Is Austrian economics an American invention? by STEVEN HORWITZ and B.K. MARCUS.
Do those of us who use the word Austrian in its modern libertarian context misrepresent an intellectual tradition?
We trace our roots back through the 20th century’s F.A. Hayek and Ludwig von Mises (both served as advisors to FEE) to Carl Menger in late 19th-century Vienna, and even further back to such “proto-Austrians” as Frédéric Bastiat and Jean-Baptiste Say in the earlier 19th century and Richard Cantillon in the 18th. Sometimes we trace our heritage all the way back to the late-Scholastic School of Salamanca.
Nonsense, says Janek Wasserman in his article “Austrian Economics: Made in the USA”:
“Austrian Economics, as it is commonly understood today,” Wasserman claims, “was born seventy years ago this month.”
As his title implies, Wasserman is not talking about the publication of Principles of Economics by Carl Menger, the founder of the Austrian school. That occurred 144 years ago in Vienna. What happened 70 years ago in the United States was the publication of F.A. Hayek‘s Road to Serfdom.
What about everything that took place — most of it in Austria — in the 74 years before Hayek’s most famous book? According to Wasserman, the Austrian period of “Austrian Economics” produced a “robust intellectual heritage,” but the largely American period that followed was merely a “dogmatic political program,” one that “does a disservice to the eclectic intellectual history” of the true Austrian school.
Where modern Austrianism is “associated with laissez-faire economics and libertarianism,” the real representatives of the more politically diverse tradition — economists from the University of Vienna, such as Fritz Machlup, Joseph Schumpeter, and Oskar Morgenstern — were embarrassed by their association with Hayek’s bestseller and its capitalistic supporters.
These “native-born Austrians ceased to be ‘Austrian,'” writes Wasserman, “when Mises and a simplified Hayek captured the imagination of a small group of businessmen and radicals in the US.”
Wasserman describes the popular reception of the as “the birth of a movement — and the reduction of a tradition.”
Are we guilty of Wasserman’s charges? Do modern Austrians misunderstand our own tradition, or worse yet, misrepresent our history?
In fact, Wasserman himself is guilty of a profound misunderstanding of the Austrian label, as well as the tradition it refers to.
The “Austrian school” is not a name our school of thought took for itself. Rather it was an insult hurled against Carl Menger and his followers by the adherents of the dominant German Historical School.
The Methodenstreit was a more-than-decade-long debate in the late 19th century among German-speaking social scientists about the status of economic laws. The Germans advocated methodological collectivism, espoused the efficacy of government intervention to improve the economy, and, according Jörg Guido Hülsmann, “rejected economic ‘theory’ altogether.”
The Mengerians, in contrast, argued for methodological individualism and the scientific validity of economic law. The collectivist Germans labeled their opponents the “Austrian school” as a put-down. It was like calling Menger and company the “backwater school” of economic thought.
“Austrian,” in our context, is a reclaimed word.
But more important, modern Austrian economics is not the dogmatic ideology that Wasserman describes. In his blog post, he provides no actual information about the work being done by the dozens of active Austrian economists in academia, with tenured positions at colleges and universities whose names are recognizable.
He tells his readers nothing about the books they have produced that have been published by top university presses. He does not mention that they have published in top peer-reviewed journals in the economics discipline, as well as in philosophy and political science, or that the Society for the Development of Austrian Economics consistently packs meeting rooms at the Southern Economic Association meetings.
Have all of these university presses, top journals, and long-standing professional societies, not to mention tenure committees at dozens of universities, simply lost their collective minds and allowed themselves to be snookered by an ideological sleeper cell?
Or perhaps in his zeal to score ideological points of his own, Wasserman chose to take his understanding of Austrian economics from those who consume it on the Internet and elsewhere rather than doing the hard work of finding out what professional economists associated with the school are producing. Full of confirmation bias, he found what he “knew” was out there, and he ends up offering a caricature of the robust intellectual movement that is the contemporary version of the school.
The modern Austrian school, which has now returned to the Continent and spread across the globe after decades in America, is not the dogmatic monolith Wasserman contends. The school is alive with both internal debates about its methodology and theoretical propositions and debates about its relationship to the rest of the economics discipline, not to mention the size of the state.
Modern Austrian economists are constantly finding new ideas to mix in with the work of Menger, Böhm-Bawerk, Mises, and Hayek. The most interesting work done by Austrians right now is bringing in insights from Nobelists like James Buchanan, Elinor Ostrom, and Vernon Smith, and letting those marinate with their long-standing intellectual tradition. That is hardly the behavior of a “dogmatic political program,” but is rather a sign of precisely the robust intellectual tradition that has been at the core of Austrian economics from Menger onward.
That said, Wasserman is right to suggest that economic science is not the same thing as political philosophy — and it’s true that many self-described Austrians aren’t always careful to communicate the distinction. Again, Wasserman could have seen this point made by more thoughtful Austrians if he had gone to a basic academic source like the Concise Encyclopedia of Economics and read the entry on the Austrian school of economics.
Even a little bit of actual research motivated by actual curiosity about what contemporary professional economists working in the Austrian tradition are doing would have given Wasserman a very different picture of modern Austrian economics. That more accurate picture is one very much consistent with our Viennese predecessors.
To suggest that we do a disservice to our tradition — or worse, that we have appropriated a history that doesn’t belong to us — is to malign not just modern Austrians but also the Austrian-born antecedents within our tradition.
Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Microfoundations and Macroeconomics: An Austrian Perspective, now in paperback.
B.K. Marcus is managing editor of the Freeman.