Understanding Austrian economics
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Understanding Austrian economics

Carl Menger 576x720
Carl Menger (1840-1921) | Wikimedia Commons

The central theme of the Austrian tradition, which might better be called the liberal tradition, is that society runs itself. This is strongly linked to the idea of freedom in the liberal sense, meaning the opportunity for the individual to advance and to create wealth. Jeffrey Tucker, Director of Content at FEE (Foundation for Economic Education) argues that the Austrian school started by Carl Menger revived an old method of thinking in the liberal tradition of economic order. He recently gave a lecture on the topic, “The Austrian Tradition on Social and Economic Order” at Acton University.

In the nineteenth century, many intellectuals began to abandon this tradition. They became enamored with the ideas of science, and of “rational” planning, rather than the market and spontaneous order. Tucker began his analysis with Frédéric Bastiat, a nineteenth century French political economist, who saw the economic order as naturally harmonious and the source of wealth creation.

Unique to the Austrian tradition is the consistent condemnation of socialism. Bastiat called it an impossibility, because it purports to have collective ownership of scarce and contested goods. Tucker quipped that it would be like sharing the four bow ties in the room (including the one around his neck) among everyone else. Ludwig von Mises also rejected the possibility of socialism, arguing that it would fail without a functioning price system. F.A. Hayek took a different approach, saying that socialism could not overcome what he called “the knowledge problem”. No central planner can possibly know all the information and knowledge in society, so how could they possibly determine the best use of resources?

In the Austrian tradition, social and economic order is best described as spontaneous, harmonizing, and free. Tucker argues that this tradition should not be ignored, and these lessons should be taken to heart by any who believe in the benefits of freedom.