Liberty Matters

The Rebirth of the Austrian School and the South Royalton Conference: Marking the Fifty-Year Anniversary (June 2024)

The first Austrian Economics conference was held fifty years ago in 1974 in South Royalton, Vermont. In this Liberty Matters online discussion the authors share their recollections, thoughts on the fifty years since, and their hopes for the future of Austrian economics.  Richard Ebeling leads the discussion and is joined by Mario Rizzo, David Henderson, and Geoffrey Lea.
It is now half a century since the first Austrian Economics conference was held during the week of June 15-22, 1974, at South Royalton, Vermont. No doubt it was a lifetime ago. But for some of us who were fortunate enough to attend the event in that small New England “rustic” hamlet, it seems like only yesterday. Sponsored by the Institute for Humane Studies, it brought together around 50 people most of whom had been identified as young economists and students interested in the ideas and legacy of the “Austrian” tradition.
During that week at South Royalton, three leading members of the, then, nearly non-existent Austrian School, Israel M. Kirzner (New York University), Ludwig M. Lachmann (University of Witwatersrand, South Africa), and Murray N. Rothbard (Polytechnic Institute of Brooklyn), delivered a series of lectures that later appeared in book form under the title, The Foundations of Modern Austrian Economics (Dolan, 1976). The presentations summarized the “Austrian” subjectivist approach to economic method, the theory of action (“praxeology”), the nature of the competitive market process and the role of the entrepreneur, the theory of capital and production, money and the monetary process, and critiques of mainstream equilibrium theory and Keynesian macroeconomics (Ebeling, 1974; Ebeling, 2019). This first Austrian conference was followed by two others, at the University of Hartford in June 1975, and then at Windsor Castle in the UK in September 1976 [Ebeling, 1975b; Blundell, 2014], with papers from the third conference published not long after [Spadaro, 1978].
Equally or, it might easily be claimed, more importantly in bringing about this revival of the Austrian School was that just four months later, Friedrich A. Hayek was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, commonly referred to as the Nobel Prize in Economics. (Ebeling, 1975). Hayek was supposed to have attended the conference and had been listed as a “distinguished guest” in the conference brochure but was unable to do so due to health problems. To the best of my recollection, no one at the South Royalton conference in June of 1974 anticipated Hayek being awarded the Nobel Prize a few months later. As a result of these two events, the South Royalton conference and Hayek’s Nobel Prize, the Austrian School was reborn.
Many of those who were among the attendees at South Royalton may have become well known in “Austrian” circles over the last half-century. But at the time, most of them were still in graduate school or even undergraduate programs with only a few already teaching and professionally writing.  Here, really, was the “remnant” of a famous economic school of thought that had been eclipsed in the post-World War II era (Ebeling, 2016, 15-23; 2023).
The Rise and the Eclipse of the Austrian School
Before the First World War, the Austrian Economists had been internationally recognized as among the pioneers of the transformative “marginalist” revolution. In the interwar period of the 1920s and 1930s, the Austrian Economists were among those at the center and even forefront of discussions surrounding money and the business cycle, the debates concerning comparative economic systems – capitalism, socialism and the interventionist state – and the nature, logic and implications of knowledge, equilibrium, market processes and the price system in economic analysis.
Hypothetically, the late 1940s should have served as the starting point for a postwar resurgence of the Austrian School. In 1948, Friedrich Hayek published Individualism and Economic Order, which brought together a series of his essays offering more than a decade of reflection and refinement of ideas relating to the nature of the social sciences, the features and functioning of a competitive market order and the price system, and the meaning of coordinative equilibrium given the inescapability of divided and dispersed knowledge in society, along with his critique of socialist central planning.
The next year, 1949, saw the publication of Ludwig von Mises’ treatise, Human Action, which integrated and synthesized four decades of his unique and original contributions in the “Austrian” tradition. This work offered a majestic vista of an alternative vision of purposeful, acting man as the methodological foundation for a dynamic market process theory that demonstrated the role of the entrepreneur as its central player. In addition, the work addressed  the essentiality of the calculative tool of the price system in an ever-changing world of uncertainty, expectations and forward-looking planning of time consuming methods of production for adaptive coordination in the complex system of associative division of labor. There were also Mises’s refined applications within his theoretical framework to the issues of the day: capitalism versus socialism versus the interventionist economy; the monetary system and the business cycle; and a multitude of other topics.
But, instead, during the three decades following the Second World War, the Austrian Economists and their ideas and approach to economic theory and policy fell by the wayside with the ascendency and near monopolistic dominance of mathematical general equilibrium theory in microeconomics and Keynesian Economics in macroeconomics. Almost the only references to the Austrian School were in history of economic thought textbooks, and in this setting, they were clearly classified as closed chapters in the earlier developments leading to economics as a positive and quantitative “science” in its modern garb.
As a personal indication of the Orwellian memory hole that Austrian Economics had fallen into, when Ludwig von Mises died in October 1973, I was an undergraduate at California State University, Sacramento. I wrote a short obituary piece about Mises for the campus student newspaper. One of my economics professors, a Veblenian Institutionalist who was also an editor of the Journal of Economic Issues, came up to me after reading it, and said, without jest, “Mises! Mises! I thought he died in the nineteenth century.”
As another instance, when Friedrich A. Hayek won the Nobel Prize in Economics in the autumn of 1974, several of my Keynesian and Marxist professors expressed their surprise and confusion. One asked what Hayek had ever contributed to economics other than his “polemical and politically extreme right-wing tract,The Road to Serfdom.  Another asked, “Wasn’t Hayek that old business cycle theorist who assumed ‘full employment’ during the Great Depression?”
Now, I am not suggesting that such views about either Mises or Hayek reflected the knowledge, or lack thereof, of every mainstream economist in the 1970s. But I do think that my admittedly very small sample size about what was known or thought about two of the leading twentieth century members of the Austrian School was probably replicated in many departments of economics at universities around the United States and other parts of the world.
A New Generation’s Rediscovery of the Austrian School 
Hayek’s Nobel award served as a crucial catalyst for a renewed interest in his contributions and the school of thought he represented, both in scholarly and popular circles. This Hayekian revival was especially facilitated through the publication of works such as Gerald P. O’Driscoll’s Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek (1977), who had attended the South Royalton conference, and Norman P. Barry’s Hayek’s Social and Economic Philosophy (1979). By the 1980s and 1990s, there was practically a cottage industry in books and articles analyzing and interpreting Hayek’s contributions to economics and social and political philosophy. The most notable of these were John Gray’s Hayek on Liberty (1984), G. R. Steele’s The Economics of Friedrich Hayek (1993), and Bruce Caldwell’s Hayek’s Challenge (2004). Not since before the Second World War had these ideas received such attention.
There soon was an explosion of works restating and explaining the evolution and core concepts of Austrian Economics, from the popular to the scholarly (e.g., Littlechild, 1978; Taylor, 1980; Reekie, 1984; Shand, 1984, 1990; Cubeddu, 1993; Vaughn, 1994, 2021; Foss, 1994; Gloria-Palermo, 1999; de Soto, 2008; Butler, 2010; Ebeling, 2003, 2010a, 2016; Schulak & Unterköfler, 2011; Holcombe, 2014; Horwitz, 2019). Anthologies appeared bringing together earlier writings by the Austrian Economists to make them more easily accessible to a new generation of readers (Ebeling, 1990; Littlechild, 1990; Kirzner, 1994; Greaves 1996; Gloria-Palermo, 2002). There was the founding of the Review of Austrian Economics, the Quarterly Journal of Austrian Economics, and Advances in Austrian Economics. These journals were specifically devoted to “Austrian” theory, its history, and its application to contemporary economic issues. There were soon places for the study of Austrian Economics at several universities and colleges around the United States.
During the 1980s and 1990s, observers within and outside the Austrian School expressed some disappointment and frustration that many then writing in the “Austrian” tradition seemed to be “merely” repeating what the earlier “masters” had written in the late nineteenth century or the first half of the twentieth century. Austrian Economists seemed stuck in the past and simply rewriting, over and over again, the history of long gone economic ideas.
But, I would argue that this phase in the revival of the Austrian tradition was in fact necessary and essential. Except for a small circle of scholars narrowly interested in the history of economic thought, the content, character, quality and texture of economic ideas before the Second World War were hardly known or understood by the generation of economists trained in the 1950s, 1960s and 1970s. And what was known or referenced about the economists in that earlier pre-World War II period was often caricatures of them and their ideas. The Austrians theoretical contributions and policy conclusions were either ignored or widely misrepresented.
This was the intellectual climate in which the Austrian School was experiencing a revival. While I may be accused, no doubt, of “romanticizing” it, for some of us the rediscovery of the Austrian School was like the archeologists who unearth a long-forgotten civilization. They must excavate the site, explore the buildings and passageways, and carefully study the artifacts extracted from the grounds to determine what kind of civilization it was. What types of lives did those ancient people live? What was their culture, technologies, values and belief systems? Then, we compare their achievements and accomplishments with our own. Sometimes, no doubt surprisingly, “modern man” finds out that that older civilization had made discoveries and advancements in knowledge and understanding that still bewilder those in contemporary society; such was realized about the Austrians of that earlier time (Dekker, 2016).
Intellectual History as a Gateway to New Understandings and Applications
