The Austrian School of Economics
A History of It's Ideas, Ambassadors and Institutions

mit Herbert Unterköfler
Auburn 2011
Ludwig von Mises Institute
261 Seiten, broschiert, USD 19,-
ISBN 978-1610161343

Online-Bestellung (Mises Institute)



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Preface to the English Edition


The Austrian School in Brief

1. Vienna in the Mid-Nineteenth Century
2. Economics as an Academic Discipline
3. The Discovery of the Self: The Theory of Subjective Value
4. The Emergence of the Austrian School in the Methodenstreit
5. Carl Menger: Founder of the Austrian School
6. Time is Money: The Austrian Theory of Capital and Interest
7. Friedrich von Wieser: From Economist to Social Scientist
8. Eugen von Böhm-Bawerk: Economist, Minister, Aristocrat
9. Emil Sax: The Recluse from Voloska
10. Further Students of Menger and Other Supporters
11. Money Makes the World Go Round: The Monetary Theory of the Business Cycle
12. Joseph A. Schumpeter: Maverick and Enigma
13. Schumpeter's Theory of Economic Development
14. The Austrian School's Critique of Marxism
15. 1918 and the Consequences of War: The Imminent Collapse
16. Between the Wars: From Re-formation to Exodus
17. Ludwig von Mises: The Logician of Freedom
18. Friedrich August von Hayek: Grand Seigneur on the Fence
19. Other Members of the Younger Austrian School
20. Praxeology: A New Start from Ludwig von Mises
21. Friedrich August von Hayek's Model of Society and His Theory of Cultural Evolution
22. The Entrepreneur
23. The Rejected Legacy: Austria and the Austrian School After 1945
24. The Renaissance of the old 'Viennese' School: The New Austrian School of Economics





Preface to the English Edition

When preparations for the 2008 German edition were complete, the prospect of an English translation lay in the far distance. That it would come about so quickly, only shortly after the German edition's appearance in 2009, is owed to our friend and mentor, Hans-Hermann Hoppe. He not only lent his support and good counsel in the case of the first German edition - now in its second edition - but also brought it to the attention of the Ludwig von Mises Institute, suggesting it publish a translated edition. This development is without doubt a great joy for the authors. Along with it comes the expectation that the recast contents will reach a much wider audience than ever before. Whoever believes that the honor of having one's work translated includes the convenient self-contentment of looking on as others labor with the same text one had successfully concerned himself with years before, makes a formidable error. Rendering a comprehensive bibliography in another language in a user-friendly way is alone a task that can scarcely be brought to perfection. All in all, the pitfalls of translation are numerous, unexpected, and theoretically endless, especially in the scientific literature. This is ever more the case when intellectual or political schools of thought are to be conveyed across culture or language groups, preferably without losing meaning. Thee many discontinuities, violent upheavals, and contradictions in the history of middle Europe, wherein ideas, institutions, and terms were repeatedly in need of turning upside down and reframing, pose unusual problems. Take the question, for example, of whether certain historical personalities should be cited according to their legal names or according to the inherited, aristocratic titles they carried with them to foreign lands. Further, one stumbles upon the limits of language when fundamental, historically authentic but long antiquated German terms are to be rendered in a modern foreign language; or if no English equivalents for the baroque multiplicity of official titles, position descriptions, and service categories of the Austrian bureaucracy or European universities are readily found.

A first translation was undertaken by Robert Grözinger and financed by André Homberg, and appeared as an online version at Upon the wish of the publisher and the authors, it was replaced by the present edition, which Arlene Oost-Zinner attended to in an exemplary manner. Veronika Poinstingl offered significant help with research and correction, as did Rahim Taghizadegan and Gregor Hochreiter of the Institut für Wertewirtschaft (Institute for Value-Based Economics) in Vienna. The title of the German edition, Die Wiener Schule der Nationalökonomie (The Viennese School of Economics), which emphasized Vienna's natural role in the history of the "old" Austrian School of Economics, was modified. We ultimately decided that the internationally established, technical term was the most appropriate for the English edition, despite the fact that the Austrian School originated in Vienna and it was there that it experienced its first bloom and first international recognition.

