Austrian Family Album
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AN AUSTRIAN TIME LINE THE lATE SCHOLASTICS Francisco de Vitoria (c.1485-1546) Juan de Medina (1490-1546) Martin de Azpilcueta Navarrus (1493-1586) Domingo de Soto (1494-1560) Diego de Covarrubias y Leiva (1512-1577) Luis de Molina (1535-1601) Juan de Mariana (1536-1624) RICHARD CANTILLON (1680-1734) Etierme Bormot de Condillac (1714-1780) AR.J. Turgot (172 7-1781) Antonie Louis Claude Destutt, Comte de Tracy (1754-1836) Jean Baptiste Say (1767-1832) Claude Frederic Bastiat (1801-1850) Gustave de Molinari (1819-1911) CARL MENGER (1840-1921) Philip Henry Wicksteed (1844-1927) Knut Wicksell (1851-1926) Friedrich von Wieser (1851-1926) EUGEN YON BOHM-BAWERK (1851-1914) James Bonar (1852-1941) William Smart (1853-1915) Robert Meyer (1855-1914) Eugen von Philippovich von Philippsberg (1858-1917) Frank Taussig (1859-1940) Edwin Carman (1861-1935) Herbert Davenport (1861-1931) Frank Fetter (1863-1949) Henry Rogers Seager (1870-1930) Luigi Einaudi (1874-1961) Hans Mayer (1879-1955) LUDWIG YON MISES (1881-1973) Joseph Schumpeter (1883-1950) Benjamin Anderson (1886-1949) Faustino Ballve (1887-1958) Leo Schonfeld-Illy (1888-1952) Richard von Strigl (1891-1942) John V van Sickle (1892-1975) Henry Hazlitt (1894-1993) Trygve J.B. Hoff (1895-1982) Katsuichi Yamamoto (1896-1987) Jacques Rueff (1896-1978) Ludwig Erhard (1897-1977) V Orval Watts (1898-1993) Lionel Robbins (1898-1984) Ewald Schams (1899-1955) Wilhelm Ropke (1899-1966) Friedrich A von Hayek (1899-1992) William Hutt (1899-1988) Gottfried von Haberler (1900-1995) Fritz Machlup (1902-1983) Paul Rosenstein-Rodan (1902-1985) Oskar Morgenstern (1902-1977) G.L.S. Shackle (1903-1992) F. A Harper (1905-1973) Ludwig Lachmarm (1906-1991) Percy L. Greaves, Jr. (1906-1984) Bruno Leoni (1913-1967) Jack Wiseman (1919-1991) Benjamin Rogge (1920-1980) William W Bartley (1934-1990) MURRAY N. ROTHBARD (1926-1995) THE TRADITION CONTINUES. I\ustrian School: A Family Album THE STORY OF THE AUSTRIAN they urged governments to obey SCHOOL begins in the fifteenth ethical strictures against theft and century, when the followers of murder. And they lived up to Thomas Aquinas, writing and Ludwig von Mises's rule: the first The value of an article does teaching at the University of job of an economist is to tell not depend on its essential Salamanca in Spain, sought to governments what they cannot nature but on the estimation explain the full range of human do. of men, even if that action and social organization. The first general treatise on estimation is foolish . These Late Scholastics economics, Essay on the Nature of DrEGO DE COVARRUBIAS observed the existence of economic Commerce, was written in 1730 by law, inexorable forces of cause and Richard Cantillon, a man schooled effect that operate very much as in the scholastic tradition. Born in other natural laws. Over the Ireland, he emigrated to France. He course of several generations, they saw economics as an independent Diego de Covarrubias. one of the lAte Scholastics discovered and explained the laws area of investigation, and explained of supply and demand, the cause the formation of prices using the of inflation, the operation of "thought experiment." He exchange rates, and the subjective understood the market as an nature of economic value-all entrepreneurial process, and held To suppose all consumers to reasons Joseph Schumpeter be dupes, and all merchants to an Austrian theory of money and manufacturers to be celebrated them as the first real creation: that it enters the cheats, has the effect of economists. economy in a step-by-step authorizing them to be so, The Late Scholastics were fashion, disrupting prices along of degrading all the working advocates of property rights and the way. members of the community. Cantillon was followed by the freedom to contract and trade. AR.J. TURGOT They celebrated the contribution of Anne Robert Jacques Turgot, the business to society, while doggedly pro-market French aristocrat and opposing taxes, price controls, and finance minister under the ancien regulations that inhibited regime. His economic writings were Anne Robert Jacques Turgot enterprise. As moral theologians, few but profound. His paper The Austrian School: A Family Album 1 • "Value and Money" spelled out Say discovered the the origins of money, and the productivity theory of resource nature of economic choice: pricing, the role of capital in The best tax is that it reflects the subjective the division of labor, and always the lightest. rankffigs of an individual's "Say's Law": there can never J.B. SAY preferences. Turgot solved the be sustained "overproduction" famous diamond-water or "underconsumption" on the paradox that baffled later free market if prices are classical economists, allowed to adjust. He was a articulated the law of defender of laissez-faire and diminishing returns, and the industrial revolution, as criticized usury laws (a was Bastiat. As a free-market sticking point with the Late journalist, Bastiat also argued Scholastics). He