Those who were experiencing an active interest in the Austrian School after the South Royalton conference and Hayek’s awarding of the Nobel Prize literally had to go back to the foundational origins of the school starting with Carl Menger, Eugen von Böhm-Bawerk and Friedrich von Wieser. A new generation needed to explore the buildings and passageways of the theoretical construction built up by the first generation of Austrians. They discovered  different and subtly more insightful ways of thinking about the meaning of “the margin,” and an understanding of many nuances concerning the meaning of “subjective value” that broadened into a subjectivism of meaning, purpose, intention, action, uncertainty, time and causality (Ebeling, 2010b).
The static equations of Walrasian and Paretian general equilibrium were seen to be outside of time and space, to be ignoring the limits to human knowledge by assuming that everyone began with knowing everything relevant to know. This new generation of Austrian Economists, like careful and methodical historians going through “original documents,” worked their way through the controversies of the interwar period. Having all the articles and books spread before them, they retraced the steps and stages of the controversies over economic calculation and socialist central planning. Through it they came to understand how Austrians like Mises and Hayek revised, refined, and enriched their own arguments concerning property, prices, competition and entrepreneurship, as the advocates of socialism and interventionism were challenging them.
With this historical hindsight this new generation better understood why many Austrian arguments failed to persuade during the 1930s and 1940s. But through this very hindsight they could also see how Mises and Hayek, for instance, came to redefine the notion of “equilibrium,” the conception of “coordination,” and the meaning of market processes through and in time with actors inescapably acting within a division of knowledge, and its relevance for social and economic policy (Lavoie, 1985a, 1985b; O’Driscoll and Rizzo, 1985; Barry, 1988; Cordato, 1992; Thomsen, 1992; Machovec, 1995; Ikeda, 1997; Aimar, 2009; de Soto, 2009, 2010; Boettke, 2012, 2021; Mitchell & Boettke, 2017)
The same applied to the controversies surrounding money and the business cycle. The Austrians were concerned with the meaning and nature of an intertemporal equilibrium that coordinates the choices of savers and investors through a network of interest rates and stages of production by which resources are applied over time to make finished consumer goods. All market transactions occur through the medium of money. However, with the supply of money in the banking system influenced by the money-creation powers of a central bank, there is the possibility of an illusion that there is a greater plentitude of available factors of production for investment purposes than may be the case. This can result in an imbalance between investment projects undertaken relative to the actual supply of savings to sustain them over time. At the same time, however, the apparent simplicity and clarity of the Hayekian triangles to explain and illustrate this savings-investment process were seen to be more complicated and confining than they had first appeared to be in the 1930s. Thus, there was the need for a richer conceptualization of capital and its structure. (Skousen, 1990; Lewin, 1999; Garrison, 2001; Horwitz, 2016; Lewin & Cachanosky, 2019; 2021).
The advantage of the historian is that he, at least partly, knows “how things turned out,” in a way that the human actors in the stream of those earlier events did not and could not imagine, including the evolution of their own ideas and actions through the lived experiences and sequences of their own time. Through this all, the new post-South Royalton generation of Austrians came to understand the strengths and shortcomings in the ways those earlier Austrians had laid out and defended their system of ideas, and why they seemingly “lost” the debates of that interwar period. This “defeat” left the field of economics open to the “victory” of the Walrasian and Marshallian mainstream of the profession in microeconomics and to the Keynesians in the “new economics” of macroeconomic theorizing.
At the heart of many of these controversies was the realization that a good part of it centered on alternative conceptions of the philosophy and methods of the social sciences. The dichotomy between a science of the logic of the human mind and purposeful actions, along with the unintended consequences emerging from social and economic processes, versus the mainstream economics primarily focused on quantitative relationships and equilibrium states. These differences in approach became starkly clearer from the perspective of more than a hundred and fifty years after the birth of the Austrian School in 1871.
This all required a retracing of the steps and stages of the evolution of the Austrian School, with all their triumphs and tragedies in those battles of ideas. A “doctrinal” focus of attention and emphasis was almost impossible to avoid for a fuller revival of the “lost civilization” of the Austrian School of Economics. Being an historian of Austrian Economic thought was found, to a greater or lesser extent, to be part of the reconstruction and then new advancements in the Austrian tradition.
From Doctrinal Studies to New and Significant Contributions
But already in the 1980s and 1990s the focus of some of these newer Austrians began to change. Having successfully finished the process of rediscovery, the Austrian tradition was taken up and applied in new ways. Two such areas that stand out, may I suggest, were monetary and banking theory and policy, and the theory of entrepreneurship and the firm. In 1942, the German economist, Gustav Stolper, could say, “There is today only one prominent liberal theorist consistent enough to advocate free, uncontrolled competition among banks in the creation of money.” That was Ludwig von Mises (Stolper, 1942, p. 59). But following Hayek’s Denationalization of Money in 1976, an entire Austrian-inspired new theoretical field emerged developing the possibilities of private, competitive free banking in place of central banking (White, 1984, 1998; 1999; 2023; Selgin, 1988, 1996; 2017; Dowd, 1988, 1989, 1993, 2001; Horwitz, 2000, 2019; Salerno, 2010; Ebeling, 2015, pp. 104-138).
The same can be said about entrepreneurship. Kirzner’s Competition and Entrepreneurship (1973) not only was followed over the next several decades by additional works by Kirzner, himself, but fostered new contributions concerning additional sides to the entrepreneurial role besides that of coordinating arbitrageur; including the entrepreneur in relationship to the existence, nature, and workings of decision-making within the business enterprise and its organization (Harper, 1996; Sautet, 2000; Foss & Klein, 2002, 2012, 2019, 2022; Pongracic, 2009; Klein, 2010). The “Austrian” contributions to these two areas of economic study are generally recognized within the economics profession as a whole, and no longer as simply “fringe” ideas of a bygone school of thought.
In addition, during the last thirty years, several “Handbooks” (Boettke, 1994; 2010; Boettke & Coyne, 2015) and collections of essays devoted to summarizing and clarifying Austrian themes have appeared. But unlike most of the earlier anthologies that I referred to, these were not meant to merely restate the body of older Austrian conceptions and ideas on various topics. No, their purpose was to explain the relevance of the Austrian tradition to contemporary economic theory and policy, with applications and examples, and complementary connections to other schools and fields in modern-day economics. (Rizzo, 1979; Backhaus, 2005; Aligica & Boettke, 2009; Boettke, Coyne, & Storr, 2017; Coyne, Hall & Norcross, 2024).
Those who have been drawn to this revived and revitalized post-South Royalton Austrian School have also applied its analytical framework to social problems such as community disasters and “spontaneous” responses by the institutions and participants of civil society (Storr & Haeffele-Balch, 2015; 2020) and to the importance of cultural and institutional factors within the social and market processes of the open society (Storr, 2015; Gruber & Storr, 2015; Storr & John, 2020), as well as critiques of behavioral economics (Rizzo & Whitman, 2019) and the hubris of the presumed expertise possessed by social engineers (Formaini, 1990; Koppl, 2015; 2018). This has also included areas of human life as wide and diverse as a Hayekian approach to the family and marriage (Horwitz, 2015) and the economics of war and peace (Coyne. 2007; 2013; 2022).
Conclusion: The Lasting Significance of the South Royalton Conference
The first day of the South Royalton conference began with a banquet dinner. Since Ludwig von Mises had passed away less than a year earlier, in October 1973, at the age of 92, some of the attendees who had known him were asked to make a few remarks.  Free market journalist Henry Hazlitt recalled how he had first met Mises in 1940, shortly after Mises had arrived in New York City from war-torn Europe. British economist William H. Hutt talked about what he considered to be some of Mises’s most important contributions to economics. Murray Rothbard recounted some of the amusing anecdotes that Mises would tell during the graduate seminar he taught at New York University from 1946 to 1969. Milton Friedman, who had a summer home in Vermont and who was invited to the dinner, was asked to say a few words. Friedman said that, of course, Mises had made a number of notable contributions. And while he hoped that we would have an enjoyable and fruitful conference over the coming week, it was important to remember that there was no such thing as “Austrian Economics,” just “good” economics and “bad” economics.
Friedman clearly thought that many of those at the conference were on a fool’s errand in pursuing an interest in something called “Austrian Economics.” Yet, for many of those attendees, Austrian Economics was good economics, and they wanted to know more about it from the lectures that were about to be given by Israel Kirzner, Ludwig Lachmann, and Murray Rothbard over the next several days.
During a walk, one day, with Ludwig Lachmann around the South Royalton town square with its statue of a Civil War Union soldier standing on a pedestal in the middle, Lachmann said to me that he had long feared that he might very well be “the last” of the Austrian Economists.
Those lectures at the South Royalton conference half a century ago this year, have resulted in a vibrant and productive rebirth of the Austrian School of Economics. It has seen the refinement and refashioning of the original ideas for which the Austrian Economists were internationally renowned in the late nineteenth and twentieth centuries, and which have now been taken into numerous new directions of theoretical and public policy significance.
The Austrian attention to imperfect knowledge, uncertainty, and the potential for frustrated expectations, reminds us that what the future holds in store can never be fully anticipated. But the revival and growth of the Austrian School over the last fifty years has made it clear that Ludwig Lachmann had nothing to fear in thinking he might have been the last of the Austrian Economists.
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Response Essay South Royalton: Before, During, and After

