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Mises knew Bauer from the Böhm-Bawerk seminar. Mises

engaged in an ongoing effort to convince Bauer of the wis-
dom of laissez-faire, eventually persuading him to back away
from Bolshevik-style policies.
Mises next undertook an in-depth analysis of socialism.
After writing a breakthrough paper in 1920 on the problem of
calculation under socialism, he completed his second great
book, Socialism, in 1922. A worldwide socialist common-
wealth, Mises demonstrated, would result in utter chaos and a
return to barbarism. Mises challenged the socialists to explain,
in economic terms, precisely how their system would work”
a task that the socialists had avoided up to that point. (Marx
had contended that it was “unscientific” to ask such ques-
tions.) The debate between the Austrians”chiefly Mises and
Hayek”and the socialists continued in a series of papers pub-
lished during the ˜20s and ˜30s. Israel Kirzner holds that it was
during this debate that Mises and Hayek came to understand
how different their “Austrian” approach was from the emerg-
ing neoclassical mainstream.
Mises™s arguments for free markets attracted a group of
converts from the socialist cause, including Hayek, Wilhelm
Röpke, and Lionel Robbins. Mises began holding a private
seminar in his offices at the Chamber of Commerce, that was
attended by Fritz Machlup, Oskar Morgenstern, Gottfried von
Haberler, Alfred Schutz, Richard von Strigl, Eric Voegelin, Paul
Rosenstein-Rodan, and many other intellectuals from across
the European continent. Several of these scholars later held
positions at leading universities in the United States: Machlup
taught at Johns Hopkins, NYU, and then Princeton, Rosen-
stein-Rodan at MIT, Haberler at Harvard, and Morgenstern at
Princeton. Morgenstern, working with mathematician/physi-
cist/computer scientist John von Neumann, did pioneering
work in the area of game theory.

During the 1920s and ˜30s, Mises was working on two other
academic fronts. He argued against the German Historical
School with a series of essays in defense of the deductive
method in economics, which he would later call praxeology.
He also founded the Austrian Institute for Business Cycle
Research, putting Hayek in charge of it.
During these years, Hayek and Mises authored several
studies on the business cycle, warned of the danger of credit
expansion, and predicted the coming economic crisis. The
Nobel Prize committee cited Hayek™s work during this period
when he received the award for economics in 1974. Hayek
was one of the most prominent opponents of Keynesian eco-
nomics in his works on exchange rates, capital theory, and
monetary reform. His popular book The Road to Serfdom
helped revive the classical-liberal movement in America in the
1940s. His three-volume work Law, Legislation, and Liberty
elaborated on the Late Scholastic approach to law, and
applied it to criticize egalitarianism.
In the early 1930s Austria was threatened by a Nazi
takeover. Hayek had already left for London in 1931, at
Mises™s urging. In 1934, Mises moved to Geneva to teach and
write at the International Institute for Graduate Studies. Fol-
lowing the Anschluss, knowing that Mises was an enemy of
National Socialism, the Nazis confiscated Mises™s papers from
his apartment in Vienna and hid them for the duration of the
war. After the fall of the Soviet Union, the papers were
unearthed in a formerly secret archive and brought to the
attention of scholars by Richard Ebeling of Hillsdale College.
Ironically, Mises™s ideas, through the work of Wilhelm Röpke
and the statesmanship of Ludwig Erhard, had a profound
influence on the postwar economic reforms that led to the
“German miracle.”

Meanwhile, in London, Hayek taught and researched at the
London School of Economics. Among his students was a
young post-graduate named Ludwig Lachmann. Hayek also
profoundly influenced English economist Lionel Robbins,
whose synthesis of Alfred Marshall™s ideas with those of the
Austrians helped to create the neoclassical mainstream that
has dominated economics since that time.
Robbins incorporated certain Austrian insights, especially
the notion of economics as the science of employing scarce
means to achieve subjectively desired ends, into Marshall™s
economics. The Austrian-Marshallian synthesis focused on the
properties of equilibrium markets, which were taken to be a
good approximation of the real world. However, at the same
time, Austrian economist Hans Mayer was critiquing price
theories that simply assumed equilibrium, foreshadowing
Hayek™s work on knowledge and prices. Austrians moved
away from Robbins™s formulation of economics. They began
to emphasize the freedom and unpredictability of human
action. Unlike Robbins™s picture of a given set of fully under-
stood means and ends, from which choices are plucked on
the basis of maximizing a utility function, Austrians gradually
realized that both our means and our ends only come to be
understood through the market process itself. They came to
view general equilibrium as a model of an unreal and unob-
tainable world.
In Geneva, Mises wrote his systematic work, Nation-
alökonomie (published in 1940). With war seeming to threaten
even Switzerland, Mises left for the United States. Once settled
in the U.S., he wrote Bureaucracy, Omnipotent Government,
and translated, revised, and expanded Nationalökonomie,
resulting in the publication of Human Action in 1949. His stu-
dent Murray N. Rothbard called it: “Mises™s greatest achieve-
ment and one of the finest products of the human mind in our

