All Commentary
Saturday, February 1, 1997

Book Review: Austrian Economics: An Anthology edited by Bettina Bien Greaves

A Thorough Grounding in Austrian First Principles

The Foundation for Economic Education • 1996 • 176 pages • $14.95 paperback

In my years in academia, I’ve attended many seminars in Austrian economics and even taught a few. Indeed, Austrian Economics: An Anthology reminds me of nothing so much as one of those scholarly assemblies—a seminar between covers, if you will. Led by Dr. von Mises, assisted by Dr. Bohm-Bawerk, and graced with the presence of visiting professors Bonar and Seager, this seminar delves into the origins and first principles of Austrian economics. All of these proceedings take place under the watchful eye of Dean Bettina Greaves, who went to great lengths to assemble the essays that make up this volume and wrote an enlightening introduction to it.

In any discussion of the origins of Austrian economics, the rivalry between Vienna and Berlin looms large. H. R. Seager’s discussion of the contrasts between the Austrian School and the German Historical School is enlivened by details of the actual participants available only to an eyewitness. While showing utmost respect for the scholars of both schools, Seager does not shrink from the conclusion that, contrary to the assertions of the German Historical School, all the historical data in the world can teach us nothing without being sifted through a filter of theory. The inadequacy of that approach comes through clearly in his description of chief German Historical School proponent Gustav Schmoller’s attempt to explain value and price. In this part of his lectures, the student meets only confusion, loose definitions, and description instead of careful analysis, and conclusions arrived at, no one knows exactly how. His elucidation of the action of demand and supply in fixing price seemed to me especially unhappy.

While Seager describes the products of this approach, Mises, in his previously published contributions here (including The Historical Setting of the Austrian School and The Epistemological Problems from Human Action) analyzes its essence. While Seager accords Schmoller and his colleagues the status of economist, Mises correctly sees their approach as the nullification of economics. To Mises, economists exposed the dispensation of privileges by governments to their sustainers for the injustice that it is. The German Historical School, however, glorified government and its prerogatives and sought, with undeserved success, to brand laissez faire a parochial and outmoded doctrine. Mises’ penetrating mind cut through their muddled methodological arguments to unearth the method in their madness: The only way to refute economists’ critique of interventionism is to deny the very existence of economics as a science.

Where the Austrians’ method of making logical inferences from the irrefutable axiom of human action (i.e., that people seek to achieve goals) was attacked by the Germans as yielding nothing but tautologies, Mises correctly insists that tautologies do indeed add to our substantive knowledge. This is especially true when the adherents of the Historical School were busy denying these tautologies—with the predictable tragic consequences.

In The Austrian Economists, Bohm-Bawerk steers the seminar away from the methodological battles, which he sees as distractions, however necessary they may be, to the crux of the matter, namely, the reform of positive economic theory. He does not dwell here on his own monumental contribution to our understanding of capital and interest, but rather on how Austrian economics stands the labor theory of value on its head by showing that value determines cost.

Make no mistake about it. It was their value theory which made it possible for Austrian economists to elucidate such issues as the role of money in economic activity and the inability of socialism to engage in rational economic calculation. Thus, it is appropriate that the first essay in this collection is James Bonar’s lengthy appreciation of Austrian value theory. While he errs in one particular, claiming that Austrian economic ideas are, substantially identical with those of Jevons, a fellow discoverer of the marginalist principle who stressed the use of mathematics to advance economic theory, elsewhere he captures a truth which only Austrians have taken to its ultimate conclusion: Objective value in exchange is the resultant of subjective valuations of the competing individuals in a commercial society.

As any good seminar does, this book provides a reading list (References for Further Study), not to mention an index. To the serious student seeking real intellectual stimulation and a thorough grounding in Austrian first principles, I would say to sign up for this course before it fills up.

  • Robert Batemarco teaches economics on an adjunct basis at Fordham University and Manhattan College. He was formerly book review editor of The Freeman. He is a member of the FEE Faculty Network.