I have no disagreements with Richard Ebeling’s recounting of the rebirth of the Austrian School. As one who lived through this experience as well, I can only praise what he has done. Richard was, and is, a major actor in this revival. He has tirelessly recounted, developed, and expanded the Austrian tradition. He even discovered new documents that help us understand the tradition better than ever before.
So what is there left for me to do? I will give my own personal perspective on events that preceded, constituted, and followed the South Royalton conference. The pre-history and post-history are necessary for the broader context. I don’t want anyone to think that this perspective is definitive. No one has the full view. We each have partial views from where we stood during this time. I hope that my perspective, arising as it did in the context of much interaction with some of the major players, may be of interest to people.
Personal Pre-History
For me it all began with Henry Hazlitt’s Economics in One Lesson. In the summer of 1962 as I prepared to enter Regis High School, I came across Hazlitt’s book in the neighborhood public library. I had been interested, in a general way, in economic issues since the Nixon-Kennedy debates in 1960. I preferred Richard Nixon – the only one to do so in my Catholic eighth grade. I thought he would prevent inflation. And thus prevent the rise of comic book prices.
Hazlitt’s book gave me the opportunity, as I saw it, to gain expertise in economics in just one lesson. Why not? So I read the book. I found it exciting. I also noticed that there were references to other books by Henry Hazlitt, Ludwig von Mises and F. A. Hayek. I took a look at some of them, but they were too advanced for me to really understand them at that time.
In high school I was on the debate team which gave me the opportunity to study some economic issues like free trade, government provision of medical care, and so forth. I always favored the pro-market position. And my schoolmates playfully teased me about Ludwig von Mises.
Fast forward to college: In the fall of 1966 I entered Fordham College. I was certain that I wished to major in economics and so I did. I had the good fortune there to meet James A. Sadowsky, S.J. a professor of philosophy and a libertarian who was very interested in free-market economics, and Gerald P. O’Driscoll, Jr. a fellow economics student one year ahead of me. These friendships led me to Murray N. Rothbard’s living room where I met “all” of the other Austrians in the U.S. – not much of an exaggeration. Notably, I met historians Ralph Raico, Ronald Hamowy, Leonard Liggio, economists Walter Grinder, Walter Block (who was not yet an Austrian but a Chicagoan), and Laurence Moss. Eventually I was invited by Walter Grinder to hear a lecture by Israel Kirzner at New York University. All of these were thrilling experiences.
At one point in 1969 James Buchanan published a book Cost and Choice. It offered an Austrian-LSE contribution to the concept of cost. Murray and the rest of us were quite excited by this development. During that year Fritz Machlup lobbied successfully for the American Economic Association to give a distinguished fellow award to Ludwig von Mises in recognition of his contributions to economics, especially in the matter of socialist calculation. Another good sign, we thought.
At Fordham, I had the good fortune to meet Austrian economist Professor Louis M. Spadaro, at first the chair of the Economics Department and later the first dean of the Graduate School of Business at Fordham University. (Eventually Spadaro became president of the Institute for Humane Studies.) I took his graduate history of economic thought course and was able to write a paper on Eugen von Böhm-Bawerk’s capital theory. Also at Fordham, unrelated to Spadaro’s course, I wrote a paper with Jerry O’Driscoll on Austrian Business Cycle theory for a course on monetary theory.
Certainly a highlight of my Fordham career was the acceptance of an invitation my libertarian friends and I sent to Ludwig von Mises to lecture at Fordham before a joint meeting of the libertarian, philosophy, and economics clubs. We had asked Mises to speak on the epistemological problems of economics. He declined that topic and said he wanted to speak on money problems and inflation. Daringly, we tried to get him to change his mind. So he said as a compromise, “I will speak on epistemological problems of money.” On November 22, 1968 he spoke on money problems and inflation. Exactly what he wanted in the first place.
Finally, thanks to Lou Spadaro I had the opportunity to meet F.A. Hayek during a trip he made to the US probably in 1969. Hayek didn’t pay much attention to me – a college kid. But I did get my copy of Prices and Production signed.
Then I went to graduate school at the University of Chicago. (Murray Rothbard didn’t like my choice because he viewed the Chicago School poorly. He thought I should have chosen UCLA.) I put my Austrian interests more or less on hold while there so that I could learn what they had to offer. It was a very challenging program.
South Royalton
In 1974 when I heard that the Institute for Humane Studies was sponsoring a conference on Austrian economics, I was very excited to be invited. I would be able to meet “all” of the Austrian economists. Unfortunately, Hayek could not be there but there were many others. I made many friends for my entire career.
I did not, at the time, realize just how important this conference would turn out to be. So my memory of what exactly went on (aside from the lectures which were later published) is not great. I do remember that some of the fissures among Austrians were evident there, even at the “beginning.” Amazingly (to me), Ludwig Lachmann, Kirzner, and Rothbard were not each saying the same thing. Of course, there was unity on certain basic principles but the application of those principles, especially subjectivism, led in sometimes different directions. Lachmann questioned the inevitable equilibrating nature of market processes. Kirzner emphasized the equilibrating entrepreneur. Rothbard didn’t like the Kirznerian concept of alertness as an adequate explanation of entrepreneurship. I wondered whether Hayek would have straightened everything out if he had been there.
Milton Friedman was invited and arrived at one of the dinners. He was polite. But when he said that there was no such thing as Austrian economics – only good and bad economics, I was quite annoyed. His narrow-mindedness and intolerance of other methodologies and philosophies of economics were unacceptable to me. Why could he not have said: Let a thousand flowers bloom?
Narrow-mindedness and intolerance was not all on Friedman’s side. Rothbard was quick to put Lachmann in the Keynesian camp and to dismiss Kirzner’s entrepreneurial ideas as “un-Misesian.” His view of Austrian economics was that it was a fairly closed and essentially completed system as exemplified in Mises’ Human Action and Rothbard’s own Man, Economy, and State.
Nevertheless, the overwhelming majority of the young people there did not come away with doubts about Austrian economics or its viability as a research agenda. Interest was heightened. But, as Ebeling says, many had to go about really learning the Austrian tradition now if they wanted to contribute to its enrichment.
More conferences were called in 1975 and 1976, thanks to the Institute for Humane Studies, and the revival was well on its way.
New York University played an important role in the post-South Royalton revival of Austrian economics. Israel Kirzner decided, with the invaluable help of several foundations and the assistance of Leonard Liggio and George Pearson, to start an Austrian Program in the Department of Economics at NYU. Ludwig Lachmann began a series of academic visits to the Department in 1975. In the early spring of 1976 I was called by Israel Kirzner to determine whether I was interested in a postdoctoral fellowship at NYU. I ultimately accepted his offer and started at NYU in the fall, 1976. Later I became an assistant professor. Gerald O’Driscoll soon also joined the Department as an assistant professor. Fellowships were created for Ph.D. students. And we had a full program. The rest of the NYU story is one of major achievements and major disappointments. That story will not be recounted here.
The main thing to be noted about this point in time is that O’Driscoll and I decided a major contemporary statement of the basic principles of Austrian economics was necessary. Partly this was to educate many would-be Austrians and to let the outside world know what was going on. So we wrote a paper appropriately called “What is Austrian Economics?” The paper was not published until 2015 (O’Driscoll and Rizzo, 2015, 17-46) but, at the behest of René Olivieri, the editor at Basil Blackwell, we decided to turn it into a book. In the discussions and writings that preceded the book, the character of what we intended to do changed. We decided that we would try to produce a more thoroughgoing statement of subjectivism that would provide a basis for the process-orientation that was being more and more fully developed in the Austrian tradition. And then to link various more specific economic ideas to that basis. The first edition of the book came out in 1985 as The Economics of Time and Ignorance.
Initially, it was not well-received by the older generation. Neither Kirzner nor Rothbard liked the book. Kirzner even said that he thought the book would “confuse the students” and ultimately harm Austrian economics in a significant way. Rothbard ridiculed the book for, among other things, its reliance on some of the ideas of the philosopher Henri Bergson. Of course, Ludwig Lachmann (to whom we had dedicated the book) liked it, although he had reservations about whether we had tried too hard to keep some role for equilibrium.
Over the years, however, perhaps spurred on by the book and definitely by Peter Boettke’s open-mindedness and willingness to engage many different streams of thought compatible with Austrian economics, the Austrian school became more open to absorbing good ideas from whatever quarter. The distinctiveness of the tradition was not, and still is not, lost. Boettke and others (including Don Lavoie, Jack High and Richard Fink) established a program at George Mason University which has continued and enriched the Austrian tradition to the present day. Many other programs have also been founded. Austrian economics has developed almost in accordance with the wild dreams of the college kid who met Hayek in 1969. We have not gotten to where many of us hoped we would be, however, because scientism still dominates the profession, even more so than before. For further advances, we may have to wait until the scientistic preoccupation exhausts itself. Nevertheless, the revival thus far of Austrian economics demonstrates the fundamental attractiveness and fruitfulness of its core ideas. I hope and expect that this great intellectual adventure will continue for many more years.
O'Driscoll, G. P., & Rizzo, M.J. (1985), The Economics of Time and Ignorance. Oxford: Basil Blackwell.
O’Driscoll, G. P., & Rizzo, M. J. (2015). Austrian Economics Re-examined: The Economics of Time and Ignorance New York Routledge. Open Access. Available at:

Response Essay Some South Royalton Reminiscences

Richard Ebeling has done an admirable job of extensively surveying the Austrian economics landscape. In doing so, he has shown great familiarity with the economics literature. I particularly like his point that the restating of Austrian economics that so many young Austrians did in the 1970s and 1980s was “necessary and essential” for the revival of the Austrian tradition. It’s easier to know where to go when you know where you’ve been and where you are.
I will not try to compete with Richard in knowledge of Austrian economics. He has already beat me, and not on points, but with a knockout. The one small criticism I would make is that he should have mentioned some of the promising work being done by younger scholars in the Austrian tradition, notably Robert Murphy and Patrick Newman.
In the rest of this essay, I’ll discuss particular experiences I had at the South Royalton conference, experiences that, hopefully, readers will find interesting. They involve Richard Ebeling, Milton Friedman, Rose Friedman, Frances Hazlitt, Israel Kirzner, and William H. Hutt.
How I Got There
Like Richard Ebeling, I was excited to attend the first Austrian Economics conference in South Royalton, Vermont. My motivation was different from Richard’s. I didn’t regard myself as an Austrian economist, but I did find Friedrich Hayek’s work on the socialist calculation debate, and Ludwig von Mises’ work more generally, profoundly insightful and important. I was also a big fan of Hayek’s The Road to Serfdom, the first thing by Hayek that I had read. I had read Hayek and Mises in the late 1960s when I was a young undergraduate mathematics major at the University of Winnipeg. I never took a course in Austrian economics: all of my reading was on my own. In the fall of 1971, when I applied for the Ph.D. program at UCLA, I knew a lot about UCLA’s strong free-market orientation and was looking forward to taking classes from Armen Alchian, Harold Demsetz, and Sam Peltzman, the three UCLA economists whose work I had read. While I knew that none of them was an Austrian economist, I hoped that some of them would be sympathetic. So I took a chance on my application letter, writing, “I would like to be in a graduate program where, if I refer to Mises, people don’t assume that I’m mispronouncing the name of a childhood disease.” It worked, if you judge by the outcome: I was offered full tuition plus a 2-year teaching assistant position paying $440 per month for a 9-month year. That was more than this kid from rural Manitoba had imagined he could get and, more relevant, more than I was offered at my second choice, the University of Chicago.
The person who had motivated me to get into economics was Harold Demsetz, whom I had met in January 1970, when he gave 3 talks at the University of Winnipeg. I was hooked on economics. Although I almost always took Demsetz’s advice—he was my dissertation advisor and my mentor—in this case I went against his advice. I told him that I had received an offer to attend the South Royalton conference at someone else’s expense, and the program looked interesting. The three main speakers were Murray Rothbard, Israel Kirzner, and Ludwig Lachmann. I had read, and been impressed with, much of Rothbard’s Man, Economy, and State. Demsetz’s friend and colleague Ben Klein had assigned Israel Kirzner’s Competition and Entrepreneurship in his industrial organization class earlier that year. While I don’t recall Klein saying why he liked the book, I think one reason was that Kirzner rejected the idea that perfect competition had anything to do with perfection. I do remember that Ben liked the idea of dynamic evolving competition that Kirzner, and the Austrians in general, refreshingly brought to the economic discussion.
So I was surprised that Demsetz discouraged me from going to the South Royalton event. He told me that, now that my course work was done, I should be digging into my dissertation immediately. But I needed a break after two intense years, and this “busman’s holiday” seemed like what the doctor ordered. I probably batted a thousand on Demsetz’s advice: taking it on every other issue and rejecting it on this one. The conference was well worth it.
Sunday Afternoon
My fellow Canadian and fellow UCLAer Harry Watson and I showed up early on a Sunday afternoon at a small run-down hotel in South Royalton. One other person who got there early was Richard Ebeling. Richard had a keen sense of humor. I still remember his exact line as he introduced himself, first to Harry and me, and then to other budding young economists as they showed up: “Hi, I’m Richard Ebeling from Sacramento State; if you like Marxism, you’ll love Sac State.”
While I had thought at the time that Richard might be exaggerating, fifty years later he filled in the blanks, noting that two of his professors were Stalinist Marxists who said that the world was a sadder place after Stalin had died. I doubt that was the view of millions of Ukrainian survivors of Stalin’s reign of terror.
Bit by bit that afternoon, various participants arrived and then, unexpectedly to me, Milton and Rose Friedman showed up. They had a summer home, Capitaf, nearby. At the time I thought they had crashed the party, but I learned many years later that they had been invited by Ken Templeton of the Institute for Humane Studies, which funded the event.
I had met Milton twice before, once, in May 1970, when I showed up at his office at the University of Chicago and he gave me ten minutes of attention and again, in November 1971, when he did an extensive Q&A at a libertarian event at Columbia University. I had read a lot of his work and was a fan.
Given his well-deserved reputation for civility and warmth, Milton caught me by surprise by angrily calling me a nasty name when I advocated an immediate end to Social Security. But two hours later, when I ran into Rose just before the dinner and told her that I had talked to her son David three days earlier when he was out in Los Angeles, Rose grabbed my hand and told me to sit with her and Milton so he they could see how David was doing. (Remember that this was in 1974, when long-distance phone calls were still expensive, and so my guess is that they hadn’t talked to David in over a week.) I did so, Milton seemed fine, and I was quick to forgive. Indeed, seeing that he had earlier reacted to my proposal like a human caused me to think even better of him.
Sunday Evening
One unexpected event at the Sunday dinner was that Milton got up and gave what appeared to be an impromptu talk. As Richard Ebeling noted, he did say something jarring that, at least temporarily, deflated the excitement that a lot of people had about the conference. He said that there was no such thing as Austrian economics; there was only good economics and bad economics.
For some reason, I had shuffled positions and was no longer sitting with Rose when this happened. Instead, I was sitting with Henry and Frances Hazlitt. A few minutes earlier Frances had noted my Afro hairdo and delightedly ran her fingers through it. I immediately liked her and remember thinking that she would have been a wonderful grandmother. When Milton made his comment about there being no such thing as Austrian economics, Frances said, in a voice that could be heard by those around her, “Yeah, Milton, and is there no such thing as the Chicago School?” I chuckled.
I think the person most upset by Milton’s talk was Murray Rothbard. He had had a long feud with Milton, and he probably thought, “Look, this is our event and Milton even gets to speak at our event and put it down.”
The Conference
The formal conference started the next day and, truth to be told, I don’t have a strong memory of the presentations or of the specific things I learned. But one memory does stand out, and it made me think even more highly of Israel Kirzner.
Kirzner was discussing the price system and noted that Richard Nixon’s price controls were still on some items. He said that when you have economy-wide price controls, you can no longer apply economic reasoning to the economy because prices are not allowed to rise and, therefore, can’t communicate information. That struck me as too extreme, and I wanted to come up with a counterexample to make the point. By the time the Q&A came around, I had one. I said, “Professor Kirzner, you’re saying that when there are price controls, you can’t do economics. But in saying that, you’re implicitly saying price controls make information more costly and, therefore, people have less information. Aren’t you therefore doing economics by applying the law of demand? When the cost of something rises, people do less of it.”
I was ready for him to argue and get defensive about his point and so I was ready to go at it another way. I didn’t have to. Kirzner said, “You’re right.” I was temporarily dumbfounded but delighted.
William Hutt in the Rain
One of the participants in the conference was the venerable William H. Hutt. What a delightful man. Typically, when he would stand to make a point or ask a question, he would lead by saying, “I’m not an Austrian; for one thing, I don’t speak German” and then go on to make his point. One night several of us were up late talking and laughing with Murray Rothbard, enjoying his cackling laughter. I broke from the group relatively early, at least measured in Murray time, and went upstairs to my room. It had been raining. Remember that this was an old hotel. In the hallway, I saw someone who looked like a character in a Charles Dickens novel. He had on a white nightgown and a night hat. It was William Hutt. He was upset, understandably, because the rain was coming in right on his cot. I sympathized but that’s all I did. In retrospect, I wish that I had been the person my parents raised me to be and offered him my very dry bed.
These are my memories of South Royalton. I have other memories of the 1975 Austrian Economics conference in Hartford, Connecticut. One is of my conversation with Friedrich Hayek after he showed up in a yellow cab and I offered to carry his suitcase to his room. Another is of a sweet moment between Joe Salerno and Hayek when Joe was presenting a paper. Yet another is of some behavior of mine and others on a bus tour in which we tormented the hired guide whenever she mentioned some government building. I’m still ashamed of what I did. But all of those are another story.