century. It is economics made whole.” The work remains, in my
mind, the preeminent work of the Austrian School. However, it
was not well received in the economics profession, where
neoclassical and Keynesian theories dominated.
Even before Mises immigrated to the U.S., American jour-
nalist Henry Hazlitt had become his most prominent cham-
pion. Hazlitt reviewed Mises™s books in the New York Times
and Newsweek, and popularized Austrian ideas in such classics
as Economics in One Lesson. Hazlitt also made original contri-
butions to Austrian School thought, writing a detailed critique
of Keynes™s General Theory, entitled The Failure of the “New
Economics.” Hazlitt defended the work of Say, restoring him
to a central place in Austrian macroeconomic theory.
In 1946, Leonard E. Read founded the Foundation for Eco-
nomic Education (FEE) in Irvington-on-Hudson, New York
The Foundation worked to promote free-market economics,
with a heavy Austrian and Misesian influence, during times
when they were especially unpopular.
Mises eventually landed at New York University. There, he
gathered students around him, just as he had in Vienna.
Among those attending his seminar at Washington Square
(and two other locations in Manhattan) were Rothbard, Israel
Kirzner, Leland Yeager, Ralph Raico, Percy Greaves, Bettina
Bien Greaves, William Peterson, George Koether, Lawrence
Moss, George Reisman, Paul Cantor, and Hans Sennholz.
Mises™s New York seminar continued until two years before
his death in 1973.
Murray Rothbard™s treatise Man, Economy, and State (1962)
was patterned after Human Action, but in some areas”
monopoly theory, utility and welfare, and the theory of the
state”expanded on or diverged from Mises™s views. Roth-
bard™s approach to the Austrian School picked up on Late

Scholastic thought by applying economic science within a
framework of a natural-rights theory of property. What resulted
was a rationalist defense of a free-market, stateless social
order, based on property and freedom of association and con-
tract. Rothbard was also at work applying Austrian economics
to historical periods such as the Great Depression and the
colonial period of American history.
Rothbard gained new exposure for the Austrian School
with his work For a New Liberty. A union of natural-rights the-
ory and the economics of the Austrian School was forwarded
in The Ethics of Liberty. Those books and several others were
completed while Rothbard was producing many scholarly eco-
nomic pieces, gathered in the two-volume Logic of Action, pub-
lished in Edward Elgar™s “Economists of the Century” series.
Meanwhile, Israel Kirzner extended Mises™s analysis on
another front. Focusing on Mises™s concept of entrepreneur-
ship as a component of all action, Kirzner developed his the-
ory of the entrepreneur in a number of works, including Com-
petition and Entrepreneurship, The Meaning of the Market
Process, and The Driving Force of the Market. Kirzner™s first
book, The Economic Point of View, was a comparative work
on economic methodology, highlighting the advantages of
Mises™s praxeological approach. In An Essay on Capital,
Kirzner performed a similar exercise on the varieties of capi-
tal theory. He continued the Austrian presence at New York
University, teaching there from 1957 until the spring of 2001.
Extending the tradition of Böhm-Bawerk and Mises, he gath-
ered a weekly Austrian discussion group and tutored a new
generation of Austrian scholars.
Ludwig Lachmann took Misesian thought in yet a third
direction. While his work in the 1950s and 1960s flowed
directly from Mises™s ideas, Lachmann increasingly concerned

himself with the effect of radical uncertainty on economic
order. Deeply influenced by the work of British economist
G.L.S. Shackle, Lachmann™s work emphasized the subjective
nature of expectations.
The awarding of the Nobel Prize to Hayek in 1974, and a
conference on Austrian economics in South Royalton, Ver-
mont, that same year, marked a decided upsurge of interest in
the Austrian School. The founding of the Ludwig von Mises
Institute in 1982, with the aid of Mises™s widow, Margit von
Mises, marked a further milestone in the resurgence of Aus-
trian economics. Another organization for promoting Austrian
thought, the Society for the Development of Austrian Eco-
nomics, was officially founded in 1996.
Scholarly centers for the Austrian School are thriving in
Paris, Rome, Madrid, Bucharest, Beijing, Tokyo, Prague, and
Latin America. The writings of the masters appear in every
major language and new translations appear just about every
month. Austrian ideas have gained currency in other fields,
including history, philosophy, and law. And they are increas-
ingly popular in the mainstream financial press and brokerage
Today, 130 years after its founding, the Austrian School
has more adherents and a more active literature than at any
previous time in its history. Dissatisfaction with the artificial,
“economic man” of mainstream economics is widespread,
making the future of the Austrian School look even brighter
than its present.

Praxeological Economics and
Mathematical Economics

The problems of prices and costs have been treated also with
mathematical methods. There have even been economists who
held that the only appropriate method of dealing with
economic problems is the mathematical method and
who derided the logical economists as “literary” economists.


