the subtitle declares, this work is an overall history of economic
thought from a frankly “Austrian” standpoint: that is, from the
point of view of an adherent of the “Austrian School” of economics.
This is the only such work by a modern Austrian; indeed, only
a few monographs in specialized areas of the history of thought
have been published by Austrians in recent decades. Not only that: this perspective is grounded
in what is currently the least fashionable though not the least
numerous variant of the Austrian School: the “Misesian” or “praxeologic.”
But the Austrian
nature of this work is scarcely its only singularity. When the
present author first began studying economics in the 1940s, there
was an overwhelmingly dominant paradigm in the approach to the
history of economic thought – one that is still paramount,
though not as baldly as in that era. Essentially, this paradigm
features a few Great Men as the essence of the history of economic
thought, with Adam Smith as the almost superhuman founder.
But if Smith
was the creator of both economic analysis and of the free trade,
free market tradition in political economy, it would be petty
and niggling to question seriously any aspect of his alleged achievement.
Any sharp criticism of Smith as either economist or free market
advocate would seem only anachronistic: looking down upon the
pioneering founder from the point of view of the superior knowledge
of today, puny descendants unfairly bashing the giants on whose
shoulders we stand.
If Adam Smith
created economics, much as Athena sprang full-grown and fully
armed from the brow of Zeus, then his predecessors must be foils,
little men of no account. And so short shrift was given, in these
classic portrayals of economic thought, to anyone unlucky enough
to precede Smith. Generally they were grouped into two categories
and brusquely dismissed.
preceding Smith were the mercantilists, whom he strongly criticized.
Mercantilists were apparently boobs who kept urging people to
accumulate money but not to spend it, or insisting that the balance
of trade must “balance” with each country.
works in the history of thought of the 1930s and 1940s then proceeded
to expound and largely to celebrate a few peak figures after Smith.
Ricardo systematized Smith, and dominated economics until the
l870s; then the “marginalists," Jevons, Menger and Walras,
marginally corrected Smith-Ricardo “classical economics” by stressing
the importance of the marginal unit as compared to whole classes
Then it was
onto Alfred Marshall, who sagely integrated Ricardian cost theory
with the supposedly one-sided Austrian-Jevonian emphasis on demand
and utility, to create modern neoclassical economics. Karl Marx
could scarcely be ignored, and so he was treated in a chapter
as an aberrant Ricardian.
And so the
historian could polish off his story by dealing with four or five
Great Figures, each of whom, with the exception of Marx, contributed
more building blocks toward the unbroken progress of economic
science, essentially a story of ever onward and upward into the
In the post-World
War II years, Keynes of course was added to the Pantheon, providing
a new culminating chapter in the progress and development of the
science. Keynes, beloved student of the great Marshall, realized
that the old man had left out what would later be called “macroeconomics”
in his exclusive emphasis on the micro.
And so Keynes
added macro, concentrating on the study and explanation of unemployment,
a phenomenon which everyone before Keynes had unaccountably left
out of the economic picture, or had conveniently swept under the
rug by blithely “assuming full employment.”
the dominant paradigm has been largely sustained, although matters
have recently become rather cloudy. For one thing, this kind of
Great Man ever-upward history requires occasional new final chapters.
Theory, published in 1936, is now almost sixty years old;
surely there must be a Great Man for a final chapter? But who?
For a while, Schumpeter, with his modern and seemingly realistic
stress on “innovation,” had a run, but this trend came a cropper,
perhaps on the realization that Schumpeter’s fundamental work
(or “vision,” as he himself perceptively put it) was written more
than two decades before the General Theory.
since the 1950s have been murky; and it is difficult to force
a return to the once-forgotten Walras into the Procrustean bed
of continual progress.
My own view
of the grave deficiency of the Few Great Men approach has been
greatly influenced by the work of two splendid historians of thought.