Response Essay A Vagabond Remnant

Richard Ebeling, in his usual fashion, has given a first-rate recounting of both the circumstances surrounding and the legacy of the 1974 South Royalton Conference. His essay, however, does not dwell on the conference itself—the talks given, the discussions and disagreements, the social aspects—but rather on the lasting significance of that week and its ripples through late twentieth and early twenty-first century economics. Anyone interested in the history of Austrian economics, either in America or globally, would benefit from a careful reading of Richard’s recollections and evaluations. His essay is broad and thorough; his mastery of the historical context and the dizzying growth of the subsequent literature are on full display.
By the end of the essay, however, I found myself disturbed by a nagging feeling of unease. I located the source of this unease in Richard’s reference to “the remnant,” and what I think it has to do with the state of Austrian economics today. Before turning to this unease, I offer an interpretation of why the South Royalton Conference was so successful in contributing to the success of Austrian economics in the intervening fifty years.
Richard is undoubtedly correct that South Royalton marks a “rebirth” of Austrian economics, especially in the two to three decades following the conference. Significant events have a half-life of their own that naturally diminishes their influence over time. So it seems it would have to be with something like South Royalton; it is no doubt life-changing for those in attendance, and a point of inspiration for others who are proximate to attendees, but as the ripples work further from the impulse, they diminish. The beginning of the Austrian renaissance lies in South Royalton because that conference and the broader context in which it took place planted the seeds for the success of Austrian economics both as a scientific research program and as an intellectual movement.
Peter Boettke has put forward a formula for thriving research programs in academia. He says, “The advancement of a scientific research program requires at least three things: ideas, funding, and academic positions.” (Boettke 2012, 34) Austrian economics, in this respect, became and remains a progressive scientific research program in part due to South Royalton. At present, it seems likely that the set of ideas encompassing Austrian economics is more successful as a research program (in terms of funding and academic positions) than it has ever been—or at the very least since the 1930s or 40s. Richard’s delightful and thorough recounting of recent scholarship across the various strands of modern Austrian economics gives proof to this assessment.
Along the lines of Boettke’s “ideas, funding, and academic positions” for a scientific research program, the success or advancement of an intellectual movement requires at least three things: ideas, individuals, and institutions. (I am here using the term institution to mean an organization, not a rule of the game and its enforcement.) Ideas are a necessary part of success for both scientific research programs and for intellectual movements. Richard correctly notes that for many of this “first generation,” a return to the texts was necessary and beneficial. The ideas of the “older,” European Austrian School, expressed in the writing of Karl Menger, Eugen Böhm-Bawkerk, Friedrich von Wieser, Ludwig von Mises, F. A. Hayek, and others, have inspired generations of students, scholars, researchers, pundits, and activists. Austrian economics has never suffered from a lack of ideas; what made South Royalton so important for the future of Austrian economics was that it successfully combined individuals and institutions.
In an intellectual movement, ideas are the sine qua non, but while necessary, they are not sufficient by themselves. Intellectual movements are social phenomena, and, as such, are the results of human action but not of human design. Among the most important and significant of these human actions are the interactions of individuals in a learning environment. Succinctly, a thriving intellectual movement relies on teachers. What truly distinguished the faculty participants of the South Royalton Conference—Israel Kirzner, Ludwig Lachmann, and Murray Rothbard—is perhaps less their stature as researchers and intellectual luminaries but their stature as passionate, inspiring teachers.
I never had the pleasure of meeting Murray Rothbard or Ludwig Lachmann personally, and so I must rely on retellings. The stature of the former is widely known and attested by the devotion his students maintain to this day. For Lachmann, I rely on the witness of a smaller number who nevertheless defend his intellectual breadth and the depth of his intellectual charity. As for Kirzner, I can offer a personal anecdote. In the summer of 2006, I attended the Austrian Economics seminar at the Foundation for Economic Education (FEE) then still in Irvington-on-Hudson, NY. At that seminar, Professor Kirzner gave his famous lecture on the history of the Austrian school through the 20th century. Afterward, I waited my turn to speak with him and asked him about the equilibrating and dis-equilibrating forces of entrepreneurship in the market process. Despite the fact that he must have heard this question hundreds of times from scores of upstart graduate students, he nevertheless patiently and carefully took me through a chain of reasoning that left with me no conclusion but the one that he had written and published so often before. The carefulness of his argument, however, made less of an effect on me than his patience and willingness to engage with a student he barely knew.
Without individuals to pick up, reshape, and share them, ideas lie fallow, their fecundity preserved but unused. Just as individuals serve ideas in spanning across time and in reaching a wider audience, institutions, or organizations, allow the impact of individuals to go beyond what would normally be possible with the scant years of life we are given. Institutions can both amplify the effect of an individual and provide continuity of vision and influence well beyond that individual’s lifetime. In this respect, institutions can tie together individuals over great time and distance, allowing for this essential connection that lies at the heart of an intellectual movement.
As Richard notes, the Institute for Humane Studies sponsored the South Royalton Conference. Without significant institutional support, the conference might never have occurred. Because of the conference, connections between and among individuals were formed and, over time, flourished. With those connections came deeper understandings and a gradual expansion of the ideas at the core of the intellectual movement. Austrian economics was reborn in the wake of the South Royalton Conference and Hayek’s 1974 Nobel because ideas, individuals, and institutions came together. Austrian economics has enjoyed relative success over the last fifty years because it has, for much of that time, been both a scientific research program and a vibrant intellectual movement.
I found myself ill-at-ease upon completing Richard’s truly lovely retrospective essay because I wonder whether the same institutional structures are in place that had been for much of the past fifty years, during which the Austrian school has experienced a rebirth and resurgence. Richard’s reference to the students and early professionals gathered in Vermont back in 1974 as a “remnant” is, I suspect, a nod to the famous essay “Isaiah’s Job” by Albert Jay Nock (Nock 1936). In that essay, Nock cautions his audience not to judge success by whether they achieve popular success or acceptance. “The masses” will neither understand nor have the personal fortitude to accept a difficult or important lesson. Better, argues Nock, to live one’s own life according to said principles, rightly understood, and, if one is to reach and influence anyone else, it will be those among the remnant. The remnant, by necessity, must be a small minority of all people.
Where Nock’s essay has always sat awkwardly with me is his insistence that “the remnant will find you.” (Nock 1936, 646) Simply, I remain skeptical that Nock is correct in asserting that the remnant will manage to hear the message and find their way. But even if I concede that Nock is right about discovering ideas and finding their way to their “prophets,” I’m left wondering what we do with the remnant who have identified themselves. Do we have the institutional structures today to connect and bind together those individuals into a thriving intellectual movement?
I do not in any way begrudge Richard’s characterization of those motley individuals fifty years ago as part of the remnant; indeed they were a crucial part of a faithful remnant. What gives me unease about the current state of affairs is what we are doing to reach the remnant in our society today and what that remnant will find waiting for it beyond these bare ideas. Both the South Royalton Conference and Hayek’s Nobel sparked a renewed interest in the ideas of Austrian economics, but it was the efforts of individuals and institutions that turned those interested people into students, students into scholars, and scholars into educators.
Works Cited
Boettke, Peter J. 2012. Living Economics: Yesterday, Today, and Tomorrow. The Independent Institute: Oakland, CA.
Nock, Albert J. 1936. “Isaiah’s Job.” The Atlantic. Vol 157, No 6. June 1936, 641-649.
Polanyi, M. 1962. “The Republic of science.” Minerva, 1, 54–73.

Conversation Comments My Journey to South Royalton and Conference Social Life

I want to start by thanking David Henderson, Geoffrey Lea, and Mario Rizzo for their reminiscences, reflections, and reactions to my lead essay. I greatly enjoyed all three of their responses.
David and Mario told their stories of discovering Austrian Economics and how they came to be invited to and attending the South Royalton conference. In my case, I had the good fortune of meeting two guys in Hollywood, California, where I was living, when I was 16 years old, and they introduced me to the ideas of Ayn Rand. Her non-fiction writings, especially, Capitalism: the Unknown Ideal, had numerous references to books by Ludwig von Mises, Henry Hazlitt, Carl Menger, and Eugen von Böhm-Bawerk that led me to start reading the Austrians at that tender age. When people used to say, “It usually begins with Ayn Rand,” in my case that also included a discovery of the Austrian Economists (Ebeling, 2023, 97-106).
My Journey to South Royalton
After I moved to Sacramento, two friends took me to meet Floyd “Baldy” Harper, the founder and first president of the Institute for Humane Studies, when IHS was still headquartered in Menlo Park, California. Also at that meeting were George Pearson and Ken Templeton. (After Baldy died in April 1973, Ken ran IHS for several years with financial support of the Koch Foundation.) I clearly made enough of an impression on them that in the early spring of 1974, while still an undergraduate at California State University, Sacramento, I received an invitation to attend that first Austrian conference in South Royalton.
They only offered to pay my bus fare to the conference in Vermont. So, I boarded a Greyhound bus in Sacramento, and headed east on a more than three-day ride across the country. In the middle of the Nevada desert, the bus broke down; all the passengers had to wait hours in the midday heat until a replacement bus came to continue us on our journey. In Des Moines, Iowa, new people boarded the bus as it went on to Chicago. Overnight, a young man and woman who clearly had never known each other before getting on the bus and who were sitting next to each other in the row right behind me, proceeded to have sex together – and more than once before the sun appeared on the eastern horizon! They disembarked in Chicago, kissed, and walked away in opposite directions. Then, in eastern Pennsylvania, a one-year-old baby “did its business” in its diaper, but the baby’s mother had left all the extra diapers in her luggage in the baggage section in the lower part of the bus. The remainder of the ride to New York City was a most “aromatic” one!
I changed buses in the New York Port Authority bus terminal to go on to Vermont in the evening. The person sitting in the same row across the aisle from me turned out to be also going to the Austrian conference. We talked (quietly) most of the night before arriving at South Royalton in the very early morning hours of June 15th. But I must confess, I cannot for the life of me remember who it was with whom I had that delightful conversation.
Spooky South Royalton and Social Life at the Conference
We walked across a bridge over a stream to get to the actual town of South Royalton. It was spooky. The entire town was seemingly abandoned. Buildings facing the town square had open doors and music seemed to come from some of them, but not a human soul was in sight or responded to a “hello.” The hotel where the conference was to be held was open and empty except for a cleaning lady who knew nothing about the conference or with whom we should check in. I felt like I had entered Rod Serling’s The Twilight Zone.
In a few hours, however, more people began to show up, including Ed Dolan, the local coordinator of the conference. I was assigned to a room on the second floor of a two-story building around the corner from the hotel. The floor in my room sloped on a decline, with the bed situated under a window. I practically had to hold on to the sides of the bed not to slide out of the window!
Meeting Israel Kirzner, Ludwig Lachmann, and Murray Rothbard that first day was, for me, like meeting intellectual gods from an Austrian Mount Olympus. I had read their books and articles – practically memorizing many of them to better argue with my Keynesian and Marxist undergraduate economics professors during class times. I only knew Rothbard from the pictures on the dust jackets of some of his books. I imagined him to be thin, tall, and extremely serious. What a shock to be face-to-face with this relatively short, rotund, squeaky-voiced individual constantly laughing and cackling away as he told stories.
David Henderson mentioned late night sessions with Rothbard during the conference. Rothbard would hold court every evening until way past midnight. He would sing political songs from across the political spectrum in several languages, tell humorous anecdotes, and explain why Austrian Economics was so important. I remember one night at about two in the morning, Rothbard’s wife, Joey, came downstairs and told him it was time to go to bed since he was the first speaker that morning. Joey took Rothbard by the hand to take him upstairs, and as he was being led away Murray said in a forlorn child’s voice, “But I don’t want to go to bed.”
One evening someone tried to make a phone call from the hotel phone and from a public phone across the street and found the lines dead. Also, there seemed to be barking dogs on the edges of the town. Rothbard hypothesized that this was a Keynesian-Chicago School conspiracy to isolate this remnant of the Austrian School from the outside world, maybe even to wipe it out. The next morning at breakfast one of the attendees, property rights theorist Svetozar Pejovich, who was originally from Yugoslavia, said that he had lived under the Nazis during World War II and experienced communism under the Tito regime in his home country. But after hearing Rothbard’s explanation that we were all going to be wiped out by the mainstream of the economics profession, for the first time in his life, he slept with the light on!
To describe South Royalton as “rustic,” would be a gross understatement. One day while walking with Ludwig Lachmann around that town square with the statue of the Civil War Union soldier, I asked him what he thought of South Royalton. He replied in his slow, gravely, German-accented voice, “Well, Mr. Ebeling, it has been very interesting to find out what life was like in nineteenth century America.”
Geoffrey Lea observed that I had failed to explain the conference proceedings itself. I only did not in my opening essay due to the limitations of space. But I might mention that I wrote a piece detailing what had gone on at the conference in an article, “Austrian Economics on the Rise,” which appeared in Libertarian Forum (October 1974), a bimonthly newsletter edited and mostly written by Murray Rothbard. My article is conveniently accessible on the Mises Institute website (Ebeling, 1974).
The Human Element Binding Austrian Economists Together
Finally, one of the most valuable and enjoyable consequences of my attending that Austrian conference in South Royalton were friendships that have continued for, now, half a century, among those friends are David Henderson and Mario Rizzo. Alas, some of the attendees have now left us. One of them that I especially miss is Don Lavoie, with whom I attended graduate classes at New York University that were taught by Ludwig Lachmann and Oskar Morgenstern. And also, the many late night conversations with Don at his Brooklyn apartment, made even more stimulating after we had smoked a joint or two. (I know, “shocking,” but this is the twenty-first century, and I think I’m beyond the statute of limitations in confessing this.)
Another that I would be most remiss in not mentioning is Sudha Shenoy. Her father B. R. Shenoy heard F. A. Hayek deliver his famous Prices and Production lectures at the London School of Economics in January 1931. He went on to become one of the leading free market economists in India in the postwar period. Sudha, with her Brahmin dot on her forehead and wearing her beautiful Sari dresses, spoke with a most upper class British accent. Warm and charming, she was a walking encyclopedia on all things Hayek. Sudha and Gerald O’Driscoll had co-authored a paper on Hayek’s business cycle theory that was delivered at the South Royalton conference in an extra session during the week. It was included as a chapter in the South Royalton proceedings volume, The Foundations of Modern Austrian Economics (Dolan, 1976, 185-211). Sudha was constantly seeing the logic and relevancy of Austrian capital theory in numerous episodes of economic history. I always made a point of taking advantage of delightful conversations with her whenever I could over the years before she passed away in 2008.
In the decades ahead, if anyone writes a new history of the Austrian School the South Royalton conference, no doubt, will be marked as a milestone in the School’s history. But as Geoffrey Lea said, crucial to the continuity of a set of ideas across time are the human connections and the memories of shared experiences and bonds of beliefs. This has been an inseparable part of this reborn Austrian School of Economics.
Dolan, Edwin G., ed. (1976). The Foundations of Modern Austrian Economics. Kansas City: Sheed & Ward.
Ebeling, Richard M. (1974). “Austrian Economics on the Rise,” Libertarian Forum, October.
Ebeling, Richard M. (2023). “My Life as an Austrian Economist and Classical Liberal: The Starting Point and Early Years,” in Jo Ann Cavallo and Walter Block, eds., Libertarian Autobiographies: Moving Toward Freedom in Today’s World. Cham, Switzerland: Palgrave MacMillan.