If not an economist, what am I? An outdated freak whose
functional role in the general scheme of things has passed
into history? Perhaps I should accept such an assessment,
retire gracefully, and, with alcoholic breath, hoe my cabbages.
Perhaps I could do so if the modern technicians had indeed
produced “better” economic mousetraps. Instead of evidence
of progress, however, I see a continuing erosion of the
intellectual (and social) capital that was accumulated
by “political economy” in its finest hours.


T economics”is
thoroughly mathematical. The vast majority of papers in
academic journals are dense with mathematical notation.
Nonmathematical approaches to the subject are often viewed
as unscientific and imprecise.


However, the success of the mathematical approach in
breaking new economic ground has been minimal. Even
Bryan Caplan, a critic of Austrian economics, admits, “[Mathe-
matical approaches] have had fifty years of ever-increasing
hegemony in economics. The empirical evidence on their
contribution is decidedly negative.”
That has led to a number of challenges to the mainstream.
The part of neoclassical theory most frequently under attack
has been the assumption of rational economic behavior. The
neoclassical notion of rationality posits that human behavior
should result in the same outcomes as a computer calculating
how to employ certain “parameters” to achieve an “optimum”
result. There is a great deal of fiddling around with what the
parameters should be, and exactly how to categorize the opti-
mum result. Many of the challenges to the neoclassical para-
digm recommend modifying the current models with some
new parameters, or adjusting what is considered optimal. Per-
haps an “altruism” parameter would modify the degree of self-
ishness the models apparently suggest, or mixing some quan-
tity of “social conformity” into the desired output might
explain the whims of fashion better. But some of the criticism
goes deeper: Mathematics, while not useless in economics,
cannot convey the principles of human action.
Mises explained the fundamental gulf between praxeologi-
cal economics and mathematics in Human Action:
Logic and mathematics deal with an ideal system of
thought. The relations and implications of their sys-
tem are coexistent and interdependent. We may say
as well that they are synchronous or that they are
out of time. A perfect mind could grasp them all in
one thought. Man™s inability to accomplish this
makes thinking itself an action, proceeding step by
step from the less satisfactory state of insufficient

cognition to the more satisfactory state of better
insight. But the temporal order in which knowledge
is acquired must not be confused with the logical
simultaneity of all parts of an aprioristic deductive
system. Within such a system the notions of anteri-
ority and consequence are metaphorical only. They
do not refer to the system, but to our action in
grasping it. The system itself implies neither the cat-
egory of time nor that of causality. There is func-
tional correspondence between elements, but there
is neither cause nor effect.

What distinguishes epistemologically the praxeologi-
cal system from the logical system is precisely that it
implies the categories both of time and of causality.

Let us take a famous mathematical discovery, the
Pythagorean theorem, as an example of what Mises is talking
about. As is well known to geometry students everywhere, the
theorem says that there is an immutable relationship between
the three sides of a right triangle, where the sum of the
squares of the legs is equal to the square of the hypotenuse
(a2 + b2 = c2). None of the legs of a triangle causes any of the
other legs to be a certain length. Neither Pythagoras™s equa-
tion nor any of the infinite number of triangles that it
describes have any temporal relationship to each other. We
needn™t go into the question of whether or not mathematical
forms have an existence independent of the human mind. In
either case, once we apprehend the Pythagorean relationship,
then the universe of right triangles, along with the relationship
of their sides and all other geometric facts about them, emerge
as aspects of a completely timeless, ideal form. Although our
limited minds must approach those aspects piecemeal, their
existence is simultaneous with the very notion “right triangle,”

and none of those aspects are prior to or stand in a causal
relationship to any other aspect of the ideal form.
Human action is different. Just as the idea of a right trian-
gle implies the Pythagorean theorem, the idea of human
action implies “before” and “after,” “cause” and “effect.” We
cannot make sense of human plans unless we understand that
there is a past that, for the human actor, provides the soil in
which the seeds of action might be sown; there is a present
during which the sowing might transpire; and there is a future
in which the actor hopes to reap the fruit of any action. Sim-
ilarly, we must see that the actor hopes that his action will be
the cause of a desired effect, or he would not act.
Viewing the economy as if it were a mathematical form is
coherent if it is seen, for instance, as the study of a limiting
state”equilibrium”that the real economy may gravitate
toward. But when used to explain human action it creates
confusion, for it eliminates from view real human choices, the
very phenomena that differentiate economics from other dis-
Let™s look at an example. Steven Landsburg™s microeco-
nomics textbook, Price Theory, reminds students:
It is important to distinguish causes from effects. For
an individual demander or supplier, the price is
taken as a given and determines the quantity
demanded or supplied. For the market as a whole,
the demand and supply curves determine both price
and quantity simultaneously.

Landsburg is telling students that they must not think of
prices as being determined by the actions of individuals”
individuals simply take prices as a given. Instead, it is the
abstract mathematical notions of supply and demand curves
that “simultaneously” determine what occurs in the market.