favored a that nonmaterial services are classical liberal approach to subject to the same economic economic policy, laws as material goods. In one recommending a repeal of all of his many economic Jean Baptiste Say special privileges granted to allegories, Bastiat spelled out government-connected the "broken-window fallacy" industries. later popularized by Henry Turgot was the intellectual Hazlitt. father of a long line of great Despite the theoretical French economists of the sophistication of this eighteenth and nineteenth developing pre-Austrian Property is a necessary centuries, most prominently tradition, the British school of consequence of the Jean Baptiste Say and Claude the late-eighteenth and early nature of man. Frederic Bastiat. Say was the nineteenth centuries won the fReCX!RIC BASTIAT first economist to think deeply day, mostly for political about economic method. He reasons. This British tradition realized that economics is not (based on the objective-cost about the amassing of data, and labor-productivity theory but rather about the verbal of value) ultimately led to the elucidation of universal facts rise of the Marxist doctrine of (for example, wants are capitalist exploitation. Claude Frederic Bastiat unlimited, means are scarce) The dominant British and their logical implications. tradition received its first 2 - The Austrian School: A Family Album All things are subject to the law of cause and effect. This great principle knows no exception. CARL MENGER Precious metals naturally became the economic form of money in the ordinary trading relations of civilized peoples. CARL MENGER Car! Menger Car! Menger (left) and a friend fishing. serious challenge in many years when Carl Menger's Principles money originates in a free market when the most marketable of Economics was published in 1871. Menger, the founder of the commodity is desired, not for consumption, but for use in Austrian School proper, resurrected the Scholastic French trading for other goods. approach to economics, and put it on firmer ground. Menger's book was a pillar of the "marginalist revolution" Together with the contemporaneous writings of Leon in the history of economic science. When Mises said it "made Walras and William Stanley Jevons, Menger spelled out the an economist" out of him, he was not only referring to subjective basis of economic value, and fully explained, for the Menger's theory of money and prices, but also his approach to first time, the theory of marginal utility (the greater the the discipline itself. Like his predecessors in the tradition, number of units of a good that an individual possesses, the less Menger was a classical liberal and methodological individualist, he will value any given unit). In addition, Menger showed how viewing economics as the science of individual choice. His The Austrian School: A Family Album 3 Investigations, which came value, price, capital, and In capitalistic enterprise, the great out twelve years later, battled interest. His History and personalities of entrepreneurs have the German Historical Critique of Interest Theories, risen to their full stature: bold technical School, which rejected theory appearing in 1884, is a innovators, organizers with a keen and saw economics as the sweeping account of fallacies knowledge of human nature. accumulation of data in in the history of thought and FRIEDRICH VON WIESER service of the state. a firm defense of the idea that As professor of the interest rate is not an economics at the University artificial construct but an of Vienna, and then tutor to inherent part of the market. Friedrich von Wieser the young but ill-fated It reflects the universal fact of Crown Prince Rudolf of the "time preference," the Labor cannot House of Habsburg, Menger tendency of people to prefer increase its share restored economics as the satisfaction of wants sooner at the expense science of human action rather than later (a theory of capital. based on deductive logic, and later expanded and defended EUGEN 1'011 B6HM·BAWERJ< prepared the way for later by Frank Fetter). theorists to counter the Bohm-Bawerk's Positive influence of socialist thought. Theory of Capital Indeed, his student Friedrich demonstrated that the von Wieser strongly normal rate of business influenced Friedrich von profit is the interest rate. Hayek's later writings. Capitalists save money, pay Menger's work remains an laborers, and wait until the excellent introduction to the final product is sold to receive economic way of thinking. profit. In addition, he At some level, every Austrian demonstrated that capital is since has seen himself as a not homogeneous but an student of Menger. intricate and diverse Menger's admirer and structure that has a time follower at the University of dimension. A growing Innsbruck, Eugen von Bohm econom y is not just a Bawerk, took Menger's consequence of increased exposition, reformulated it, capital investment, but also Eugen von B6hm-Bawerk and applied it to a host of of longer and longer new problems involving processes of production.