Conversation Comments The Unintended Consequences of Milton Friedman

Geoffrey Lea says that “as the ripples work further from the impulse, those ripples diminish in magnitude.” Taken literally, this is no doubt true. But there are some processes that amplify over time. I will argue that Milton Friedman’s little speech at the South Royalton dinner in 1974 is a case where the, at first, mere ripple was somehow magnified over time. To be sure, it was not the speech itself, but the fundamental idea in it that has worked to the disadvantage of a cause he cared deeply about: liberalism.
David Henderson gives the context of Freidman’s comments at that dinner. He had indeed been invited and was encouraged to say something. But when he said that there is no such thing as Austrian economics but only good and bad economics, he was making a profound point. We all knew that his conception of good economics was that it must be scientific in the sense of fundamentally mathematical in its analysis, consisting of testable propositions, and using up-to-date methods of empirical research. And this was the only acceptable method.
Why was Friedman so concerned about being scientific? He wanted to demonstrate that liberal ideas about the efficacy of free markets and the importance of general rules over government discretion could have a scientific basis. If there were to be a postwar revival of liberalism, it could not be on the terms of the pre-war liberals, especially the Austrians, who seemed so old-fashioned in their methods of analysis. They seemed to him to be dogmatic, ideological, and averse to the current trend of economic thinking. It is clear that he and others of the new Chicago school (yes, there was a Chicago school – everyone knew it – even though there was no Austrian school!) did not take seriously the anti-scientistic cautions of Frank Knight who had died in 1972.
At South Royalton Murray Rothbard was quite angry and he had every right to be. I think those who invited Friedman thought he would be pleased about an Austrian revival. After all, it could be yet another route to re-establishing liberalism. But they should have known better based on Friedman’s writings and participation in Mont Pèlerin discussions.
Friedman’s point exemplified the general attitude held by his Chicago School – as well as most of the economics profession. As the decades rolled on, economic theory became increasingly more abstract and mathematical. Empirical methods developed by leaps and bounds. Experimental methods were introduced. Fields became ever more specialized and isolated from each other. The narrowness of neoclassical rationality was questioned. Some of this was to be expected and some even welcomed. But there was a major problem: The thrust to specialize and to be as “scientific” as possible meant that economists had no time to consider the broader social implications of their work. And, because entry into the economics profession involves self-selection, many young economists had no interest in such issues. A perfect example was an economics faculty meeting at New York University during the 1990s in which William Baumol, who had himself made contributions to the history of economic thought in earlier days, argued that the history of economic thought requirement for Ph.D. students should be abolished because the opportunity cost of studying broader issues was now too high in view of increasing technical nature of the discipline. The requirement was abolished over the objections of Israel Kirzner and Wassily Leontief. A classic case of crowding-out.
Of course, Milton Friedman could have had no idea that things would develop in this way. He could have no idea that the view of economics – which he shared with the mainstream of economists – would evolve into an exaggerated form and obsession. In part, he did not know this because Chicago had always been far more moderate in its formalism than was economics at Harvard, Yale, or MIT. Chicago economics always kept a close relationship with the real world and employed intuitively-plausible theories. They were Marshallians – you could burn the mathematics and you still had something. Economics was an engine for the discovery of concrete truth.
Crowding-out meant that economists, at the highest level, were increasingly ill-educated beyond narrower and narrower technical concerns. Education for economists today has no room for the study of political theory, the history of economic thought, heterodox economic ideas, even economic history and economic institutions. The idea of discovering the scientific basis of liberalism makes no sense at the “elite” (aka fancy-school) level of the economics profession. Nevertheless, many economists still opine on political matters but without any of the background to do so.
Who continues to pursue the substantive relationship between economics, philosophy and the other social sciences? Clearly, the Austrians have been prominent in all this. Others, beyond the elite mainstream, are involved too – witness the surge in interest in Philosophy, Politics and Economics (PPE) programs.
Friedman’s error was to put down the distinctively Austrian perspective, thinking that his view of science was the only one acceptable and not recognizing the dangers of scientism. Ironically, and without his intent or responsibility, the mainstream profession of economics today has crowded-out the informed concern with broad political and social issues. The scientism in Friedman’s science has overwhelmed the liberal framework he hoped economics could contribute to building.
But not among the Austrians.

Conversation Comments South Royalton Mattered but It’s Important Not to Isolate

Because my original essay was a response to Richard Ebeling’s excellent essay, I’ll focus here on responding mainly to Mario Rizzo and Geoffrey Lea.
South Royalton Mattered
Both Mario and Geoffrey (explicitly) and Richard (implicitly) make the point that institutions matter. In particular, the South Royalton conference mattered. You can have some great ideas, but they might not go very far without institutions backing you up.  Institutions provide two important inputs.
The first is resources. As I mentioned in my essay, someone (the Institute for Humane Studies) was offering to pay all my expenses to go to an interesting conference. Given my resources at the time, I almost certainly wouldn’t have gone if I had had to pay my own way.
The second important input is contacts. Before I went to the South Royalton conference, I had met none of the other students who went there, other than my friend Harry Watson, with whom I went, and Jerry O’Driscoll, a fellow UCLA student who had mentored me somewhat during my first year at UCLA. Many of those students became friends and even those who didn’t became friendly acquaintances with whom I have kept in touch for half a century. When I run into Randy Holcombe at conferences, for example, he never fails to remind me that we first met at South Royalton and then usually adds, “Who knew when we went there that it would be that big a deal?” Who knew, indeed?
As far as faculty go, I had met Murray Rothbard once but had never met Israel Kirzner or Ludwig Lachmann. In my case, meeting them didn’t have a large direct impact on my career or my scholarly or popular work, but it probably helped me feel comfortable dealing with older economists who were accomplished.
I told the story, as did Richard and Mario, of Milton Friedman saying at the South Royalton conference that there was no such thing as Austrian economics but only good economics and bad economics. There is one important way in which Friedman’s comment mattered, even if it was not the way he intended. Far from discouraging the young attendees who heard him, his comment (at least in my view) amounted to his throwing down the gauntlet and challenging them to do good work. Many of them did, and much of it was in the Austrian tradition. Oh, and it was, by and large, good economics.
The Remnant
I’m glad that Geoffrey Lea expressed his misgivings about Richard Ebeling’s discussion of “the Remnant.” Even though I had read Richard’s essay carefully twice, I failed to comment on that part of his essay. But Geoffrey’s comment reminds me that I do have my own misgivings.
I shouldn’t blame Richard too much. I had misgivings in the 1970s, when I first read about Albert Jay Nock’s concept of the Remnant. As Nock himself admits in his famous 1936 essay, neither the “Remnant” nor the “masses” can be defined by class or station. Someone could be a bona fide member of the elite and still be a member of the masses; similarly, one could come from a humble background and be part of the Remnant. So even if one stuck to writing only for the Remnant, that would not mean that he or she should focus on a particular well-defined audience.
When he gets to his actual argument, Nock is essentially saying that we should not water down or compromise our thinking to appeal to the masses. I agree with that. Even if Nock didn’t intend it, though, thinking that one is producing ideas for the Remnant could lead one not to reach out to others. It could easily lead someone to isolate himself from all but those who already agree with him, whether they be fellow scholars or what might seem to be members of the “masses.” Fortunately, many members of the Austrian school have engaged in valuable outreach to people who might be mistaken for the “masses,” without compromising or watering down. In my view, Murray Rothbard is a case in point.
I do remember, though, the case of one prominent Austrian scholar who refused to reach out to a scholar who was not a member of the Austrian school. That Austrian scholar was Israel Kirzner. This might sound surprising, given my genuine praise of Kirzner in my first essay. But I distinctly remember a story he told the audience at either the South Royalton conference of 1974 or the Hartford conference of 1975.
Kirzner told of his excitement when hearing that Sir John Hicks, who had earlier won the Nobel Prize in economics, was writing an explicitly Austrian book. The 1973 book was titled Capital and Time: A Neo-Austrian Theory. Kirzner told of excitedly attending a session of the American Economic Association meetings in New York in 1973 at which Hicks was to present his “neo-Austrian” ideas. Kirzner said that after listening to Hicks present for a few minutes, he concluded that Hicks did not understand Austrian economics and he, Kirzner, got up and walked out before the session was over. When I heard Kirzner say that, I thought, “What a wasted opportunity!” It’s true that Hicks was not an Austrian. But a good-willed prominent economist, Hicks, who thinks he is doing Austrian economics is probably worth talking to. And who better to try to steer him in the right direction than the clear-thinking and normally patient Israel Kirzner.