We can agree with Landsburg that it is important to distinguish
causes from effects. At the same time, we must contend that,
from the point of view of a science of human action, he has
gotten them backward. Prices and quantities only change as
the result of human action. Where in the world can a new
price come from if not a human bidding or asking above or
below the market price? It is the striving of individuals to bet-
ter their circumstances, in the face of an uncertain future, that
drives the market process.
Landsburg is forced into his odd posture because of his
desire to capture human action with mathematical equations.
Those equations cannot take into account creative human
decisions based on the categories of cause, effect, before, and
after. What they describe is a world of timeless correlations
from which causation is absent. Human intentions play no
part in the model, as the model assumes all humans can only
accept it as a given. Faced with the prospect of acknowledg-
ing the limits of his model, Landsburg opts for eliminating
human action from the economy.
The fact that supply and demand curves can give us a
rough picture of market behavior is an effect of human action,
and certainly not the cause of it. No one acts with the goal of
bringing supply and demand into balance. People act in the
market in order to profit, in the broadest sense of the word:
they exchange because they feel they will be better off after
the exchange than they were beforehand. That their search for
profit tends to bring supply and demand into balance is a by-
product of their actual goals. As Hayek says in Individualism
and Economic Order, “the modern theory of competitive equi-
librium assumes the situation to exist which a true explanation
ought to account for as the effect of the competitive process.”

In order to make economic theory amenable to a mathe-
matical treatment, neoclassical economists remove the very
subject matter of praxeological economics, human action,
from their theories. Mises says,
The mathematical economists disregard the whole
theoretical elucidation of the market process and
evasively amuse themselves with an auxiliary notion
[i.e., equilibrium] employed in its context and
devoid of any sense when used outside of this con-
text. (Human Action)

The study of the correlations provided by mathematical
descriptions of events is central to physics and chemistry
because in those fields we can determine constants of corre-
lation that allow us to make predictions. We feel confident
that electrons will not suddenly decide that they aren™t quite
so attracted to protons, and that oxygen will not come to the
conclusion that it would really prefer to bond with three
hydrogen molecules rather than two.
Such constants are absent in human action. The subject
matter of economics, in the Austrian view, is the logic of eco-
nomic events, not the correlations existing between them. The
study of those correlations is the subject matter of economic
history and will never reveal fundamental laws of economics,
because of the absence of constants. If we determine that last
year a 10¢ rise in the price of bread resulted in a 2-percent
reduction in demand”in neoclassical terms, we measure the
elasticity of demand for bread”that does not tell us what will
happen this year if there is another 10¢ increase.
Mathematical equations can be useful for modeling the
result of people following through on previously made plans.
Once a batter in a baseball game decides to swing at a pitch, we
can use an equation that, based on the initial force the batter

chose to apply to the bat, predicts the bat™s progress. This
equation will be of little use, however, in predicting whether
the batter will change his mind and check his swing.
Similarly, the relative price of the two stocks in a proposed
corporate merger may move in line with the predictions of a
mathematical model for some time. But should market partic-
ipants gain knowledge of something that alters their percep-
tion of the merger, the relative price of the stocks may differ
greatly from the model™s prediction. If rumors emerge indicat-
ing that the merger might fall through, the relative price of the
seller might plunge. Arbitrage traders must employ their his-
torical understanding in an attempt to grasp how other mar-
ket participants will react to that news. Once that reevaluation
is completed, a new risk factor for deal failure can be fed into
the model and it may again function reasonably well. How-
ever, the model, cannot capture the change of perception,
which is the beginning of the creation of a new plan. And it
is precisely the implications of that planning that is the sub-
ject of Austrian economics. That is the moment of human
choice, as the plan must aim for one goal while setting aside
others, and choose some means to achieve that goal while
rejecting others. Mathematical economics models the phases
of markets when plans are not being created or revised, in
other words, when the events that are of interest to Austrian
economists, human choices, are absent.
None of the above should be taken to mean that the math-
ematical approach to economics is useless, only that it cannot
capture the essence of human action. The British philosopher
Michael Oakeshott says that we can theorize about a particu-
lar phenomenon as either a mechanical system, characterized
by measurably constant responses to identical conditions, or
as an intelligent activity, seen as intelligent precisely because
it is not seen as the outcome of a mechanical process. In

commenting on the two different approaches to the social sci-
ences, Oakeshott says:
[In the formulation of a mechanical] “science of
society” . . . a society is understood as a process, or
structure, or an ecology; that is, it is an unintelligent
“going-on,” like a genetic process, a chemical struc-
ture, or a mechanical system. The components of
this system are not agents performing actions; they
are birth-rates, age groups, income brackets, intelli-
gence quotients, life-styles, evolving “states of soci-
eties,” environmental pressures, average mental
ages, distributions in space and time, “numbers of
graduates,” patterns of child-bearing or of expendi-
ture, systems of education, statistics concerning dis-
ease, poverty, unemployment, etc. And the enter-
prise is to make these identities more intelligible in
terms of theorems displaying their functional inter-
dependencies or causal relationships. . . . It is not
an impossible undertaking. But it has little to do
with human [action] and nothing at all to do with
the performances of assignable agents. Whatever an
environmental pressure, a behaviour-style, or the
distribution of gas-cookers may be said to be corre-
lated with or to cause (a rise in the suicide rate? a
fall in the use of detergents?) these are not terms in
which the choice of an agent to do or say this rather
than that in response to a contingent situation and
in an adventure to procure an imagined and
wished-for satisfaction may be understood. It is only
in a categorial confusion that this enterprise could
be made to appear to yield an understanding of the
substantive actions and utterances of an agent. (On
Human Conduct)

Austrian economics is the economics of people viewed as
creative, intelligent agents.

