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Austrian Economics: An Introduction
What if economics began with people? Choice is an essential feature of the human condition. Every time we embark on a given plan of action, big or small, we make a choice. Whereas many economists model people’s behavior using idealized assumptions, economists of the Austrian School don’t. The Austrian School of Economics takes people as they are and constructs economic theories by examining the logical structure of the choices they make. This book explains the Austrian School’s insights on a wide range of economic topics and introduces some of its key thinkers. It also explains the relationship between the Austrian School and mainstream economics and delves into the criticisms that Austrian School economists have mounted against communist and socialist economic thought.
168 pages, Paperback
First published July 14, 2020
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185 people want to read
About the author
Steven Horwitz
20 books20 followersAmerican economist of the Austrian School and Charles A. Dana Professor of Economics at St. Lawrence University in Canton, NY. He has written extensively on Austrian economics, Hayekian political economy, monetary theory and history, and macroeconomics. He is an Affiliated Senior Scholar at Mercatus Center at George Mason University and Senior Fellow of the Fraser Institute in Canada.
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Displaying 1 - 11 of 11 reviews
August 18, 2020
This short book is the perfect read for someone who just starts studying economics but is yet unsure on what "school" he wants to concentrate. It also has value for non-academics, but it's somewhat demanding for an introduction book.
Mises Celebration organizer Patrick Peterson indicated this book to me. At first, I didn't want to read it because I said to myself, well, I kinda know all this stuff already, having read dozens of books by Austrian economists. But because of its shortness and neat appeal, I gave it a try. And I have to admit, I learned quite a lot! Especially the last chapter, Austrian Economics in the 21st century was all News to me. And it's also a chapter that made very happy and hopeful what concerns the future of Austrian Economics and economics in general. The Austrian academic scene seems finally very vibrant and ready to shake, rattle & roll and maybe even bring about paradigm change in the epistemology of economics towards a greater acceptance of Misesian aprioristic deductivism.
Well, maybe that’s still too much to hope for and may not be the most important thing right now. Horwitz tells of new Austrians adopting new tools and methods for their research, like Public Choice Theory and surveys. Sometimes they thus leave the field of pure economics, but that’s no concern. The only thing import is to know what one is doing, i.e. a researcher has to know when he doesn’t do pure economics anymore. Because the validity of pure economics is of course different then when for example surveys or historical data are involved. But this doesn’t say anything about the importance of the study.
Again, I really did not know that so much stuff is going on in academia concerning Austrian Economics. I haven’t read anything in the blogosphere about it. It was a surprise that fully restored my believe in optimism. For that alone the book deserves 5 stars (but there are other reasons as well)!
Horwitz says that it is almost certain that there have never been more professional economists working in the Austrian tradition then there are today. That’s really neat though the amount of economists working today is a zillion times higher than ever before (Even the amount of people alive is at a record high). It’s still not a no-brainer that the Austrian department has grown, for example, I think today there is literally nobody left in the Stockholm School that was inspired by Knut Wicksell and nobody writes an introduction about that.
What I missed the most was a stronger appreciation of Eugen von Böhm-Bawerk and his invaluable contribution in the form of the time preference theory of interest rates. Böhm-Bawerk is even missing from the index. So, to everybody who reads this book as an introduction, I recommend you to read both volumes of Böhm-Bawerk’s Capital and Interest, it’s a milestone in Austrian Economics and a teacher in how to treat your scholarly opponents.
I liked how he compared the labour theory of value to the ptolemaic system: “Early economists worked hard to try to explain their way around these puzzles [things like the value of a good that is discovered at random], much like Ptolemy resorted to inelegant mathematical contrivances to make his geocentric model of the solar system predictively accurate”.
Horwitz writes that Menger discovered marginal utility around the same time as Jevons and Walras but that only Menger combined it with an emphasis on subjectivism to offer a unique approach to understand economic processes. Having not read Jevons and Walras, I always wondered, how Menger’s approach was different from theirs, except the mathematical stuff.