Conversation Comments In Search of “Good” Economics: Friedman, Mises, and Heyne

I am grateful to Richard, David, and Mario for their thoughtful and insightful contributions to discussion. It is a grave understatement to say I am honored by the opportunity to contribute.
The first draft of my response to Richard's essay included a discussion and consideration of the Milton Friedman quotation that there was no such thing as Austrian economics but only good economics and bad economics.. However, I decided—having not been there in the first place to hear the quotation in context—that mine probably wasn't the best perspective on what Friedman had said or how he said it. Since all of my interlocutors have referenced the 'pot-shot heard round the world,' I have decided that I might offer another perspective on the remark.
Following what the late Daniel Dennett called “Rapoport’s Rules,” I want to offer my most charitable criticism of Friedman (Dennett 2013, pp 33-36). There is an interpretation of Friedman’s words in which he is unambiguously right. It does not matter whether your economics is Austrian or not—if it is good economics. And a corollary, it does not matter whether your economics is Austrian or not—if it is bad economics. This is likely not the purest sense in which Friedman meant his remark, but I want to be as charitable as possible to what I think Friedman was trying to say, not necessarily what he said.
Where do I find agreement with Friedman? I agree with him that there really is only good economics and bad economics. While one can find all manner of logical and philosophical distinctions among our various approaches to economic science and the art of political economy, this is the only distinction that truly matters.
In his response essay, David recounts Frances Hazlitt's incisive wit in wondering whether Friedman would agree there is also no Chicago school. It seems to me that an intellectually honest Friedman would probably agree with Frances. Or, in parallel formulation, It does not matter whether your economics is Chicagoan or not—if it is good economics; and it does not matter whether your economics is Chicagoan or not—if it is bad economics. The “Chicago” school, method, or approach is just one way to try to do good economics and avoid doing bad economics—so, too, with Austrian economics. I think that Friedman and I would find agreement here. Perhaps, I am also willing to admit, many others would find this goes too far.
But what are “good economics” and “bad economics” anyway? It is a hollow agreement if we do not have a definition of what counts for “good” or “bad” economics. By not defining them—maybe we are all just supposed to know them when we see them—Friedman has probably smuggled in some assumptions or presuppositions with which any of us might take issue.
One possibility is that Friedman is making an intentionally harsh methodological point, in line with his essay “The Methodology of Positive Economics.” (Friedman 1966, pp 3-43) Under this interpretation, insofar as Austrian economics drifts from this positivist approach, it is a non-entity in the realm of positive economic science and is only incidentally “good” economics. This interpretation is possible and perhaps one to which Friedman would assent. It is just not the interpretation I want to believe, and it is far too uncharitable on Friedman’s behalf.
Nevertheless, it is a possible interpretation and one with some precedent. I have long seen a parallel between Friedman’s remark and the following from Ludwig von Mises’s Human Action:
There are no such things as a historical method of economics or a discipline of institutional economics. There is economics and there is economic history. The two must never be confused.(Mises 1949, page 66)
This quotation arises in Mises’s defense and extrapolation of his aprioristic method of economics, particularly against rival ‘schools’ of economic science. Mises, it seems, does not even allow for the existence of “bad” economics; things outside the proper method are not even economics!
Instead of either extreme methodological commitment—Friedmanite positivism on the one hand or Misesian apriorism on the other—is there a middle ground consensus for “good” economics? Perhaps Frédéric Bastiat?
The entire difference between a bad and a good Economist is apparent here. A bad one relies on the visible effect, while the good one takes account both of the effect one can see and of those one must foresee.(Bastiat 2017, p 403, emphasis original)
Henry Hazlitt wholeheartedly agrees with Bastiat. It seems reasonable that one is a good economist by doing good economics; and so good economics seems to be that which allows the practitioner to see beyond the obvious results of something to its unintended, often counterintuitive consequences.
Someone is doing good economics, then, when he or she is able to see the spontaneous order that is the product of individual action and the producer of social outcomes. In other words, good economics is economics which uses what Paul Heyne called the economic way of thinking: “All social phenomena emerge from the choices of individuals in response to expected benefits and costs to themselves.” (Heyne 2008, p 294, emphasis original) It is what Peter Boettke calls ‘the persistent and consistent application of opportunity cost reasoning’ in understanding individual choice and an attention to the results of human action that go well beyond humans’ capacity for design.
“Good” economics is not a litmus test for methodological purity. It is a way to perceive and understand the fascinating depths of human cooperation in a world of strangers. “Good” economics, then, is a little more Capitalism and Freedom and Free to Choose and a little less Essays in Positive Economics. It’s a little more Liberalism and Planning for Freedom and a little less Epistemological Problems of Economics.

Conversation Comments The Subjectivism of the Austrian School and the Next 50 Years

