• Why I Wrote My Histories of Thought

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    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.[1] 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.”[2]

    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.

    Scholastics were dismissed even more rudely,
    as moralistic medieval ignoramuses who kept warning that the “just”
    price must cover a merchant’s cost of production plus a reasonable

    The classic
    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
    of goods.

    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.”

    Since then,
    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.
    Keynes’s General
    , 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.

    The years
    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.

    Second, a
    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
    two-volume Foundations
    of Modern Political Thought
    , the significance of which
    could be appreciated without adopting Skinner’s own behaviorist

    The continual
    progress, onward-and-upward approach was demolished for me, and
    should have been for everyone, by Thomas Kuhn’s famed Structure
    of Scientific Revolutions
    .[5] 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

    On analogy
    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.”

    The inevitable
    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.

    Kuhn, however,
    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.

    There can
    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.

    In recent
    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.[6]

    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.

    But these
    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.

    It turns
    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

    It seems
    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
    into English.[7]

    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.

    Instead of
    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.

    If Smith
    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.

    Emil Kauder’s
    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.

    The British
    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.

    On reading
    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.

    The result
    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.

    In consequence
    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.

    The entire
    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.


    [1] 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
    and idiosyncratic.

    [2] 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).

    [3] 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
    in Marshall.”

    [4] 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).

    [5] Thomas S. Kuhn, The
    Structure of Scientific Revolutions
    (1962, 2nd ed.,
    Chicago: University of Chicago Press, 1970).

    [6] 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,

    [7] 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
    Rothbard-Rockwell Report

    Rothbard Archives

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