Thoughtful Marxist economists have often, it appears, been fascinated by Austrian economics. Some 70 years ago Nikolai Bukharin (the eminent Marxist economist, who had attended Bohm-Bawerk’s famous Seminar, and who was later to be executed by Stalin) perceptively pronounced Austrian economics (among all the schools of economic theory then on the stage) to be the principal intellectual enemy of Marxism. In the present volume we find a thoroughgoing exposition of modern Austrian economics together with a searching critique of it from the vantage point of “democratic socialism” (p. xi), reflecting the author’s explicit acceptance of the Marxist perspective on the market system (see pp. 9-10). As such the volume will be of considerable interest to Austrian economists on several counts.
One source of interest will be that an obviously highly intelligent Marxist scholar has taken note of the developments in Austrian economics during recent decades, and has judged them to be of sufficient importance to warrant a careful and lengthy analysis and critique. This reflects, one may surmise, the judgment that the Austrian criticisms of neoclassical orthodoxy and the newer articulations of the Austrian understanding of markets and market processes, offer fresh threats to the older socialist criticisms of the market.
A second source of interest for Austrian economists will be the author’s substantive exposition of modern Austrian economics (i.e., those late twentieth-century developments in the Austrian tradition which have sought to elucidate and elaborate the contributions of Mises and Hayek—whose portraits appear on this book’s dust-jacket.) Dr. Ioannides has carefully examined a wide (if not quite exhaustive) range of Austrian writings. He has provided a lucid and largely accurate account of Austrian positions on perhaps the entire span of economists’ concerns. Austrian economists would do well to read his exposition, not only for the clarity and sensitivity with which he so often accurately lays out Austrian arguments, but also for an appreciation for those points in his exposition where he unaccountably appears to have gone astray.
A third—but admittedly baffling and frustrating—source of interest for Austrian economics consists in the Marxist-inspired critiques of the Austrian positions, with which Ioannides concludes each chapter. It is as if, two-thirds of the way through each chapter, the author suddenly donned Marxist spectacles and henceforward sees only fog where, up until that moment, he had clearly seen and understood the Austrian concerns and insights. Certainly these Marxist-inspired critiques, frustrating though they certainly must be for Austrians, offer valuable material for anyone desiring to identify the presumptions which permit the Marxist perspective to “see” economic facts and relationships so differently from the way those same facts and relationships appear to others.
The brief review will not seek to cover all points upon which an Austrian must be inclined to pronounce Ioannides’ expositions inaccurate and his critiques unfair (or, at any rate, incomprehensible to a non-Marxist). We choose one example—but a centrally important example—of a puzzling interpretation of the Austrian position on one issue, and one example—again, a centrally important one—of what seems an unfair critique by the author of the Austrian position on a second issue.
Throughout the volume the impression is conveyed that the Austrian critique of government interventionism rests primarily on an Austrian “conception of economic phenomena as being fundamentally indeterminate” (p. 7). Because of this “fundamental indeterminateness” assumption held by Austrians, the author maintains, an “observer of economic phenomena can never predict the outcome of market processes and, consequently, the results of . . . intervention upon them” (p. 8). It is this consequence of the Austrian view, we are given to understand, which undergirds Austrian condemnations of interventionism. Now, if Ioannides meant by “fundamental indeterminateness” merely the unpredictability of market outcomes, as a practical matter, an Austrian might accept this as indeed one element—but certainly not the only or even primary element—in the Austrian critique of government intervention. But Ioannides rather clearly seems to be attributing to Austrians not only the view that market phenomena are unpredictable, but also that these phenomena are inherently and intrinsically indeterminate. For Ioannides the term “fundamental indeterminateness” is used (p. 80) to describe the position of the late Professor Ludwig Lachmann in his denial of any overriding stabilizing forces in markets (due to the fundamental subjectivism of individual expectations which drive the decisions taken during the market process). Since Ioannides recognizes (pp. 7879) that Lachmann’s position is by no means the dominant position among modern Austrians (since both Mises and Hayek emphatically recognized powerful stabilizing tendencies within markets), it is puzzling to read his assertions linking Austrian concerns about intervention to their alleged commitment to the doctrine of “fundamental indeterminateness.” Certainly Austrians could marshal arguments quite distinct from those advanced by neoclassical theorists, against government intervention, which arguments do not rest on any “fundamental indeterminateness” premise—or even upon any de facto unpredictability of market outcomes.
As our example of what appears an unfair criticism of Austrian economics, we take Ioannides’ insistence that Austrian economics suffers from a serious weakness in that it cannot provide what Ioannides considers to be a truly “dynamic” economics. This is a theme which recurs in the critical portions of chapters throughout the book. It is a theme which underlies Ioannides’ assertion (p. 174)—forming a central conclusion of his book—that Austrian theory must, because of its alleged “static” character, fail to perceive how the true dynamics of the market tend to produce predictable results (in regard to property ownership distribution) which are sharply at variance with the Austrian view of the market as a system free of coercion. It is this theme, in fact, which permits Ioannides to satisfy himself concerning the “authoritarian”(!) “character of neo-Austrian theory.”
This bizarre conclusion is reached by emphasizing the role of capital in the dynamics of the market process: “the process which is of paramount importance for the understanding of social dynamics is the reproduction of capital, which in turn determines the reproduction of society itself” (p. 172). The ultimate “failure” of Austrian economics for Ioannides rests, it is thus apparent, on his question-begging assumption of the validity of a Marxist “objective” dynamics of capital-using processes of market production (i.e., a dynamics which arbitrarily rejects Austrian insights concerning the subjectivism of the decisions made by consumers in regard to the possibilities of saving and consumption). Only on the basis of this assumption is he able to identify as a weakness what he terms the “static” character of Austrian economics. Nowhere, except by assertion, does Dr. Ioannides establish the possibility of dynamic regularities, in regard to the capital structure of the market system, that might operate regardless of the subjective time-preferences of market participants.
These deeply disturbing aspects of Ioannides’ critique of Austrian economics certainly underscore the ideological motivation which drives the entire book. If, in spite (or, as suggested earlier, partly because) of this, the volume retains substantial interest for Austrian economists, this must be judged a tribute to the quality of those passages in each chapter in which Ioannides has endeavored honestly to set forth the central ideas of Austrian economics within its own—rather than the Marxist framework.