Classical Liberalism and the Austrian School

by Ralph Raico

Here is the book to learn classical liberalism from the ground up, written by the foremost historian in the Austrian tradition--Ralph Raico. He takes on all comers, disposing of all opponents of the market from Keynesians to Marxists and everyone in between, with crackling prose and sizzling wit. The liberal history comes alive with Raico's pen, and at the same time quenches the reader's thirst for detail, infusing an excitement that urges the reader to further explore. Raico's breadth of scholarship is on full display, combining insights and arguments from disparate points. He provides clarity to a history that is often slanted and distorted. Multiple reference lists contained in the book will serve as a classical liberal treasure trove for students and scholars for decades to come.

Genres: Economics, Philosophy, Politics, History, Nonfiction

372 pages, ebook

First published January 1, 2012

About the author

Ralph Raico was an American libertarian historian of European liberalism and a professor of history.

Reviews

[Arun Pandiyan · Rating 3 out of 5]

Karl Marx conceived the idea that surplus value, known as profit, is due to labour exploitation, and that this surplus accumulates in the hands of a few. But where Marx missed was that the value of anything, a precursor to profit, is determined by human preferences and values, not by “socially necessary labour time.”

To put it simply, labour can produce as many Nokia phones as possible, but there would be no surplus value from them, since human preference for mobile phones has shifted from Nokia to Apple iPhones. Now, if profits are surplus value derived from labour, the subsequent modernization and technological development after the Industrial Revolution have further shown that socially necessary labour time alone is not a prerequisite for surplus value, rather productive labour and utility are.

Labour can produce as many iPhones as possible, but the surplus value will be distributed among them in order of specialization, from founders to factory workers, for the simple reason that wages are determined by the value offered rather than by labour time. This is why a scientist who patents a technology captures a larger share than the factory worker who manufactures the patented product.

As the world moved forward with utility maximization, i.e., deriving maximum value from minimum resources, the theory of supply and demand gained a stronger hold in mainstream economics, leaving behind Karl Marx’s Labour Theory of Value as a theory widely considered to be disproven, much like Thomas Malthus’s population bomb. A key Austrian economist who played a role in this shift was Carl Menger, who defined “marginal utility,” that is, the additional satisfaction a person gets from each additional unit of consumption. This concept became the foundation of modern price theory, which holds that demand ultimately determines the maximum price a consumer is willing to pay, which in turn determines surplus value or profit. A classic example is gold and land, where limited supply and consumer demand together determine the maximum price, not the socially necessary labour time on mining or construction alone.

Another Austrian who made an immense contribution to this field of economics was Ludwig von Mises, who wrote in his book Human Action, “While praxeology, and therefore economics too, uses the terms happiness and removal of uneasiness in a purely formal sense, liberalism attaches to them a concrete meaning. It presupposes that people prefer life to death, health to sickness, nourishment to starvation, abundance to poverty. It teaches men how to act in accordance with these valuations. . . . The liberals do not assert that men ought to strive after the goals mentioned above. What they maintain is that the immense majority prefer [them].” Suffice to say, humans are always in search of convenience and the ‘next better’, which eventually leads to innovation and trade.

Why is the philosophy of liberalism an essential tenet of this human action? Because the core principles of Liberalism include the right to private property, the freedom to question authority, individualism, limiting government to its minimal necessary functions without allowing it to dictate all aspects of life, the rule of law, market economies, and the protection of civil liberties such as freedom of speech, religion, and assembly.

While liberalism acknowledges that all civilized societies with liberal democracies experience some degree of economic inequality, partly due to the Pareto distribution of knowledge and production, where roughly twenty percent of the population produces and concentrates eighty percent of the wealth, it also recognizes that power can concentrate even more easily under alternative systems.

[Seth · Rating 4 out of 5]

I was going to give this book five stars, until I read the last chapter, the one on "American Militarism." That's the only chapter with no footnotes, and it seems to be the only chapter that was not researched, but instead seems to have been taken from a speech by Fidel Castro. It's apparent that there was not much thought or reasoning behind that chapter.

