own small way, is a first step in that educational project.  

Roger Ream [00:46:08] Well, thank you. That’s a great way to end. You’ve touched on a lot of important themes here, especially at the close here. Our work at The Fund for American Studies and the work here at the university demonstrates that one person or a small group of people can truly make a difference, as we’ve seen throughout history. We have the example of Jesus and 12 disciples. It’s small groups, but it takes knowledge and courage and those two ingredients together, you can really make a difference for good as well. So, thank you, Pete. Pleasure to be with you today. Thank you for joining me.  

Peter Boettke [00:46:44] It’s great to see you, Roger, and thanks for this opportunity.  

Roger Ream [00:46:49] Thank you for listening to the Liberty + Leadership Podcast. If you have a comment or question, please drop us an email at podcast@TFAS.org and be sure to subscribe to the show on your favorite podcast app and leave a five-star review. Liberty + Leadership is produced at Podville Media. I’m your host, Roger Ream, and until next time, show courage in things large and small.  


TFAS has reached more than 49,000 students and professionals through academic programs, fellowships and seminars. Representing more than 140 countries, TFAS alumni are courageous leaders throughout the world forging careers in politics, government, public policy, business, philanthropy, law and the media.

Liberty + Leadership is a conversation with TFAS alumni, faculty and friends who are making a real impact. Hosted by TFAS President Roger Ream ’76, the podcast covers guests’ experiences, career stories and leadership journeys. 

If you have a comment or question for the show, please email podcast@TFAS.org.

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