T to ponder the policy implications of the
Austrian view at greater length can™t do better than pick-
ing up a copy of Henry Hazlitt™s Economics in One Les-
son. Hazlitt is one of the finest writers ever to tackle economic
issues. In this book, inspired by Bastiat™s conception of the
seen and unseen aspects of policy, he examines a wide vari-
ety of economic interventions.
Carl Menger™s Principles of Economics is a model of clear
exposition and is packed with insights that retain their value
130 years after publication. Perhaps because Menger is laying
out the basis for marginalist, subjectivist economics for the
first time, he explains his concepts carefully enough that the
“intelligent layman” with no economic background should be
able to grasp his ideas.
Israel Kirzner™s new biography, Ludwig von Mises: The Man
and His Economics focuses on Mises™s economic thought. It is
another good introduction to Austrian ideas.
If you are serious about the study of Austrian economics,
either Ludwig von Mises™s Human Action, The Scholar™s Edi-
tion or Murray Rothbard™s Man, Economy, and State should be
tackled next. They are both large, imposing books, but both


are well written, and they are the two best sources for a sys-
tematic overview of Austrian theory. Which to choose? If you
are familiar with neoclassical economics, pick Rothbard™s
book, as it carefully explains the points of connection and
divergence between the Austrian and neoclassical approaches.
If you are more philosophically inclined, start with Mises, as
he spends more time on the philosophical background behind
his approach. Whichever you choose first, by all means con-
tinue with the other, if time and interest permits.
For more bibliographic references, grouped by subject, see
the Austrian Economics Study Guide: http://www.mises.org
/study.asp. There is also a web site for this book with more
information: http://www.economicsforrealpeople.com/.
Below is a list of some other recommended books, organ-
ized by the chapter(s) to which they are most relevant. For the
most part, I™ve limited the list to things that I™ve read and can
vouch for. There are certainly excellent books that aren™t on
the list simply because I™m not familiar with them.

Israel Kirzner, The Economic Point of View.
Michael Oakeshott, On Human Conduct.

Carl Menger, Principles of Economics.
Ludwig von Mises, The Ultimate Foundation of Economic

Israel Kirzner, An Essay on Capital.
Ludwig Lachmann, Capital and Its Structure.

Gerald P. O™Driscoll, Jr., and Mario Rizzo, Economics of Time
and Ignorance.

Leonard E. Read, I, Pencil.
Adam Smith, The Wealth of Nations.

James Buchanan, Cost and Choice: An Inquiry in Economic
Milton Friedman, Monetary Mischief: Episodes in Monetary
Ludwig von Mises, The Theory of Money and Credit.

Ludwig von Mises, Human Action.
Murray N. Rothbard, Man, Economy, and State.

Israel M. Kirzner, Competition and Entrepreneurship.
Ludwig von Mises, “Profit and Loss,” Planning for Freedom.

Howard Baetjer, Software as Capital.
Eugen von Böhm-Bawerk, Capital and Interest.
Ernst Cassirer, Language and Myth.
Lachmann, Capital and Its Structure.

Mises, The Theory of Money and Credit.
Murray Rothbard, The Case Against the Fed.
Leland Yeager, The Fluttering Veil.

Peter J. Boettke, Calculation and Coordination: Essays on
Socialism and Transitional Political Economy.
F.A. Hayek, Individualism and Economic Order.
F.A. Hayek, The Road to Serfdom.
F.A. Hayek, The Constitution of Liberty.
F.A. Hayek, The Fatal Conceit: The Errors of Socialism.
Ludwig von Mises, Socialism.
Murray Rothbard, Freedom, Inequality, Primitivism and the
Division of Labor.

Fr©d©ric Bastiat, Selected Essays in Political Economy.
Tom Bethell, The Noblest Triumph: Property and Prosperity
Through the Ages.
Hernando de Soto, The Mystery of Capital: Why Capitalism
Triumphs in the West and Fails Everywhere Else.
Henry Hazlitt, Economics in One Lesson.
Sanford Ikeda, The Dynamics of the Mixed Economy.
Steven Landsburg, Price Theory.

Hans Sennholz, The Politics of Unemployment.