I would, again, like to thank David Henderson, Geoffrey Lea, and Mario Rizzo for both their responses to my original lead essay and their other comments and discussion points over the month.
The Meaning of the Austrian “Remnant”
Geoffrey brought up and David commented also on my reference to “the remnant.” I wonder, now, whether that was the best choice in the passing use of a particular phrase. I simply meant that in the 1960s and 1970s, those interested in the Austrian tradition were a small and dispersed group of people, many of whom had come across the ideas of the Austrian School – from Carl Menger to Ludwig von Mises and Friedrich A. Hayek – on their own or by a chance reference in something they read or from someone they talked to. The “remnant” also meant that those interested in the Austrian perspective were a small handful due to the fact that in the post-World War II period the mainstream of the economics profession had moved in very different methodological, theoretical, and applied directions that had eclipsed the earlier Austrian Economic approach.
As I mentioned, in my case it was the happenstance of meeting two people who suggested my reading Ayn Rand, whose non-fiction works led me to some of the Austrians. It was fortunate that I decided to take the time to go through her Capitalism: The Unknown Ideal (1967) and notice the footnote references to Ludwig von Mises and others.
I understand how both Geoffrey and David zeroed in on Albert Jay Nock’s use of the remnant in his well-known essay, “Isaiah’s Job” (1936), since that is the context in which it is often known.  The theme of “Isaiah’s Job” is being on a “mission” to share the truth as one knows it, and the despondency of feeling it’s all for nought. But in fact, Nock argues, you never know who may hear what you say when talking about ideas with someone; and while it may seem that the listener is not interested in or opposes your arguments, you never know if something you said rattles around in their head, and in some way influences them at some point in the future, about which you will never know a thing.  This certainly applies to the written word, since you can never know many, if any, of the people who read something you have put down on paper (or its digital equivalent nowadays).
Carl Menger Alone and the Unknown Others Who are Influenced
Thus, even if it seems that you are a minority of one, that should not dissuade you from thinking about, developing, and sharing ideas that you think shed important light on aspects of reality and the world. Carl Menger found himself in that situation in the 1870s after the publication of his Grundsätze der Volkswirtschaftslehre [Principles of Economics] (1871) when it was at first either ignored or rejected by a good number of the members of the German Historical School who dominated the universities in the German-speaking world at that time.
Mises remarks in The Historical Setting of the Austrian School (1969) that he once mentioned to Menger in a conversation before the First World War about the informal discussion groups among some of the younger economists in Vienna about the ideas of the Austrian School. Menger replied, “When I was your age, nobody in Vienna cared about these things.” Mises adds, “Until the end of the [1870s] there was no ‘Austrian School.’ There was only Carl Menger” (Mises, 1969, 1).
Yet, when the American sociologist, Albion Small, spent a day with Menger in 1903, Menger concluded their discussion of his ideas by saying, “It is entirely indifferent to me whether the name Austrian School be preserved. The important thing is that every economist worthy of the name has now virtually adopted every essential thing that I stood for” (Small, 1924, 172-173). How could Menger have known in 1871 that two young economists, Eugen von Böhm-Bawerk and Friedrich von Wieser, would come across his book and make it part of their life’s work to refine, develope and expound Menger’s subjectivist marginalism to the point that the “Austrian School” had received international recognition within the economics profession by the end of the nineteenth and the beginning of the twentieth centuries? (Wieser, 1926). This was, of course, assisted by two British economists, James Bonar (1888) and William Smart (1891), who introduced “Austrian” ideas to the English-speaking world. Menger had no way to imagine Bonar and Smart in the 1870s.
How a Phrase by Mises Influenced Someone’s Entire Life
Likewise, how could Ludwig von Mises have anticipated or known that in September 1954, a graduate student studying business administration at New York University would take a course of his and become one of his most important protégées and a leading contributor to this reborn Austrian School? Israel M. Kirzner recounted that in the first evening of Mises’s graduate seminar, Mises began his opening remarks by saying, “The market is a process.” Kirzner later explained:
“Mises’s statement, I recall, left me completely puzzled. I had thought of the market as a place, an arena for exchanges, an abstract idea referring to voluntary exchange transactions. I could not fathom what on earth could be meant by the observation that the market is a process. I now, in retrospect, consider that all my subsequent training and research in economics, before and after obtaining my doctorate under Mises, has consisted in learning to appreciate what it was that Mises meant by that assertion” (Kirzner, 1996, 151).
That evening led Kirzner to study under Mises, earn his PhD in economics, and later publish Competition and Entrepreneurship (1973), a year before the South Royalton conference in June 1974, a book that has been the inspiration for part of the revived Austrian research agenda over the last half century.
How a World War Helped Bring About the Austrian Revival in America
We can extend this backward to Mises’s presence in the United States. In the 1920s and 1930s, Mises was one of the most widely known and respected economists on the European continent, primarily because of his theory of money, credit and the business cycle and his critique of any attempt to try to successfully implement socialist central planning. But these works were only translated from German into English in the mid-1930s and were considered background to Hayek’s more already well known writings on the same themes from his position at the London School of Economics. As a result, Mises’s direct intellectual influence outside of Central Europe was minimal, and this was certainly the case in America.
Mises, who had made his living as a senior economic analyst at the Vienna Chamber of Commerce, had accepted his first full time professorship at the Graduate Institute of International Studies in Geneva, Switzerland in the autumn of 1934. He spent the next six years writing a major economic treatise, Nationalökonomie: Theorie des Handelns und Wirtschaftens, which was published in May of 1940, just as the German invasion of Western Europe was beginning, with the fall of France in the middle of June 1940. Mises had been on the Nazi wanted list since the German occupation and annexation of Austria in March 1938. With the Germans in control of most of France in June 1940, it was feared that Adolf Hitler’s gaze might turn to Switzerland as his next target for the unification of all German-speaking people into the Third Reich.
Mises and his wife, Margit, therefore, crossed unoccupied France, entered Spain, and went on to Lisbon, Portugal, where they boarded a ship that brought them to America in August 1940. After five difficult years, Mises was able to obtain a visiting professorship in the Graduate School of Business Administration at New York University, a visiting position that he held until his retirement in 1969, at the age of 89. It was from this teaching position that Israel Kirzner ended up becoming a student of Ludwig von Mises.
But if not for the European tragedy of the Second World War, if not for the concerns about a possible Nazi invasion of Switzerland – which, no doubt, if such an invasion had happened and Mises had stayed in Geneva, would have resulted in his arrest and certain death at Nazi hands – he might never have come to America. If he had not come to America, there may not have been an English-language version of his 1940 treatise, which this year is marking 75 years since its publication under the title, Human Action: A Treatise on Economics in September 1949 (Ebeling, 2010, 141-148; 2020).
If not for the presence of Mises at New York University, if not for the publication of Human Action in English, if not for young scholars like Israel Kirzner and Murray Rothbard being drawn to Mises’s articulation of the ideas of the Austrian School and interacting with him at NYU, there would most likely not have been that conference at South Royalton, Vermont, and no revival of the Austrian School as it has been experienced over the last half-century.
The Role of the Unexpected and the Unpredictable
Geoffrey Lea, drawing upon some remarks made by Peter Boettke, emphasized that if there is to be a vibrant and successful scientific research agenda, three elements must be present: ideas, funding and academic positions. This is most certainly true. If not for funding from an organization such as the Institute for Humane Studies in 1974, there likely would not have been a South Royalton conference. The establishment of Austrian graduate economic programs like the one at George Mason University or non-profit educational groups like The Mises Institute at Auburn, Alabama have been crucial in offering places where interested young minds can learn from informed and articulate proponents of the Austrian School for a continuance of the Austrian tradition. Academic positions from which a new generation of professors may pursue their scholarly interests and attract new generations of young Austrians in the classroom, along with professional associations as outlets for new scholars to try out ideas, have been essential to the vitality of this reborn Austrian School. Similarly, an institution like Liberty Fund has helped keep the literature of liberty in general and Austrian Economics in particular readily available, including through such forums as Liberty Matters.
But we should not lose sight of the fact that intellectual movements, including their directions and successes, cannot be fully anticipated or centrally planned. My examples of Carl Menger, Israel Kirzner, and Ludwig von Mises should remind us of a whole variety of things that are inescapably unknowable and unpredictable. They are instances of that essential Austrian theme: the unintended consequences of human action.
We also see in the examples I offered the significance of “path dependency,” that is, future events and outcomes are not completely independent of the events that preceded them, and which lead to some directions being possibly taken and developed by human actors rather than others. But, again, what those directions may be and which developments may emerge can never be fully known or anticipated. This depends upon human ideas, which reminds us of one of Ludwig Lachmann’s famous phrases that the future is imaginable but not knowable.
Which one of us knows what all our own thoughts and deeds will be five years from now, one year from now, next month or a week from now, or even tomorrow? As Karl Popper and others have pointed out, tomorrow’s knowledge and the actions arising from that knowledge, cannot be fully known today. Because our knowledge tomorrow will be the product of new or modified ideas, beliefs, experiences, and plans between today and tomorrow. And none of us can know perfectly what we will think or do next. Otherwise, tomorrow’s knowledge would already be part of today’s knowledge (Popper, 1957, vi-viii; Lachmann, 1959, 81-93; Nisbet, 1968, 12-13). This also means that we have little way of knowing with any degree of certainty what the next fifty years holds in store for the Austrian School as an approach to social and economic theory or its success or failure vis-a-vie the mainstream of the economics profession.
Menger’s Error that the Economics Profession Was “Austrian”
Think about that quote from Carl Menger in 1903, that he cared little about whether the name “Austrian School” survived or not, because in his view virtually all economists by that time had adopted the essential elements of his own contributions to economics. So, by implication in those early years of the twentieth century, “Austrian Economics” had become the economics as generally understood and practiced by most members of the economics profession.
In retrospect, we understand Menger was wrong about his perception of the economics profession in his own time and certainly over the twentieth century and into the twenty-first. The Walrasian and Paretian variations on the marginalist themes, with their insistence on mathematics as the most appropriate language for economic science and the increasing focus on mathematically determined states of general economic equilibrium were slowly capturing the imagination of a growing number of economists looking for the holy grail of determinate economic “solutions.” The same was the case with the emergence of the perfect competition model in the 1920s and its formalization as the benchmark for economic efficiency and optimization. Or with the growing emphasis on quantitative measurement and statistical analysis of aggregate economic relationships culminating in the triumph of the new Keynesian macroeconomics in the 1930s, 1940s, and 1950s. And, of course, there has been the shift from a general default position held by many economists that, unless otherwise demonstrated, a free market economy was the most effective in assuring freedom and prosperity, to a presumption that extensive government regulation and even central economic planning were superior to an unhampered market system.
The siren call of scientism – the misguided application of the methods of the natural sciences to the social and human sciences – overwhelmed the subjectivist strands in existence in economics before and during the 1920s and 1930s (Mises, 1942, 3-15; Hayek, 1955). Hayek had shown that if one makes the types of assumptions that underlay the perfect competition model, especially that all market agents possess “perfect” or “sufficient” knowledge never to make buying and selling errors, such essential questions as how competitive markets move toward a hypothetically successful overall coordination has been assumed away (Hayek, 1946, 105-116).
The Austrian Subjectivism of Meaning, Action, and Social Processes
From the time of Carl Menger, the Austrians had built their theories on different assumptions: that the human actors have less than perfect knowledge, that they must imagine ends to pursue and search out useful means to try to apply in the attempt to attain those ends. That the ends-means nexus implies causal relationships, and that causality includes the existence and reality of time (the periods before, during, and after when selected means are set to work to try to achieve a desired end) have all been hallmarks of the “Austrian” approach to economic analysis.
The Austrians have insisted that knowledge is imperfect and, again, as Hayek emphasized, divided and dispersed among all those participating in the social system of division of labor; how individuals see, understand, and interpret the world in which they live and act, opens up a wider notion of subjectivism than merely the subjectivity of tastes and preferences (Hayek, 1943, 78-92; 1945, 93-104). Or, in Mises’s words:
“Economics is not about things and tangible material objects; it is about men, their meanings and actions. Goods, commodities, and wealth and all the other notions of conduct are not elements of nature; they are elements of human meaning and conduct. He who wants to deal with them must not look at the external world; he must search for them in the meaning of acting men” (Mises, 1949, 92).
All human interactions arise from and are dependent upon how the actors view the intentions and actions of themselves and others. That is, the subjective meanings they see in all they do. Someone is running towards you waving his arms late at night in a dark alley. Is he a threatening attacker, or a long lost relative rapidly approaching to embrace you? The man standing over you has a pointed, sharp object in his hand. Is he planning to use this knife to kill you, or is he a surgeon about to make an incision with a scalpel to save your life? Are a group of people jumping up and down in a circle performing a war dance or celebrating at a wedding? The meanings seen in one’s own actions and that of others, and in the objects used in all that we do, defines and determines the type of social and economic interactions they are, and which influences the respective actions each individual plans and undertakes.
By this standard, the Austrian focus on “subjectivism” in its various dimensions – meaning, understanding, and interpretation – places the Austrian approach to social and economic analysis outside the realm of the “positive” science followed by most of the mainstream economics profession. For the Austrians, however, it seems impossible not to see the relevance and reality of this subjectivist dimension to the study of human action and the market process. To ignore or minimize it is to leave out an essential and inescapable aspect of the human condition, whether the focus of analysis is on the marketplace, the political arena, or the general institutional order in all its forms and facets.
The rebirth of the Austrian School that began at the South Royalton conference fifty years ago in June of 1974, represents a return to this methodological subjectivist approach that began with Carl Menger and was carried on by many of the Austrian Economists of the interwar and immediate postwar period, most especially Mises and Hayek. Will it succeed in winning greater recognition and application by a growing number of economists in the next half century? As we suggested, no one can know the answer today about the future of Austrian Economics. But its vibrancy and the increasing number of younger economists who have taken up the Austrian approach and have been applying it in a wide variety of directions, as we outlined in the lead essay to this series, suggests that the next half century offers a wide horizon for a successful development of the methodological subjectivism of the Austrian Economists.
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