We thank all of our friends, advisors, translators, and supporters for their work and cooperation on this book. Their efforts have made the present edition possible. Special thanks are due our publisher, Douglas French, president of the Ludwig von Mises Institute in Auburn, Alabama, who actively supported our work. Finally, we wish to extend our sincere and loving thanks to those in closer proximity - Elvira and Veit Georg, and Kerstin - for their abundant support.

Eugen-Maria Schulak and Herbert Unterköfler, Vienna, January 2011.



After several years of preparatory work and many interruptions, it seems an odd coincidence that the authors completed their manuscript at the very time a global crisis in the financial sector suddenly became evident to all. Economic developments since that time appear only to confirm many fundamental insights of the Austrian School of economics, especially those in monetary and business cycle theory. Longstanding, low interest rate policies in the U.S. and a steady increase in the money supply and money equivalents in industrial nations seem to have led to a staggering volume of misallocations and countless unsustainable business models.

The attempts of industrial nations to quell the pent-up need for correction through government intervention will in time lead to a gain that is deceptive at best-but hardly a real solution. These astonishingly purposeful government interventions are certainly no accident. In recent decades, the so-called welfare states have entered into a very close symbiosis with the financial sector. In no other sector of the economy - save perhaps the armaments industry in certain countries - are institutions, people, and the economy so closely interwoven with the state as is the case with the finance industry. It has often been possible in recent years to get the impression that welfare states might be competing, in the most imaginative and opportunistic ways, with the banking industry in their efforts to circumvent the basic laws that rule economics, money, and the market. While welfare states, with their increasing national budget deficits, have for many years nourished the illusion of growing prosperity, banks and financial institutes have on the one hand provided finances for these deficits. But on the other hand, and to the wider public, they have acted as impresarios of an everything-is-adordable philosophy. Hence the crisis, which has not yet come near reaching its full magnitude, will affect both the global financial sector and individual countries much more deeply than all crises seen thus far.

Based on the assumption that the individual was the decisive economic agent, and thus centering its research on individual preferences and on the intersubjective balancing of these preferences in the context of markets, the Austrian school has consistently pointed to the fact that institutions such as money, states, and markets had emerged without any planning, without any central purpose, and without force. They had emerged on the basis of human interaction alone, and in a manner that was therefore natural, befitting both humans and human logic. This basic insight counters all political and economic ideologies that view such institutions as working arenas for the establishment or development of authoritarian activity aimed at influencing or even controlling the direction of individual preferences or their intersubjective balance.

This meant that during the interwar period in Austria, the Austrian School was attacked, sometimes fiercely, by political parties of both the left and the right. The Austrian school not only denied the legitimacy, but also the efficacy of many economic policies. Furthermore, the school had always identified itself with a universal science in which there was no room for national, religious, or class-oriented constrictions. In ways it even represented a kind of alternate world to many of the country's idiosyncrasies: it focused exclusively on the individual and asserted that individual action on the basis of subjective preferences was the starting point for research; it was based on a realistic image of humanity that was not suited for inconceivable flights of idealistic fantasy and therefore not amenable to cheap political exploitation; it was free of magniloquent utopias, upheld the principles of self-determination and non-violence, and was united in its fundamental criticism of any monopolistic and forceful intervention of the state. In addition, it emanated a highly scholarly ethos which made possible the emergence of an uncommonly cosmopolitan and tolerant discourse.

It follows that among the many intellectual legacies of the Austrian monarchy, the Austrian School of Economics was one of the very few traditions that did not become entangled in vice and guilt in the midst of the political upheavals of the twentieth century. The same ideologies-of both left and right-which in the twentieth century so often caused bloodshed and large scale destitution and misery, accused-with great impudence- the Austrian School of blindness to the urgent economic questions of the period. It was due to this perspective as well that the history and philosophy of the Austrian School were not to be incorporated into the foundation and reconciliation myth of the Second Republic's grand coalition.

