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Austrian History (2 of 2)

Austrian History (2 of 2)

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09/11/2010

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THE HISTORY OF AUSTRIAN SCHOOL OF ECONOMICS
1936-2001
Alexandre Padilla
University of Law, Economics and Science of Aix-Marseille (FRANCE) and George Mason University 
 alexpadilla@mises.org http://www.alexpadilla.org ORGANIZATION:(1) The Interwar Period(2) Mises'
Human Action
and Hayek's
Individualism and Economic Order 
 (3) The Austrian Revival(4) The Present State of Austrian School of Economics1. The Interwar Period
As we have seen previously by the mid-30's, there was virtually no
 Austrian School of Economics
. Mainstream economics has absorbed more or less the important points theAustrians made.
Its members were dispersed around the world:
Hayek was at LSE (1931), which became the new intellectual center of theuniverse. He moved to US at the Chicago University (1950).
 
Mises' students moved to U.S.: Haberler, Machlup, Morgenstern,Schumpeter had prestigious position in U.S. universities.
 
Mises moved to Switzerland in 1934 because of Nazi's takeover threat of over Austria. Mises stayed in Switzerland (Geneva) until 1940 and after moved to US in 1940 to New York. His chair as a professor of InternationalEconomic Relations at the Graduate Institute of International Studies at theUniversity of Geneva was his first and last paid academic post. Actually, heturned down a position at UCLA.
 
Keynesian avalanche buried Austrian School.
 
True, Hayek and Mises published many works and were involved in many debates:
 
Mises (1920, 1922) and Hayek (1935) were involved in Socialist CalculationDebate against Socialist economists such as Taylor, Lerner, Roper,Dickinson, and Oskar Lange who was the most prominent figure.
 
Hayek has been involved with a debate with Keynes on the
Treatise onMoney 
(1930) but unfortunately did not write
 A General Theory of Employment, Interest and Money 
(1936).
 
1
 
Hayek has been involved in a debate with Piero Sraffa and Frank Knight over Theory of Capital in the 30's.
Mises published in 1940 in
Nationalökonomie
while he was teaching in Switzerland. This bookrepresents the crowning point of his scientific research in the fields of monetary theory and thetrade cycle, the comparative analysis of economic systems, and the methodology of socialsciences. Unfortunately,
Nationalökonomie
proved a total flop because of the war and thereforepeople did not read it. Only Knight (another occasion for Knight to attack Austrian theory of capital) and Hayek reviewed it.
 
Hayek published several papers (1937, 1945, 1948), which later will be considered as his mostimportant contributions, in particular, among Hayekians. These papers mark the beginning of Hayek's dissatisfaction with general equilibrium economics and the change of his views oneconomics (focus on knowledge problems).
 2. The Post-WWII: Mises'
Human Action
(1949) and Hayek's
Individualism and Economic Order 
 (1948) – The Rebirth of Austrian School
The late 40's mark the beginning of the revival of Austrian Economics with two important books.
In 1948, Hayek published a collection of lectures and papers that he has previously given or published.
 
In 1949, Mises published
Human Action
:
 A Treatise on Economics
at Yale University Press. Thisbook did not share the same fate of its German language predecessor and has been in print since1949 and continues to be sold (1996: 4th Edition published by the FEE; 1998: Scholar's Editioncelebrates the 50th birthday of Human Action). This book was originally considered as the Englishversion of its German predecessor and has the same overall structure of seven parts. However,there are significant differences. First, it is longer and has numerous additions. Second, somepassages, sections, and chapters previously in
Nationalökonomie
have been omitted, shortened or modified. One important addition is the chapter on Uncertainty.
 
 
Human Action
is important in two respects:
 
First, it is an attempt to revive the Mengerian tradition.
 
Second, this work tries to correct the flaws existing in the Mengerian system;elaboration into a complete and unified system of economic theory.
 