One is my own dissertation mentor Joseph Dorfman, whose unparalleled
multi-volume work on the history of American economic thought
demonstrated conclusively how important allegedly “lesser” figures
are in any movement of ideas. In the first place, the stuff of
history is left out by omitting these figures, and history is
therefore falsified by selecting and worrying over a few scattered
texts to constitute The History of Thought.
large number of the supposedly secondary figures contributed a
great deal to the development of thought, in some ways more than
the few peak thinkers. Hence, important features of economic thought
get omitted, and the developed theory is made paltry and barren
as well as lifeless.
the cut-and-thrust of history itself, the context of the ideas
and movements, how people influenced each other, and how they
reacted to and against one another, is necessarily left out of
the Few Great Men approach. This aspect of the historian’s work
was particularly brought home to me by Quentin Skinner’s notable
of Modern Political Thought, the significance of which
could be appreciated without adopting Skinner’s own behaviorist
progress, onward-and-upward approach was demolished for me, and
should have been for everyone, by Thomas Kuhn’s famed Structure
of Scientific Revolutions. Kuhn paid no attention to economics,
but instead, in the standard manner of philosophers and historians
of science, focused on such ineluctably “hard” sciences as physics,
chemistry, and astronomy.
the word “paradigm” into intellectual discourse, Kuhn demolished
what I like to call the “Whig theory of the history of science.”
The Whig theory, subscribed to by almost all historians of science,
including economics, is that scientific thought progresses patiently,
one year after another developing, sifting, and testing theories,
so that science marches onward and upward, each year, decade,
or generation learning more and possessing ever more correct scientific
with the Whig theory of history, coined in mid-nineteenth-century
England, which maintained that things are always getting (and
therefore must get) better and better, the Whig historian of science,
seemingly on firmer ground than the regular Whig historian, implicitly
or explicitly asserts that “later is always better” in any particular
scientific discipline. The Whig historian (whether of science
or of history proper) really maintains that, for any point of
historical time, “whatever was, was right,” or at least better
than “whatever was earlier.”
result is a complacent and infuriating Panglossian optimism. In
the historiography of economic thought, the consequence is the
firm if implicit position that every individual economist, or
at least every school of economists, contributed their important
mite to the inexorable upward march. There can, then, be no such
thing as gross systemic error that deeply flawed, or even invalidated,
an entire school of economic thought, much less sent the world
of economics permanently astray.
shocked the philosophic world by demonstrating that this is simply
not the way that science has developed. Once a central paradigm
is selected, there is no testing or sifting, and tests of basic
assumptions only take place after a series of failures and anomalies
in the ruling paradigm has plunged the science into a “crisis
situation.” One need not adopt Kuhn’s nihilistic philosophic outlook,
his implication that no one paradigm is or can be better than
any other, to realize that his less than starry-eyed view of science
rings true both as history and as sociology.
But if the
standard romantic or Panglossian view does not work even in the
hard sciences, a fortiori it must be totally off the mark
in such a "soft science" as economics, in a discipline
where there can be no laboratory testing, and where numerous even
softer disciplines such as politics, religion, and ethics necessarily
impinge on one’s economic outlook.
therefore be no presumption whatever in economics that later thought
is better than earlier, or even that all well-known economists
have contributed their sturdy mite to the developing discipline.
For it becomes very likely that, rather than everyone contributing
to an ever-progressing edifice, economics can and has proceeded
in contentious, even zigzag fashion, with later systemic fallacy
sometimes elbowing aside earlier but sounder paradigms, thereby
redirecting economic thought down a total erroneous or even tragic
path. The overall path of economics may be up, or it may be down,
over any given time period.
years, economics, under the dominant influence of formalism, positivism
and econometrics, and preening itself on being a hard science,
has displayed little interest in its own past. It has been intent,
as in any “real” science, on the latest textbook or journal article
rather than on exploring its own history. After all, do contemporary
physicists spend much time poring over eighteenth-century optics?
In the last
decade or two, however, the reigning Walrasian-Keynesian neoclassical
formalist paradigm has been called ever more into question, and
a veritable Kuhnian “crisis situation” has developed in various
areas of economics, including worry over its methodology. Amidst
this situation, the study of the history of thought has made a
significant comeback, one which we hope and expect will expand
in coming years.
For if knowledge
buried in paradigms lost can disappear and be forgotten over time,
then studying older economists and schools of thought need not
be done merely for antiquarian purposes or to examine how intellectual
life proceeded in the past. Earlier economists can be studied
for their important contributions to forgotten and therefore new
knowledge today. Valuable truths can be learned about the content
of economics, not only from the latest journals, but from the
texts of long-deceased economic thinkers.
are merely methodological generalizations. The concrete realization
that important economic knowledge had been lost over time came
to me from absorbing the great revision of the Scholastics that
developed in the l950s and 1960s. The pioneering revision came
dramatically in Schumpeter’s great History
of Economic Analysis, and was developed in the works of
Raymond de Roover, Marjorie Grice-Hutchinson, and John T. Noonan.
