Rothbard and Mises in the History of Economic Thought (lecture 23 of 32)

July 18, 2004 10:17 PM by David J. Heinrich | Other posts by David J. Heinrich | Comments (1)

These notes are from the lecture Rothbard and Mises in the History of Economic Thought, given at the Mises University. Any errors are mine, feel free to point them out so that I can correct them. This lecture was given by Prof. Salerno.

Introductory Comments

• Ludwig von Mises (1881-1973).

• Murray N. Rotbhard (1926-1995).

• Hayek -- system builders vs. puzzlers. System builders, Hayek noted, tend to change their mind by the fashion of the day.

• However, Salerno argues that system builders never change their minds; it is technicians, like Robbins, who change their minds.

Parallels between Mises and Rothbard

• Creative genuises.

• Neither claimed false originality for their systems; humility.

• Both worked in isolation.

• Both started from foundations and didn't try to revolutionize, but worked from foundations.

• Both had treatises publishes at key moments:
  • Mises -- Human Action (1949).
  • Rothbard -- Man, Economy, and State & Power and Market (1962).

• Intrasient -- didn't deviate from the correct path.

Kirzner-Caldwell Account of the History of the Austrian School of Economics

• Big bang theory of the Austrian School of Economics and its rebirth:
  1. Started with Menger.
  2. Quickly spread throughout Europe in 1914 to the 1920s, and to the Americas.
  3. Austrian School had predicted that the boom would come to a screaching halt.
  4. Big Bang: After/as the Great Depression started, there were even more Austrians.
  5. Death: When Keynes came out, everyon went to him as a fashion-wave. Mises was forgotten about.
  6. Mises fled to the US, continued to work, and had some prominent students, such as Rothbard, Hayek, and Kirzner.
  7. None of Mises' students made many ripples.
  8. 2nd Big Bang: In 1974, after Hayek got the Nobel, there was the first meeting of Austrians.
  9. Shifted focus to Kirzner, because he started an NYU Austrian graduate school program.
  10. Late 1970s, Lachman was brought over.
  11. Argued that from late 1970s to late 1980s, Rothbard shifted from economics to social libertarianism.

• Problems:
  • No attribute to Mises/Rothbard in the re-birth.
  • Treates the whole school as a monolith from the start; doesn't account for the Wieser/Bawerk split.
  • Doesn't provide treatment for the scarcity of resources.
  • Doesn't treat ups and downs with academic position.
  • Too much focus on the evil influence of Schumpeter.

Salerno's Account of the History of the Austrian School of Economics

• Menger's students split:
  • Böehm-Bawerk -- elaborated on Menger, followed Menger: dyanmic market process view.
  • Wieser -- influneced by mathematical Walras, static equilibrium view.

• Böehm-Bawerk's studnets were Mises and Strigl.

• Wieser's students:
  • Schumpeter was influenced by Wieser and Walras:
    • 1908 -- Natures Essence.
    • 1911 -- Theory of Economic Development.
    • Basically, thought of the economy as static for long periods of time, then -- poof! -- there's entrepreneurs, technology, and growth, then it settles down.
  • Hans Meyer.
  • Friedrich von Hayek.
  • Haberlen.
  • Machlup.
  • Morgenstern.

• Böehm-Bawerk entered the State, which was a mistake, and then returned to academics in 1904-1914, but had a hard time and found it difficult to keep up with academia. He held a seminar with Mises.

• 1920s: Mises started his seminar. Hayek sat in one of Mises' classes, and didn't like it very much. Mises hadn't elaborated on his thoughts yet, and Hayek hadn't read Böehm-Bawerk yet.

• Mises also held a private seminar (privatseminar) for phD's; by the time Hayek was in Mises' seminar, he was already mostly set in his thinking (though Mises influenced him).

• The Austrian school begins to deteriorate after 1914:
  • Marshallian economics sweeps England and the US.
  • One faction was left at LSE, the London School of Economics, led by Lionnel Robbins.
  • Robbins wrote a great Austrian book in 1922.

• 1930s: Hayek gives some brilliant lectures, and is invited to the LSE.

• Hayek encourages Hicks to read Pareto. Hicks then imports mathematical economists.

• 1934: Robbins is leaning in a more mathematical direction.

• Mises invited for full-time academic position in Vienna; looking around Vienna, he notices that there are no more Mengarians.

• 1929-1933: Working on Nationalökonomie (Human Action), Mises didn't publish an academic paper.

• Wieserians didn't understand how to use the Evenly Rotating Economy (ERE); Mises understood that it was to be used only as a way to explain interest.

• Also, no-one had explained the economy as a system of money-prices, not just barter-prices. Mises had.

• 1940: Mises flees. In 1949, he publishes Human Action.

• By the end of World War II, the Mengerians were completely forgotten, and economics was completely mathematical. There wasn't a sudden "big bang" in Austrian development. And while Keynes did help in the demise of the Austrians, he wasn't key.

• The Austrain school was basically dead, though there were scattered works from a group of Mises' students.

• 1961-1963: Rothbard writes a primer on money, explaining how it's created; also Man, Economy, and State.

• Heres how the Austrian school began to become reborn: when graduate students started coming to Austrians.

• Kirzner's 1972 book was very important, but didn't inspire people with an overall view of the economy.

• By 1974, all of the people who had come to see Kirzner and Rothbard came because Rothbard had paved the way.

• 1974/1975: Austrians such as Hayek and Rothbard commented on student's papers. Rothbard was a Misesian, Lachman a nihilist. Kirzner tries to homogenize Hayek and Mises.

• 1976: Rothbardian students.

• 1978: IHS books/place taken over by a billionare, Charles Koch, who founded the CATO institute and the NYU program.

• Koch's view was that you should play up Hayek, and downplay Mises and Rothbard.

• Phases of the Austrian revival:
  1. Genius in bloom, Rothbard and students (1961-1976).
  2. Austrian economics without Mises/Rothbard.
  3. Revival of Rothbardians (1986-present).

• Rothbard publishes a number of books and articles during what Kirzner considers his dormant period.

• Many Kirznerians now have come closer to Rothbardians and come to the Austrian Scholars Conference.

• Austrian economics is now flourishin.