Reference on the role of Human Action in the revival of the Austrian School, see Joseph T. Salerno,"The Place of 
Human Action
in the Development of Modern Economic Thought,"
Quarterly Journal of  Austrian Economics
, Spring 1999, Volume 2, No. 1.
 
See also Herbener, Hoppe, and Salerno (1998), "Introduction to the Scholar's Edition".
 
See also Peter J. Boettke (2001), "The Place of 
Nationalökonomie: Theorie des Handelns und Wirtschaftens
in Modern Political Economy."
 
For fun – You can download mp3 onwww.mises.organd I encourage to listen the following files:
 
Rothbard, "Mises in One lesson"
 
Joseph T. Salerno, "
Human Action
in the History of Economic Thought,"
MisesUniversity 2001
.
 
2
 
3. Rothbard, Kirzner, and Lachmann: 1956-1974
Three major economists contributed to the Austrian revival: Rothbard (1926 -1995), Kirzner (1930 -), and Ludwig M. Lachmann (1906-1990).
 
Two of them, Rothbard and Kirzner, were Mises' students at New York University when he wasteaching, every Thursday evening, seminar on economic theory as permanent "visiting Professor" atthe Graduate School of Business.
Rothbard attended at Mises' seminars when he was graduate student at Columbia University andwas Joseph Dorfman's student. Already a great defender of free-market, Rothbard had beenintroduced to Mises while he was "hanging out" at the Foundation for Economic Education (FEE).
 
Kirzner attended at Mises' seminars when he was completing a MBA with a major in accounting.After meeting Mises and attending his seminars, he "saw the light" and decided to pursue a Ph.D.under Mises.
(Little story, when Kirzner came to give a talk in Aix-en-Provence – where I am from -, he told us,that when he was planning to do a Ph.D., he received an offer from Machlup, who was also a Mises'student, to come to pursue his Ph.D. at Princeton. He went to see Mises for advice and Mises kindlyadvised him to accept the offer. Mises considered that working under the direction of Machlup was agreat opportunity for Kirzner. Kirzner turned down Princeton's offer.)
 
The third contributor to the Austrian revival was a Hayek's student, Ludwig Lachmann, at LSE.Nevertheless, there is no doubt that Mises had a strong impact on Lachmann.
 
We can list Rothbard and Kirzner's works which have contributed to the revival of AustrianEconomics in 1974. Lachmann's contributions, while important, have more contributed to thedevelopment of Austrian School from inside; that is to say, Lachmann's work has played a role of agitator by raising questions.
 
Rothbard' works are Misesian in the strict sense of the term. Follower of Mises, he belongs to the"rationalist" branch of Austrian Economics (See Hoppe (1999), "Murray Rothbard: Economics,Science and Liberty"). Between 1956 and 1974, Rothbard has already published that we wouldcalled today classics in Austrian Economics:
 
1956: "Toward a Reconstruction of Utility and Welfare Economics" – In thismasterpiece, he develops his concept of 
demonstrated utility 
.
 
1960: "The Mantle of Science" – In this paper, Rothbard develops a defense of Misesian/Austrian methodology.
 
1963:
Man, Economy, and State
– Treatise on Economics. He wrote this treatiseat the age of 36! It is a "simplified" version of Mises'
Human Action
that wasintended to economists not familiar with Austrian Economics. However, thisbook contains to elaboration of Mises' work: A Theory of Monopoly and atypology of Government Interventions.
 
1963:
What has Government Done to Our Money? 
– This booklet is anintroduction to monetary theory and
 America's Great Depression
– Applicationof Austrian Business Cycle to the Great Depression; the cause of GreatDepression originates in FED's inflationary monetary policy in the 20's.
 
1970:
Power and Market 
– Elaboration and Extension of 
Man, Economy, and State
's Chapter XII on Government Intervention.
 
1973: "Praxeology as the Method of Economics," "Praxeology as the Method of Social Sciences," Value Implications of Economic Theory."
 
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