Against this backdrop, it is to his credit that Prof. Dr. Hubert Christian Ehalt, the publisher of the series Enzyklopädie des Wiener Wissens ("Encyclopedia of Viennese Learning"), acknowledges this almost forgotten piece of Viennese intellectual and scholarly history. Despite delays on the part of the authors, he has remained a patient and loyal supporter of this project and it is to him that we are particularly indebted.

It seems to be in the nature of every larger undertaking that a considerable debt of gratitude is accumulated along the course of its development, and one which can hardly be repaid in a few lines. With gratefulness we recall the many suggestions that led to the continuous evolution of the idea for this book: First, the extensive discussions of economic theory in the "Haldenhof- Runde" in Kitzbühel with the thoughtful host and profound expert on the Austrian School, Karl-Heinz Muhr; the in-depth engagement with ordoliberalism, repeatedly prompted by Dr. Rüdiger Stix, a colleague who combines Viennese charm with erudition and intellectual honesty in a manner hard to come by; and finally, the providential encounter with Prof. Dr. Hans-Hermann Hoppe, then still at the University of Nevada, who introduced us to the current state of the Austrian School of economics in the US, and piqued our interest most decidedly in the already almost forgotten history of the Austrian School. Prof. Hoppe, whose friendship and hospitality led to a series of fruitful conversations, has continued to be well-disposed to our project, contributing a number of important suggestions and giving it impetus.

During the course of our considerable archival and literary research we were lucky enough to have encountered a number of exceptionally helpful employees in several Viennese libraries: the University of Vienna library's Dr. Roland Zwanziger, who more than once set off in person to search for some rare volume or other in the depths of the archives basement; Frau Daniela Atanasovski, who sometimes postponed her lunch break in order to suit the authors' time constraints; and Gabriela Freisehner of the economic faculty library, who, in addition to her skillfull assistance, created a particularly hospitable atmosphere by providing us with Viennese coffee now and then. We were also received kindly in the Vienna University Archive, in the Library of Historical Science, in the Austrian Nationalbibliothek, and in the Library of the Austrian Parliament. Our sincere thanks go out to all of the above, including Veronika Weiser, for her valuable support and time-saving assistance in the finding of resources.

We are grateful for the help and support we received on many occasions while drafting this manuscript from Rahim Taghizadegan and Gregor Hochreiter from the Institut für Wertewirtschaft ("Institute for Value-Based Economics") in Vienna. Apart from many expert suggestions and help in researching the literature, they commented on our drafts and looked over the final draft critically. After having completed this book project we left not only with the feeling that we had greatly profited from their tremendous knowledge of the subject, but also with the certitude of having forged a selfless and sincere friendship. Heartfelt thanks are also extended to Beate Huber for the many valuable and extensive conversations that accelerated the acquisition of knowledge.

Of particular help was the proofreading by Dr. Barbara Fink of the publisher, Bibliothek der Provinz. Dr. Fink's sharp eye and mind brought to light a considerable number of incorrect source citations which were subsequently corrected by the authors.

The authors are also much obliged to those colleagues who contributed a great deal to their understanding of the dramatic ruptures in recent Austrian history. In particular to Prof. Dr. Norbert Leser, who focused our sight on genuine Austro-Marxism in the course of many friendly conversations, and to Prof. Dr. Oliver Rathkolb, who offered a number of new perspectives on the great intellectual exodus of 1938 and on Schumpeter's work in the United States.

Finally, our special thanks go to Prof. Dr. Jörg-Guido Hülsmann of the University of Angers, France, whose profound knowledge of the original Austrian School literature, himself a biographer of Mises, was able to other advice and make suggestions regarding the history of dogmas on many occasions. He also very kindly took upon himself the task of looking through the final manuscript. All remaining deficiencies, inaccuracies, or even errors in content or form are naturally the sole responsibility of the authors.

Last but not least, it is our wish to extend our thanks to our nearest and dearest: to Elvira, for whom this book offered the opportunity to exercise the virtue of spousal tolerance; and to Veit Georg, who had to do without a number of games of soccer with his father; and to Kerstin, who, faced with a radical reduction of free time, always remained a loving soul and an affectionate partner.

Eugen-Maria Schulak and Herbert Unterköfler, Vienna, November 2008