"Economics, wrote Joseph Schumpeter, is "a big omnibus which contains many passengers of incommensurable interests and abilities." That is, economists are an incoherent and ineffectual lot, and their reputation reflects it. Yet it need not be so, for the economist attempts to answer the most profound question regarding the material world." Met deze uiteenzetting vat Lew Rockwell zijn essay “Why Austrian economics matters” aan. Op vraag van Simon Van Wambeke, één van mijn trouwe bloglezers en zelf ook een overtuigd libertariër, herneem ik hieronder dit bewuste essay. Volgens Van Wambeke wordt er in de media iets te veel de loftrompet gestoken met de Chicago School van Milton Friedman, terwijl het volgens Van Wambeke juist de Austrians zijn die meer welvaart mogelijk maken en dus vooropgesteld dienen te worden. Dit essay van LVMI-voorzitter Llewellyn H. Rockwell, Jr. zou die overtuiging moeten staven.

Pretend you know nothing about the market, and ask yourself this question: how can society's entire deposit of scarce physical and intellectual resources be assembled so as to minimize cost; make use of the talents of every individual; provide for the needs and tastes of every consumer; encourage technical innovation, creativity, and social development; and do all this in a way that can be sustained? This question is worthy of scholarly effort, and those who struggle with the answer are surely deserving of respect. The trouble is this: the methods used by much of mainstream economists have little to do with acting people, and so these methods do not yield conclusions that have the ring of truth. This does not have to be the case.

The central questions of economics have concerned the greatest thinkers since ancient Greece. And today, economic thinking is broken into many schools of thought: the Keynesians, the Post Keynesians, the New-Keynesians, the Classicals, the New Classicals (or Rational Expectations School), the Monetarists, the Chicago Public Choicers, the Virginia Public Choicers, the Experimentalists, the Game Theorists, the varying branches of Supply Sideism, and on and on it goes. Also part of this mix, but in many ways apart from and above it, is the Austrian School. It is not a field within economics, but an alternative way of looking at the entire science. Whereas other schools rely primarily on idealized mathematical models of the economy, and suggest ways the government can make the world conform, Austrian theory is more realistic and thus more socially scientific. Austrians view economics as a tool for understanding how people both cooperate and compete in the process of meeting needs, allocating resources, and discovering ways of building a prosperous social order. Austrians view entrepreneurship as a critical force in economic development, private property as essential to an efficient use of resources, and government intervention in the market process as always and everywhere destructive.

The Austrian School is in a major upswing today. In academia, this is due to a backlash against mathematization, the resurgence of verbal logic as a methodological tool, and the search for a theoretically stable tradition in the madhouse of macroeconomic theorizing. In terms of policy, the Austrian School looks more and more attractive, given continuing business-cycle mysteries, the collapse of socialism, the cost and failure of the welfare warfare regulatory state, and public frustration with big government. In its twelve decades, the Austrian School has experienced different levels of prominence. It was central to the price theory debates before the turn of the century, to monetary economics in the first decade of the century, and to the controversy over socialism's feasibility and the source of the business cycle in the 1920s and 1930s. The school later fell into the background and was usually mentioned only in history of economic thought texts until the 1970s.

The proto-Austrian tradition dates from the 15th-century Spanish Scholastics, who first presented an individualist and subjectivist understanding of prices and wages. But the formal founding of the school dates from the 1871 publication of Carl Menger's Principles of Economics, which changed economists' understanding of the valuing, economizing, and pricing of resources, overturning both the Classical and the Marxian view in the "marginal revolution." Menger also generated a new theory of money as a market institution, and grounded economics in deductive laws discoverable by the methods of the social sciences. Menger's book, said von Mises, made an economist of him, and it is still of great value.

Eugen von Böhm-Bawerk was the next important figure in the Austrian School. He showed that interest rates, when not manipulated by a central bank, are determined by the time horizons of the public, and that the rate of return on investment tends to equal the rate of time preference. He also dealt a deadly blow to Marx's theory of capital and exploitation, and was a key defender of theoretical economics at a time when historicists of every stripe were trying to destroy it. Böhm-Bawerk's greatest student was Ludwig von Mises, whose first major project was the development of a new theory of money. The Theory of Money and Credit, published in 1912, elaborated on Menger, showing not only that money had its origin in the market, but that there was no other way it could have come about. Mises also argued that money and banking ought to be left to the market, and that government intervention can only cause harm.

In that book, which remains a standard work today, Mises also sowed the seeds of his business-cycle theory. He argued that when the central bank artificially lowers interest rates, it causes distortions in the capital-goods sector of the structure of production. When malinvestments occur, an economic downturn is necessary to wash out bad investments. Along with his student F. A. Hayek, Mises established the Austrian Institute for Business Cycle Research in Vienna, and he and Hayek showed that the central bank is the source of the business cycle. Their work eventually proved to be most effective in combating Keynesian experiments in fine-tuning the economy through fiscal policies and the central bank. The Mises-Hayek theory was dominant in Europe until Keynes won the day by arguing that the market itself is responsible for the business cycle. It didn't hurt that Keynes's theory advocating more spending, inflation, and deficits was already being practiced by governments around the world.