out that the Scholastics were not simply “medieval,” but began
in the thirteenth century and expanded and flourished through
the sixteenth and into the seventeenth century. Far from being
cost-of-production moralists, the Scholastics believed that the
just price was whatever price was established on the “common estimate”
of the free market. Not only that: far from being nave labor
or cost-of-production value theorists, the Scholastics may be
considered “proto-Austrians,” with a sophisticated subjective
utility theory of value and price.
some of the Scholastics were far superior to current formalist
microeconomics in developing a “proto-Austrian” dynamic theory
of entrepreneurship. Moreover, in “macro,” the Scholastics, beginning
with Buridan and culminating in the sixteenth-century Spanish
Scholastics, worked out an “Austrian” rather than monetarist supply
and demand theory of money and prices, including interregional
money flows, and even a purchasing-power parity theory of exchange
to be no accident that this dramatic revision of our knowledge
of the Scholastics was brought to American economists, not generally
esteemed for their depth of knowledge of Latin, by European-trained
economists steeped in Latin, the language in which the Scholastics
wrote. This simple point emphasizes another reason for loss of
knowledge in the modern world: the insularity in one’s own language
(particularly severe in the English-speaking countries) that has,
since the Reformation, ruptured the once Europe-wide community
of scholars. One reason why continental economic thought has often
exerted minimal, or at least delayed, influence in England and
the United States is simply because these works had not been translated
For me, the
impact of Scholastic revisionism was complemented and strengthened
by the work, during the same decades, of the German-born “Austrian”
historian, Emil Kauder. Kauder revealed that the dominant economic
thought in France and Italy during the seventeenth and especially
the eighteenth centuries was also “proto-Austrian,” emphasizing
subjective utility and relative scarcity as the determinants of
value. From this groundwork, Kauder proceeded to a startling insight
into the role of Adam Smith that, however, follows directly from
his own work and that of the Scholastic revisionists: that Smith,
far from being the founder of economics, was virtually the reverse.
On the contrary, Smith actually took the sound, and almost fully
developed, proto-Austrian subjective value tradition, and tragically
shunted economics on to a false path, a dead end from which the
Austrians had to rescue economics a century later.
subjective value, entrepreneurship, and emphasis on real market
pricing and market activity, Smith dropped all this and replaced
it with a labor theory of value and a dominant focus on the unchanging
long-run “natural price” equilibrium, a world where entrepreneurship
was assumed out of existence. Under Ricardo, this unfortunate
shift in focus was intensified and systematized.
was not the creator of economic theory, neither was he the founder
of laissez faire in political economy. Not only were the
Scholastics analysts of, and believers in, the free market and
critics of government intervention, but the French and Italian
economists of the eighteenth century were even more laissez-faire-oriented
than Smith, who introduced numerous waffles and qualifications
into what had been, in the hands of Turgot and others, an almost
pure championing of laissez faire. It turns out that, rather
than someone who should be venerated as creator of modern economics
or of laissez faire, Smith was closer to the picture portrayed
by Paul Douglas in the 1926 Chicago commemoration of the Wealth
of Nations: a necessary precursor of Karl Marx.
contribution was not limited to his portrayal of Adam Smith as
the destroyer of a previously sound tradition of economic theory,
as the founder of an enormous “zag” in a Kuhnian picture of a
zigzag history of economic thought. Also fascinating if more speculative
was Kauder’s estimate of the essential cause of a curious
asymmetry in the course of economic thought in different countries.
Why is it,
for example, that the subjective utility tradition flourished
on the Continent, especially in France and Italy, and then revived
particularly in Austria, whereas the labor and cost-of-production
theories developed especially in Great Britain? Kauder attributed
the difference to the profound influence of religion: the Scholastics,
and then France, Italy, and Austria were Catholic countries, and
Catholicism emphasized consumption as the goal of production and
consumer utility and enjoyment as, at least in moderation, valuable
activities and goals.
tradition, on the contrary, beginning with Smith himself, was
Calvinist, and reflected the Calvinist emphasis on hard work and
labor toil as not only good but a great good in itself, whereas
consumer enjoyment is at best a necessary evil, a mere requisite
to continuing labor and production.