Horwitz writes that arguments for the superiority of socialism started with Karl Marx in the middle of the 19th century. Of course, it started much earlier and there were many socialists before Marx. Mises said that Marx had nothing new to offer except polylogism (well, and some other trifling things I’ve forgotten).
He tells us that “rather than admit failure, socialist and communist governments further consolidated power [...] Almost all of the nominally socialist regimes collapsed by the end of the 20th century, vindicating Mises, Hayek, and the Austrians.” To me, Mises was vindicated when these regimes, rather than admitting failure, stopped their plans to collectivize the economy to start a communistic commonwealth. Instead, they all reintroduced some aspects of market economies as well as profited from them. They profited from the wealth, knowledge and morals created by their own markets before the communist revolution, by copying the price structure of market economies and by letting the black market do its business. As the calculation argument shows us, a pure socialist regime would have starved anybody who wouldn’t have been killed previously in another way. Even in the “communistic” countries we had, it wasn’t fun for all communistic leaders, even they had to be afraid of being tortured and killed, as Stalin’s purges sadly demonstrate.
In one of the later chapter Horwitz maintains that Rothbard’s argument for 100% backed reserves was wrong and that free banking that allowed fractional reserves could and did work. I haven’t looked much into that question, but I would have been very interested in what he would have to say to Jesùs Huerta de Soto’s very convincing judicial-ethical argument that fractional reserve represents an invalid contract (found in Money, Bank Credit, and Economic Cycles). I know this question is outside the sphere of economics but it’s still central to the issue.
I began with Horwitz telling us about what’s new in Austrian Economics in the 21st century. I want to end it with a wish of what else the field should focus on in this century. At the top of my list is the exploration of the link between Austrian Economics and Ethics based on Natural Law Theory. It is very perplexing that we get similar policy recommendations if we deduce human rights based on the self-ownership of man and homesteading on the on side or Austrian Economics on the other side. The link between Economics and Ethics has already been noted by the proto-Austrian Destutt de Tracy, it unfortunately got lost with the beginning of the Austrian tradition until it got rediscovered by Murray Rothbard who was inspired by Ayn Rand. He described Economics and Ethics as two legs that go together. So it is time to find out more about the pelvis. The connection has also been noted by David Friedman, in his Machinery of Freedom, where he has some references to works based on this issue (Which I frankly still haven’t read).
Also, ethics could more often be used as a tool in Economics. Sometimes, deducing from Natural Law is easier than using Austrian Economics to solve a question. By using Natural Law in this way, we can define on which side of the question we have to look for an answer. What do I mean by this? Take for example the economic question of what interest is. This question was debated for a long time during the 19th century and it was solved only toward its end. Starting from scratch, with Natural Law Ethics we can deduce that interest is legitimate. From this we can deduce that the phenomenon of interest is economically explainable and that answers which suggest that interest is illegitimate are false (for example all the exploitation theories).
Mises Celebration organizer Patrick Peterson indicated this book to me. At first, I didn't want to read it because I said to myself, well, I kinda know all this stuff already, having read dozens of books by Austrian economists. But because of its shortness and neat appeal, I gave it a try. And I have to admit, I learned quite a lot! Especially the last chapter, Austrian Economics in the 21st century was all News to me. And it's also a chapter that made very happy and hopeful what concerns the future of Austrian Economics and economics in general. The Austrian academic scene seems finally very vibrant and ready to shake, rattle & roll and maybe even bring about paradigm change in the epistemology of economics towards a greater acceptance of Misesian aprioristic deductivism.
Well, maybe that’s still too much to hope for and may not be the most important thing right now. Horwitz tells of new Austrians adopting new tools and methods for their research, like Public Choice Theory and surveys. Sometimes they thus leave the field of pure economics, but that’s no concern. The only thing import is to know what one is doing, i.e. a researcher has to know when he doesn’t do pure economics anymore. Because the validity of pure economics is of course different then when for example surveys or historical data are involved. But this doesn’t say anything about the importance of the study.
