You’ve been watching the debates (except for that one at 7 AM on Sunday morning), and you keep hearing references to Austrian economics. They keep mentioning names like Hayek, Friedman, and Mises .  What’s with all these German sounding names, you say. And why is Ron Paul staying up to read an economics textbook while the rest of these bozos are watching college football?  (ok, maybe Friedman is more Chicago style, but his name sounds German, too, and Paul does ascribe to certain aspects of Friedman philosophy, as well).

I know, and you know, who Keynes is (because we “are all Keynesians, now,” right? Wrong…but I digress, as usual), but who are these other guys?

Friedrich Hayek

Two of them are Nobel prize winners (Hayek and Friedman), and all are the fathers of Ron Paul’s political philosophy. If that’s not substantial enough for you to spend at least five minutes figuring out who the Austrian economists are, as well as what they believe, then I don’t know what is.

To help us out, we have Peter Boettke, an economist himself at George Mason University. He recently spoke to The Browser and, in addition to providing a brief explanation of the Austrian school of economics, recommended a few books that could get you started on your way to understanding Austrian economics better. Here’s how he describes the way Austrian economists view the world:

Classical economists, Austrian economists, and New Institutional economists reside in the box that starts with a complex problem situation but nevertheless gets you social order. The way you do that is not based on the behavioural assumptions of the actors, but on the institutional assumptions underlying them, ie things like the political, legal and cultural context within which individuals engage and exchange. If that context is the right context, then even in the most difficult of situations, individuals can generate social order. They can cope with their ignorance, they can take care of uncertainty. When the market goes astray, it’s not because there is something wrong with the market mechanism, it’s because the rules under which the market mechanism operates have got distorted.

That last word is very interesting. I think if we were to go back and check out what Ron Paul’s been talking about during the campaign, I think we would find out that his complaints about the government spending, healthcare reform, entitlements, and perhaps even defense spending and American projection of power abroad, often root from his views that government is interfering in the natural workings of the market. In other words, distortions.

Check out the rest of his analysis. It’s interesting and compares the Austrians to Marxists and Keynesians. It’s well worth the read.

So what books does he recommend?

• Human Action by Ludwig von Mises. “[...] when the government distorts the monetary unit, through the manipulation of money and credit, it can generate boom-and-bust cycles. So rather than the business cycle being inherent to capitalism, it’s a consequence of distortions caused by the manipulation of money and credit.”
• Individualism and Economic Order by Friedrich Hayek. “Hayek’s writings set off a research programme to study how it is that information gets communicated within a complex system, and a variety of different people have picked up on that, and worked with that idea and taken it in directions that even Hayek couldn’t have envisioned.”
• Calculation and Coordination  by Peter Boettke. “What I’m doing is trying to get the history right and then get the political economy analytics right, and then trying to use both of those to explain that from that original history it was logical that we ended up with the system that we ended up with, rather than the system that we wanted to end up with.”
• The Invisible Hook by Peter Leeson. “I think The Invisible Hook does a fascinating job of communicating to people the enjoyment of just thinking through a problem like an economist.”
• After War by Christopher Coyne. “What he found was that in US-led efforts, basically somewhere between two-thirds and three-quarters of the efforts failed to meet even that minimum standard.”

I’ve not read any of these, yet, but I’m looking into them. I could certainly use an expanded understanding of our economy. Which will you pick up this week? Are there others that you recommend?

Related articles

• On Austrian economics (abolishthebank.wordpress.com)
• “We’re All Austrians Now” Say What? (roninsjourney.wordpress.com)
• Mises and the Importance of Context (coordinationproblem.org)
• Learn Austrian Economics by Thomas E. Woods, Jr. (gunnyg.wordpress.com)