Anthony M. Carilli and Gregory M. Dempster, “Expectations
in Austrian Business Cycle Theory: An Application of the
Prisoner™s Dilemma.”
Roger Garrison, Time and Money: The Macroeconomics of
Capital Structure.

Steven Horwitz, Microfoundations and Macroeconomics: An
Austrian Perspective.
W.H. Hutt, The Keynesian Episode.
Mises, The Theory of Money and Credit.
Murray Rothbard, America™s Great Depression.
Richard K. Vedder and Lowell E. Gallaway, Out of Work:
Unemployment and Government in Twentieth-Century

Ronald Coase, Essays on Economics and Economists.

Ikeda, The Dynamics of the Mixed Economy.
Landsburg, Price Theory.
Murray Rothbard, The Logic of Action I.

Kirzner, Competition and Entrepreneurship.
Stan J. Liebowitz and Stephen Margolis, Winners, Losers,
and Microsoft.

Bastiat, Selected Essays in Political Economy.

John Gray, Enlightenment™s Wake: Politics and Culture at the
Close of the Modern Age.
Hans-Hermann Hoppe, “Marxist and Austrian Class Analysis.”
Timur Kuran, Private Truths, Public Lies: The Social Conse-
quences of Preference Falsification.
Mises, The Ultimate Foundation of Economic Science.

Benjamin M. Anderson, Economics and the Public Welfare.
Frank A. Fetter, Capital, Interest, and Rent.
F.A. Hayek, The Fortunes of Liberalism.
Randall G. Holcombe, ed., 15 Great Austrian Economists.
Kirzner, Ludwig von Mises: The Man and His Economics.
Murray Rothbard, Economic Thought Before Adam Smith.
Murray Rothbard, Classical Economics.

Israel Kirzner, The Meaning of the Market Process.
Landsburg, Price Theory.
Mises, The Ultimate Foundation of Economic Science.

Anderson, Benjamin. 1979. Economics and the Public Welfare.
Indianapolis, Ind.: Liberty Fund.

_____. 1917. The Value of Money. New York: Macmillan. Reprinted by
Libertarian Publishers, Grove City, Penn., n.d.

Baetjer, Howard. 1998. Software as Capital. Los Altimos, Calif.: IEEE
Computer Society.

Bastiat, Fr©d©ric. 1995. “What is Seen and What is Not Seen.” In Bastiat,
Selected Essays in Political Economy. Irvington-on-Hudson, N.Y.:
Foundation for Economic Education.

Bethell, Tom. 1999. The Noblest Triumph: Property and Prosperity
Through the Ages. New York: St. Martin™s Press.

Boettke, Peter. 2001. Calculation and Coordination: Essays on Socialism
and Transitional Political Economy. London: Routledge.

Böhm-Bawerk, Eugen von. 1959. Capital and Interest. 3 Vols. South
Holland, Ill.: Libertarian Press. Includes History and Critique of Interest
and Theories and Positive Theory of Capital.

Buchanan, James. 1979. What Should Economists Do? Indianapolis, Ind.:
Liberty Press.

_____. 1979. Cost and Choice: An Inquiry in Economic Theory. Chicago:
University of Chicago.

Callahan, Gene, and Roger W. Garrison. 2002. “A Classic Hayekian
Hangover.” Ideas on Liberty (January).

Cantillon, Richard. 1959. Essay on the Nature of Commerce. Henry Higgs,
ed. and trans. London: Frank Cass.

Carilli, Anthony M., and Gregory M. Dempster. 2001. “Expectations in
Austrian Business Cycle Theory: An Application of the Prisoner™s
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Accountants, 107, 180 Banks, 138“40, 148, 210, 228
Barter, 73
Action, 13, 17“24, 26“27, 29“30, 35,
37, 39“42, 45“47, 52“54, 70, 75, Bass, Carole, 271
77, 97“98, 108, 147, 149, 158, 210,
Bastiat, Claude-Fr©d©ric, 19, 27, 201,
219, 316“18, 321“28
272“73, 281“84, 293, 309
Agriculture Department, 276, 279
Bauer, Otto, 313“14
Air, 197 Betamax, 260“61, 263“64
America Online, 104 Bethell, Tom, 186
Anderson, Benjamin M., 313 Bezos, Jeff, 104
Antitrust, 259“70 Blacksmiths, 19, 128
Apple Computer, 267“68 Block, Walter, 253, 274n, 295
Arbitrage, 114“15, 327 Bodin, Jean, 147
Arthur, Brian, 261 Boettke, Peter, 169“708
Aquinas, Thomas, 307 Böhm-Bawerk, Eugen von, 131“32,
311“14, 318
Austrian Institute for Business Cycle
Research, 315 Bolsheviks, 169
Austrian School of economics, British Currency School, 313
11“12, 34, 110, 131, 139, 172,
Buchanan, James, 321
291“92, 297, 307“19
Business cycle theory (boom and
Austrian economists, 125, 222, 224, bust), 229“35, 285“87
232, 246, 274n, 285, 296, 299, 314,
Calculation, 27, 71“72, 81“82, 84,
business cycle theory, 212 ff.
94, 157“76, 172, 186, 230, 262“63,
269“70, 314
Banking Cantillon effects, 148“49
free, 139 Cantillon, Richard, 149, 307“08
reserve, 139 Cantor, Paul, 317