Again, I really did not know that so much stuff is going on in academia concerning Austrian Economics. I haven’t read anything in the blogosphere about it. It was a surprise that fully restored my believe in optimism. For that alone the book deserves 5 stars (but there are other reasons as well)!
Horwitz says that it is almost certain that there have never been more professional economists working in the Austrian tradition then there are today. That’s really neat though the amount of economists working today is a zillion times higher than ever before (Even the amount of people alive is at a record high). It’s still not a no-brainer that the Austrian department has grown, for example, I think today there is literally nobody left in the Stockholm School that was inspired by Knut Wicksell and nobody writes an introduction about that.
What I missed the most was a stronger appreciation of Eugen von Böhm-Bawerk and his invaluable contribution in the form of the time preference theory of interest rates. Böhm-Bawerk is even missing from the index. So, to everybody who reads this book as an introduction, I recommend you to read both volumes of Böhm-Bawerk’s Capital and Interest, it’s a milestone in Austrian Economics and a teacher in how to treat your scholarly opponents.
I liked how he compared the labour theory of value to the ptolemaic system: “Early economists worked hard to try to explain their way around these puzzles [things like the value of a good that is discovered at random], much like Ptolemy resorted to inelegant mathematical contrivances to make his geocentric model of the solar system predictively accurate”.
Horwitz writes that Menger discovered marginal utility around the same time as Jevons and Walras but that only Menger combined it with an emphasis on subjectivism to offer a unique approach to understand economic processes. Having not read Jevons and Walras, I always wondered, how Menger’s approach was different from theirs, except the mathematical stuff.
Horwitz writes that arguments for the superiority of socialism started with Karl Marx in the middle of the 19th century. Of course, it started much earlier and there were many socialists before Marx. Mises said that Marx had nothing new to offer except polylogism (well, and some other trifling things I’ve forgotten).
He tells us that “rather than admit failure, socialist and communist governments further consolidated power [...] Almost all of the nominally socialist regimes collapsed by the end of the 20th century, vindicating Mises, Hayek, and the Austrians.” To me, Mises was vindicated when these regimes, rather than admitting failure, stopped their plans to collectivize the economy to start a communistic commonwealth. Instead, they all reintroduced some aspects of market economies as well as profited from them. They profited from the wealth, knowledge and morals created by their own markets before the communist revolution, by copying the price structure of market economies and by letting the black market do its business. As the calculation argument shows us, a pure socialist regime would have starved anybody who wouldn’t have been killed previously in another way. Even in the “communistic” countries we had, it wasn’t fun for all communistic leaders, even they had to be afraid of being tortured and killed, as Stalin’s purges sadly demonstrate.
In one of the later chapter Horwitz maintains that Rothbard’s argument for 100% backed reserves was wrong and that free banking that allowed fractional reserves could and did work. I haven’t looked much into that question, but I would have been very interested in what he would have to say to Jesùs Huerta de Soto’s very convincing judicial-ethical argument that fractional reserve represents an invalid contract (found in Money, Bank Credit, and Economic Cycles). I know this question is outside the sphere of economics but it’s still central to the issue.
I began with Horwitz telling us about what’s new in Austrian Economics in the 21st century. I want to end it with a wish of what else the field should focus on in this century. At the top of my list is the exploration of the link between Austrian Economics and Ethics based on Natural Law Theory. It is very perplexing that we get similar policy recommendations if we deduce human rights based on the self-ownership of man and homesteading on the on side or Austrian Economics on the other side. The link between Economics and Ethics has already been noted by the proto-Austrian Destutt de Tracy, it unfortunately got lost with the beginning of the Austrian tradition until it got rediscovered by Murray Rothbard who was inspired by Ayn Rand. He described Economics and Ethics as two legs that go together. So it is time to find out more about the pelvis. The connection has also been noted by David Friedman, in his Machinery of Freedom, where he has some references to works based on this issue (Which I frankly still haven’t read).