Kauder, I considered this view a challenging insight, but essentially
an unproven speculation. However, as I continued studying economic
thought and embarked on writing these volumes, I concluded that
Kauder was being confirmed many times over. Even though Smith
was a "moderate" Calvinist, he was a staunch one nevertheless,
and I came to the conclusion that the Calvinist emphasis could
account, for example, for Smith’s otherwise puzzling championing
of usury laws, as well as his shift in emphasis from the capricious,
luxury-loving consumer as the determinant of value, to the virtuous
laborer embedding his hours of toil into the value of his material
But if Smith
could be accounted for by Calvinism, what of the Spanish-Portuguese
Jew-turned-Quaker, David Ricardo, surely no Calvinist? Here it
seems to me that recent research into the dominant role of James
Mill as mentor of Ricardo and major founder of the “Ricardian
system” comes strongly into play. For Mill was a Scotsman ordained
as a Presbyterian minister and steeped in Calvinism; the fact
that, later in life, Mill moved to London and became an agnostic
had no effect on the Calvinist nature of Mill’s basic attitudes
toward life and the world. Mill’s enormous evangelical energy,
his crusading for social betterment, and his devotion to labor
toil (as well as the cognate Calvinist virtue of thrift) reflected
his lifelong Calvinist world-outlook. John Stuart Mill’s resurrection
of Ricardianism may be interpreted as his filiopietist devotion
to the memory of his dominant father, and Alfred Marshall’s trivialization
of Austrian insights into his own neo-Ricardian schema also came
from a highly moralistic and evangelical neo-Calvinist.
it is no accident that the Austrian School, the major challenge
to the Smith-Ricardo vision, arose in a country that was not only
solidly Catholic, but whose values and attitudes were still heavily
influenced by Aristotelian and Thomist thought. The German precursors
of the Austrian School flourished, not in Protestant and anti-Catholic
Prussia, but in those German states that were either Catholic
or were politically allied to Austria rather than Prussia.
of these researches was my growing conviction that leaving out
religious outlook, as well as social and political philosophy,
would disastrously skew any picture of the history of economic
thought. This is fairly obvious for the centuries before the nineteenth,
but it is true for that century as well, even as the technical
apparatus takes on more of a life of its own.
of these insights, these volumes are very different from the norm,
and not just in presenting an Austrian rather than a neoclassical
or institutionalist perspective.
work is much longer than most since it insists on bringing in
all the “lesser” figures and their interactions as well as emphasizing
the importance of their religious and social philosophies as well
as their narrower, strictly “economic” views. But I would hope
that the length and inclusion of other elements does not make
this work less readable. On the contrary, history necessarily
means narrative, discussion of real persons as well as their abstract
theories, and includes triumphs, tragedies, and conflicts, conflicts
which are often moral as well as purely theoretical. Hence, I
hope that, for the reader, the unwonted length will be offset
by the inclusion of far more human drama than is usually offered
in histories of economic thought.
 Joseph Schumpeter’s valuable and monumental History
of Economic Analysis (New York: Oxford University Press,
1954) has sometimes been referred to as "Austrian."
But while Schumpeter was raised in Austria and studied under
the great Austrian Böhm-Bawerk, he himself was a dedicated
Walrasian, and his History was, in addition, eclectic
 For an explanation of the three leading Austrian
paradigms at the present time, see Murray N. Rothbard, The
Present State of Austrian Economics (Auburn, Ala.: Ludwig
von Mises Institute, 1992).
 When the present author was preparing for his doctoral
orals at Columbia University, he had the venerable John Maurice
Clark as examiner in the history of economic thought. When he
asked Clark whether he should read Jevons, Clark replied, in
some surprise: “What’s the point? The good in Jevons is all
 Joseph Dorfman, The Economic Mind in American
Civilization (5 vols., New York: Viking Press, 1946-59);
Quentin Skinner, The
Foundations of Modern Political Thought (2 vols., Cambridge:
Cambridge University Press, 1978).
 The attention devoted in recent years to a brilliant
critique of neoclassical formalism as totally dependent on obsolete
mid-nineteenth-century mechanics is a welcome sign of this recent
change of attitude. See Philip Mirowski, More
Heat than Light (Cambridge: Cambridge University Press,
 At the present time, when English has become the
European lingua franca, and most European journals publish
articles in English, this bother has been minimized.
is the introduction to his last great work, The
History of Economic Thought: An Austrian Perspective,
available now for $45 for the two volume set.
N. Rothbard (1926–1995) was the author of Man,
Economy, and State, Conceived
in Liberty, What
Has Government Done to Our Money, For
a New Liberty, The
Case Against the Fed, and many
other books and articles. He
was also the editor – with Lew Rockwell – of The