At the time of the business-cycle debate, Mises and Hayek were also involved in a controversy over socialism. In 1920, Mises had written one of the most important articles of the century: "Economic Calculation in the Socialist Commonwealth," followed by his book, Socialism. Until then, there had been many critiques of socialism, but none had challenged socialists to explain how their economy would actually work absent free prices and private property. Mises argued that rational economic calculation requires a profit-and-loss test. If a firm makes a profit, it is using resources efficiently; if it makes a loss, it is not. Without such signals, the economic actor has no way to test the appropriateness of his decisions. He cannot assess the opportunity costs of this or that production decision. Prices and the profit-and-loss corollary are essential. Mises also showed that private property in the means of production is necessary for these prices to be generated.

Socialism holds that the means of production should be in collective hands. This means no buying or selling of capital goods and thus no prices for them. Without prices, there is no profit and loss test. Without accounting for profit and loss, there can be no real economy. Should a new factory be built? Under socialism, there is no way to tell. Everything becomes guesswork. Mises's essay ignited a debate all over Europe and America. One top socialist, Oskar Lange, conceded that prices are necessary for economic calculation, but he said that central planners could generate prices out of their own heads, watch the length of lines at stores to determine consumer demand, or provide the signals of production themselves. Mises countered that "playing market" wouldn't work either; socialism, by its own internal contradictions, had to fail. Hayek used the occasion of the calculation debate to elaborate upon and broaden the Misesian argument into his own theory of the uses of knowledge in society. He argued that the knowledge generated by the market process was inaccessible to any single human mind, especially that of the central planner. The millions of decisions required for a prosperous economy are too complex for any one person to comprehend. This theory became the basis of a fuller theory of the social order that occupied Hayek for the rest of his academic life.

Mises came to the U.S. after fleeing the Nazis and was taken in by a handful of free-market businessmen, preeminently Lawrence Fertig. Here he helped build a movement around his ideas, and most free-market economists acknowledge their debt to him. No one, as Milton Friedman has said, did as much as Mises to promote free markets in this country. But those were dark times. He had trouble finding the paid university post he deserved, and it was difficult to get a wider audience for his views. During these early years in America, Mises worked to rewrite his just completed German-language treatise into Human Action, an all-encompassing work for English-language audiences. In it, he carefully reworked the philosophical grounding of the social sciences in general and economics in particular. This proved to be a significant contribution: long after the naive dogmas of empiricism have failed, Mises's "praxeology," or logic of human action, continues to inspire students and scholars. He swept aside Keynesian fallacies and historicist pretensions, and made possible the revival of the Austrian School.

Until the 1970s, however, it was hard to find a prominent economist who did not share the Keynesian tenets: that the price system was perverse, that the free market was irrational, that the stock market was driven by animal spirits, that the private sector could not be trusted, that government was capable of planning the economy to keep it from falling into recession, and that inflation and unemployment were inversely related. One exception was Murray N. Rothbard, another great student of Mises's, who wrote a massive economic treatise in the early 1960s called Man, Economy, and State. In his book, Rothbard added his own contributions to Austrian thought. Similarly, the work of two other important students of Mises, Hans F. Sennholz and Israel Kirzner, carried on the tradition. And Henry Hazlitt, then writing a weekly column for Newsweek, did as much as anybody to promote the Austrian School, and made contributions to the school himself.

The stagflation of the 1970s undermined the Keynesian School by showing that it was possible to have both high inflation and high unemployment at the same time. The Nobel Prize that Hayek received in 1974 for his business-cycle research with Mises caused an explosion of academic interest in the Austrian School and free-market economics in general. A generation of graduate students began studying the work of Mises and Hayek, and that research program continues to grow. Today, the Austrian School is most fully embodied in the work of the Mises Institute.

Today, Austrian economics is on the upswing. Mises's works are read and discussed all over Western and Eastern Europe and the former Soviet Union, as well as Latin America and North Asia. But the new interest in America, where the insights of the Austrian School are even more sorely needed, is especially encouraging. The success of the Ludwig von Mises Institute is testimony to this new interest. The primary purpose of the Institute is to ensure that the Austrian School is a major force in the economic debate. To this end, we have cultivated and organized hundreds of professional economists, provided scholarly and popular outlets for their work, educated thousands of graduate students in Austrian theory, distributed millions of publications, and formed intellectual communities, most notably at Auburn University and the University of Nevada, Las Vegas, where these ideas thrive. Every year we hold a summer instructional seminar on the Austrian School called the Mises University, with a faculty of more than 25, and top-flight students from around the country. We also hold academic conferences on theoretical and historical subjects, and the Institute's scholars are frequent participants at major professional meetings.

New books on the Austrian School appear every few months, and Austrians are writing for all the major scholarly journals. Misesian insights are presented in hundreds of economics classrooms all over the country (whereas just 20 years ago, no more than a dozen classrooms presented them). Austrians are the rising stars in the profession, the economists with the new ideas that attract students, the ones on the cutting edge with a pro-market and anti-statist orientation. Most of these scholars have been cultivated through the Mises Institute's academic conferences, publications, and teaching programs. With the Institute backing the Austrian School, tradition and constructive radicalism combine to create an attractive and intellectually vibrant alternative to conventional thought. The future of Austrian economics is bright, which bodes well for the future of liberty itself. For if we are to reverse the trends of statism in this century, and reestablish a free market, the intellectual foundation must be the Austrian School. That is why Austrian economics matters.

Dit essay van Lew Rockwell verscheen op de websites van het Ludwig von Mises Institute en The Heritage Foundation.

Meer teksten van hem op www.lewrockwell.com.