Also, ethics could more often be used as a tool in Economics. Sometimes, deducing from Natural Law is easier than using Austrian Economics to solve a question. By using Natural Law in this way, we can define on which side of the question we have to look for an answer. What do I mean by this? Take for example the economic question of what interest is. This question was debated for a long time during the 19th century and it was solved only toward its end. Starting from scratch, with Natural Law Ethics we can deduce that interest is legitimate. From this we can deduce that the phenomenon of interest is economically explainable and that answers which suggest that interest is illegitimate are false (for example all the exploitation theories).
August 12, 2020
This book analyses not only the Austrian economics but its impact on mainstream economics and I think it gives a fair representation of the debates between Mises & Economic calculation and between Hayek and Keynes.
June 28, 2025
I spent the day dissecting my economic philosophy and trying to better understand the Libertarian arguments that my summer program is trying to instill in me. Some Austrian theories (like Subjective Value Theory and Austrian Business Cycle Theory) are certainly convincing and I agree in principle on keeping markets free and undistorted. I even recognize the merits of less regulation, lower or simpler taxes, and reduced government spending (at least demand-side). But sometimes these economists seem too detached from reality, especially political reality. If you’re a politician, good luck telling poor constituents that you can’t help them because it wouldn’t be the most efficient allocation of resources. Also, the extent to which we incorporate these economic ways of thinking into policymaking should change if the goal extends beyond economic growth to include other priorities, such as greater equity or addressing climate change, both of which I personally value. Returning to Austrian economics, aspects like little-to-no central banking and government non-interference during recessions seem totally unrealistic. And the total disregard for data or econometrics, justified by the claim that economics is purely a priori, is mind-boggling to me. I do, however, think that a more economically libertarian approach can offer valuable insights for reducing the deficit as we try to navigate a mutually exclusive triangle of robust social safety nets, world-class defense, and low taxes. I’d say my views are still evolving, and that the real world is more complex than pure ideology, but I’ve probably shifted slightly right economically — enough to at least disavow socialism.
January 17, 2021
If you are new to Austrian Economics, this is the book for you! It’s well written and cover a lot of topics need for a great understanding of modern Austrian Economics.
July 5, 2021
I was expecting a bit more, to be honest. The book provides a general overview and points you in the direction and chronology of the development of economic theory from the Austrian School, but I expected a bit more depth in the actual concepts and theories. I noticed numerous comments that relate to current economic conditions, which is great, and even though I tend to agree with them, I can't help but believe their inclusion was motivated by the CATO Institute and Libertarianism.org's involvement in developing the book.
It's hard for me to define what this book really is and while it does provide a general introduction, I'm not sure it added much to my understanding of the Austrian School beyond pointing me to further reading.
It's hard for me to define what this book really is and while it does provide a general introduction, I'm not sure it added much to my understanding of the Austrian School beyond pointing me to further reading.
November 14, 2023
This book is very short and it is not very memorable. It includes some history facts, which doesn't help much, because it is written in a short manner without broad discussion.
I would personally buy 'The Dao of Capital: Austrian Investing in a Distorted World' by Mark Spitznagel, because it is much larger book that really cements the message and has more lessons and teachings, in comparison to a small and short book like this one.
I would personally buy 'The Dao of Capital: Austrian Investing in a Distorted World' by Mark Spitznagel, because it is much larger book that really cements the message and has more lessons and teachings, in comparison to a small and short book like this one.
July 10, 2021
Does a great job of providing alternate economic theories, but did to to in-depth into them behind a summarized explanation
July 29, 2021
A very good introduction to the basic, intermediate, and advanced parts of austrian economics
August 8, 2021
Based on lies and strawmans
November 1, 2022
The best primer to Austrian Economics that I've read. Steve very succinctly highlights the theoretical base of Austrian economics and its major differences with modern economics.
May 14, 2025
This book is very boring and focused on unimportant things for too much of the book. I recommend reading “An Introduction to Austrian Economics” instead of this.
Displaying 1 - 11 of 11 reviews