For example, in arguing against war, there is a warning quote about war from James Madison. The author fails to mention that President Madison asked congress for a declaration of war against Britain in June 1812. A few paragraphs later, the author complains that the war of 1812 was an attempt to capture Canada. If he actually read Madison's speech to congress asking for a declaration of war, he would see that the reason was that Britain had a naval blockade in effect against the United States and the war was necessary to break that blockade, which it did.

The author also states that Thomas Jefferson reneged on his non-interventionist position, without providing any examples. The only example of Jefferson's use of the military that I know of was his attacks on the Barbary Pirates, who were interfering with American flagged merchant ships in international waters. I don't consider that an inappropriate use of military power.

The author also portrays that German sinking of the Lusitania as an American provocation for war. Never mind that the Lusitania was a passenger ship. The victims of the sinking were noncombatants. I view the sinking as a war crime. I don't think I would have any problem finding others who agree with me.

The author also complains of the United States' easy victor over Mexico fueling the passion for war. The Alamo never attacked the Mexican army. It was the other way around. Texas was never part of Mexico. So just what was the Mexican military doing outside their own country?

Overall this is a very good book. In future editions, I would like to see the asinine chapter on "American Militarism" removed so it would be an even better book.

[Benjamin Juhlin · Rating 4 out of 5]

I only intended to read a few chapters in this book, but after reading those whom I had found most interesting I was hooked and read the entire book. It is a collection of essays with various connection to each other. What links them together is that they are all really interesting. Raico possess a great understanding of history and the history of liberalism.

I learned alot of things I had no idea of before. For example that Keynes was very sympathetic towards the Soviet system and the "experiments" conducted there, atleast until 1936. Another thing being that fascism was originally a movement which sought to defend private property and attracted many liberals, but Mussolini shifted the movement to what we today know as fascism. The story of the german liberal Eugene Richter was also unknown to me before reading this book. All in all a very good book, and I would especially recommend the chapter on the conflicts of classes, which is a good recount of liberal class theory.

[Lucas Martinez · Rating 5 out of 5]

Very insightful.

[Ben Wanamaker · Rating 5 out of 5]

Raico is a first-rate, revisionist historian, with the training of political philosophy and related economic theory to boot. I've read most of his works, and this is front-runner to be my favorite.

Dr. Raico continues the much-needed discussion of praxeology in political philosophy and historical episodes, where installing the scholarly (but immensely accessible) tools of the Austrian School firmly in the seat of critical thinking and competing theories is vital to understanding much if our world.

My favorite essay is his interpretation of Mises' book, Liberalism, providing a fresh tapestry of thought that is sometimes only generalized in the book, but in the context of Mises' much-larger body if work. But I can easily disagree with myself and choose the chapter on John Maynard Keynes, where he demolishes the prevailing opinion
That his applied theories are necessary for governments to undertake. He displays the illogicality of The General Theory and others, showing the economic entropy that entails following his models of economic planning.

All these essays are well-documented and developed, leading to further reading.

[Eric · Rating 4 out of 5]

This book provides an excellent overview of classical liberal history. The analysis of Austrian economics and its relationship with classical liberalism is very interesting, but the most valuable chunks of the book were those which shed light onto the development of classical liberalism in general. This book is worthwhile for anyone interested in formation of the liberty movement and it's interaction with a number of statist ideologies(fascism, socialism, etc).

Raico spends a lot of time discussing a number of classical liberal heroes who have been just about forgotten by most historians. He devotes an entire chapter to the German liberal, Eugen Richter. In more ways than one, Richter very much reminds me of Ron Paul. Their similarities are numerous; a strong support for liberty, iconoclastic tendencies, and regularly mocked and ridiculed by enemies from every end of the spectrum. The unearthing of Richter alone is enough to make this book a must read for libertarians.

[Gerardo Caprav · Rating 5 out of 5]

Excelente análisis del liberalismo en todas sus vertientes históricas.