Capital Consumer Reports, 240
capital goods, 49“57, 82, 88, Consumers, 66, 79“80, 91, 94,
101“02, 110“16, 118, 121“32, 101“03, 106“07, 109, 111, 119“20,
167, 186, 196“98, 205“35, 243,
122, 127“30, 130, 139, 159, 160,
262, 276“304, 309, 311“13, 315,
165“66 180, 202“04, 212“15, 217,
318, 321
219, 229, 231“32, 237“40, 243“46,
social capital, 123“25
258, 278“87, 301“05
structure of, 125“31
sovereignty, 128“29
Capitalists, 21, 101“03, 105, 107, 109,
Corrigan, Sean, 216
111“13, 119, 312
Costs, 24, 27, 39“40, 67, 69, 91“94,
Carilli, Anthony, 232
114, 131“33, 138, 177, 180, 186“87,
Caplan, Bryan, 322
209, 227, 233, 238, 245, 249,
Case, Steve, 104
251“52, 254“55, 257, 261, 275, 279,
Cassirer, Ernst, 134 311, 321
Cheung, Steven, 252
opportunity, 93
Choice, 23“26, 34, 40“42, 44“46, 50,
Credit, 209“10, 213, 213“21, 226“29,
61, 85, 107, 159, 163, 167, 174, 181,
231“32, 282, 313, 315
183, 188, 211“12, 230, 239, 241“42,
Crusoe, Robinson, 13
249, 259, 267, 269, 275, 280,
291“92, 294, 301, 303, 308, 310,
Civil War, 207
David, Paul, 266
Clark, Jim, 104
Deflation, 141“44, 214
Coase, Ronald, 241, 246, 251
Demand, 11, 65, 75“78, 86, 89“90,
Communist China, 172
92, 106, 109, 111, 115, 119, 122,
Communitarians, 302
128, 131, 139, 153, 163, 165, 166,
Competition, 79“80, 117, 159, 173, 180, 198, 201, 203, 207“08, 212,
198, 231, 238, 241, 266“67, 318
284“87, 307, 324“26
Complementary goods, 55“56
Dempster, Gregory, 231
Computers, 60, 122, 204“05, 242,
Depressions. See Business cycle
Congress, 184, 276“77, 280
Development, 271“90
Consumer goods, 49
Diamond, Jared, 260, 266
Consumers, 119“20
Diamond-water paradox, 42“44
Consumer choice, 239, 301
Distribution, 101“05
Consumer price index (CPI), 150“53
Division of labor, 59“61, 64“65, 176,
Consumer Product Safety
Commission, 239 221, 309

Dole Foods, 279 Export Enhancement Program, 279
Externalities, 249“58
Dvorak keyboard 260, 264“66

Federal Reserve, 111, 140, 195,
Ebeling, Richard, 315
209“33, 293, 297, 327
Economic calculation, 71“72, 80“81,
86“89, 159“61, 165“68, 230, 269 Fetter, Frank, 311“12
Economic good, 197 Fiduciary media, 146“48
Economics, defined, 11“14, 17“32, Fisher, Irving, 146“48, 313
44“56, 60“62, 64“96, 98, 102“20,
Foreign policy, 279
291“305, 307“21, 324, 326“28
Foundation for Economic Education
supply side, 297
(FEE), 317
Efficiency, 131, 177, 184“88, 258,
Fox, Justin, 223
266, 269
Free market, 159, 169, 183“84, 202,
Egypt, 186, 278
257“58, 299, 310
Ellison, Larry, 104
Free riders. See Externalities
Emissions, 250
Freedom, 18, 106, 116, 175“76, 296,
Energy, 254“56
301, 307, 316, 318
Enron, 218
Friedman, Milton, 83, 222
Entrepreneur, 75, 94, 104“11, 113,
130“31, 134, 159“60, 165“66, 173,
200, 202, 229“30, 232, 234, 238, Gallo Wines, 279
258, 266“67, 274, 286, 304, 318
Garrison, Roger, 205, 213n, 215, 230
Environmental protection, 198
Gataletto, Dominick, 299
Equilibrium, 11, 95“99
Gates, William, 24, 104, 269
evenly rotating economy (ERE), Gross domestic product (GDP), 145,
97, 105 216
Equality, 69“70, 175“76 George Mason University, 169, 223
Erhard, Ludwig, 315 German Historical School, 310, 315
Exchange, 21, 54, 59, 64“67, 69“73, Gillmor, Dan, 242
75, 77“86, 95, 101, 113“14, 137,
Gingrich, Newt, 277“78
143, 150“51, 176, 182, 195, 199,
Goods, 197, 199
201, 221, 232, 251“52, 256, 270,
284, 298, 307, 315, 325 Gross national product (GNP), 145
direct, 65“70, 73 Goethe, Johann Wolfgang, 88
indirect, 81“85 Goldberg, Robert, 181
Expectations, 223“28 Gorbachev, Mikhail, 170
Exploitation, 298“99 Gordon, David, 295

Gottfried, Paul, 302 Human action, 18, 20“23, 29“30, 37,
39, 46, 47, 52“54, 70, 75, 77,
Governments, 102, 140, 144“45,
97“98, 103“04, 108, 113, 125, 147,
195, 203, 234, 272, 293, 298, 302,
149, 158, 168, 212, 219, 293“95,
304, 307
307, 309, 311, 316, 322, 324“28
Gray, John, 301“02
Hume, David, 147
Great Depression, 183“84, 222, 318
Hussein, Saddam, 125
Greaves, Bettina Bien, 317
Hutt, W.H., 112, 130, 216, 285
Greaves, Percy, 317
Greenspan, Alan, 111
Ikeda, Sanford, 97n, 178, 180“83, 256
Gregerson, Steve, 258
Index numbers, 150“55
Groundhog Day, 97
Individualism, 34, 305, 325
economic, 145, 179, 209, Industrial Revolution, 18
217“18, 220“21, 224“25, 230,
Inequality, 175, 297
Inflation, 90, 141, 144“50, 153,
Gulf War, 125
209“10, 214, 217, 230, 297, 307
Infrastructure, 271“87
Intel, 260
Haberler, Gottfried, 314
Intellectuals, 175 302, 314
Harvard University, 313, 314
Interest, 28, 54, 105, 107, 113“15,
Hayek, F.A., 91, 93, 161“64, 165,
172“75, 179, 199, 222, 253, 274n, 131“32, 138, 179, 205“25, 228“35,
292“94, 296, 308, 311, 314“16, 245, 311“13
319, 325 International Monetary Fund (IMF),
Hazlitt, Henry, 268n, 309, 317
Internet, 126, 215“19
Health care, 180“82
Interventionism. See Mixed econ-
Heartland Institute, 276
Hitler, 174
Investment, 54, 102, 113“15, 118,
HMOs, 181 127, 212“14, 217“18, 227, 229,
Honda, 260 266, 273, 275, 277, 312
Hoover administration, 183, 222 malinvestment, 219“20
Hoppe, Hans-Hermann, 274n, 295, Investors, 113“15, 196, 198, 218,
298 228, 232, 274“76
Hülsmann, Jörg Guido, 179, 295
Human Action, 13, 17“18, 20“22,
Java, 204, 227
26, 52, 88“89, 98, 101, 104, 108,
Jevons, William Stanley, 41n, 310
116, 121“22, 153, 166“67, 209, 210,
227, 286, 303, 317, 321“22, 326 Johns Hopkins, 314

Kedrosky, Paul, 261 Liebowitz, Stan, 264“67
Keynes, John Maynard, 28, 206, 317 Linux, 244
Keynesians, 125, 284“87, 315, 317 Livestock, 83“84
Kinsella, Stephan, 274n Locke, John, 147
Kirzner, Israel, 17“18, 91, 111, Logic, 29, 37, 39, 223, 254, 291“92,
121“22, 132, 311, 314, 317“18 318, 322, 326
Knowledge (learning), 35“36, London School of Economics, 315
161“64 Long-Term Capital Management,
Koether, George, 317 206, 216, 229
Krugman, Paul, 141“42, 142n, 254, Loss, 17, 27, 30, 51, 65“66, 71, 91,
257 94, 106“07, 179, 185, 207“08, 217,
274“77, 286, 297
Kundera, Milan, 170
Lucas, Robert, 223
Kuran, Timur, 300
Kurtz, Steve, 184

Machlup, Fritz, 314
Macintosh Computer, 260“61,
Labor, 115“18
marginal productivity of, 117
Macroeconomics, 122, 213, 230
Lachmann, Ludwig, 49, 132, 292“93,
Malthus, Thomas, 21
296, 316, 318“19
Margasak, Larry, 276
Land, 30“31, 83“84, 105“06, 109,
111, 114, 126, 186, 256, 275, 298, Marginalist revolution, 310
303 Margolis, Stephen, 264“67
Landsburg, Steven, 184“85, 324“25
Market Access Program, 279
Late Scholastics, 19, 307, 315,
Market failure. See Mixed economy
Market process, 75“80, 95“96, 106,
Law, 78, 80, 89, 140, 175, 184,
110, 147, 149, 159, 165, 173,
196“97, 199, 202, 203, 257, 315
177“78, 181“82, 187, 199, 201,
Law of association, 59“65
203“04, 238, 240, 255, 268, 296,
Law of comparative advantage, 62 305, 309, 316, 318, 325“26
Law of diminishing marginal utility, Marshall, Alfred, 90“92, 128, 316
Marx, Karl, 20“21, 42, 71, 101“02,
Legislation, 192, 258, 315 314


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