Peter J. Boettke is one of the most influential members of what one might call the “fifth generation” of Austrian economists—an academic cohort that is currently at the peak of its intellectual power and influence, both in this country and around the world.(1)
Austrian economics, of course, is the school of thought which holds that the free market is basically self-regulating and that the government’s role should be limited to providing a reliable and predictable legal structure within which all citizens are treated equally. According to this mode of analysis, any intervention by the government in the economic life of a society beyond the protection of individuals and their property from violence and fraud will inevitably lead to unequal treatment, perverse incentives, distorted price signals, misallocation of resources and investments, boom and bust cycles, and, in general, impairment to one degree or another of the society’s productive capacity.
Boettke was born in Rahway, New Jersey, in 1960. His father was a businessman with a love of basketball, which his son inherited. Boettke has noted the influence on him of his father’s philosophy of life, which laid stress on independence and personal responsibility.(2) He has quoted his father as often telling him: “I was not put on this earth to praise you, but to raise you.”
In the fall of 1978, Boettke entered Thiel College in Greenville, Pennsylvania, with the intention of playing basketball and eventually becoming a high school basketball coach. A broken ankle early that fall—and a resulting spiritual crisis—changed his plans. The following year, he transferred to Grove City College,(3) where he took courses with Hans Sennholz, a pupil of the great economist and social theorist, Ludwig von Mises. It was under Sennholz’s influence that Boettke decided to change his career plans, and become an economist.
After obtaining his bachelor’s degree from Grove City in 1983, Boettke entered graduate school in economics at George Mason University (GMU), in Fairfax, Virginia. There, he studied under Don Lavoie, an important young Austrian theorist whose career was tragically cut short by cancer. While at GMU, Boettke also studied with such distinguished professors as Nobel Prize–winner James M. Buchanan, public choice–theorist Gordon Tullock, and self-organizing systems–theorist Kenneth E. Boulding. He wrote his Ph.D. dissertation on the political economy of the former Soviet Union. Boettke is one of the world’s foremost experts on the causes of communism’s economic collapse, and the transition from a centrally planned to a market economy.(4)
After taking his Ph.D. in 1989, Boettke held several teaching positions, including one at New York University, where he was influenced by Israel Kirzner, another pupil of Mises’s. Since 1998, he has taught at his alma mater, GMU, where he is today University Professor of Economics and Philosophy. In addition, he serves as the BB&T Professor for the Study of Capitalism and Director of the F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at GMU’s Mercatus Center.
In recent years, Boettke has turned his attention from Sovietology to Austrian economics more generally. He is a prolific author who has (among his many published volumes) co-authored a popular textbook and edited an important journal and two major reference works on that subject.(5)
Most recently, Boettke has published a collection of essays aimed at a general audience, which we heartily recommend to all: Living Economics: Yesterday, Today, and Tomorrow (Independent Institute, 2012).
All in all, Professor Boettke is without a doubt one of the world’s leading living proponents of Austrian theory. He is a very busy man, and TheBestSchools is fortunate indeed to have caught up with him for the following interview.
* * *
TheBestSchools: You have a new book out, Living Economics. What did you hope to accomplish with this book? Who is its main audience? What has been its reception, so far?
Peter J. Boettke: The book was inspired by a visit to the Universidad Francisco Marroquin (UFM) in Guatemala City, which is an amazing community of economic educators. Living Economics was written with advanced students in mind—those who are deciding on whether they would like to pursue a career as an economist, and those who are about to embark on a career as economic educators. The idea was to capture for these audiences a vision of what type of economist one could be, and what type of teacher one should aspire to be like.
The book is divided into three sections. The first is a discussion of what are the enduring principles of economics; the second is a set of biographical case studies of great teachers of those economic principles; and third is some suggestions on how economics would be practiced differently if those principles were consistently and persistently followed. The title of the book communicates three meanings, as does the cover art of a healthy and growing tree.
First, economics is a living body of scientific thought, constantly evolving and branching out in new directions. My book should be seen as an invitation to inquiry for the would-be economist to join this scientific conversation and contribute to it.
Second, the tree depicted on the cover—a healthy and growing tree—is deeply rooted. Similarly, the science of economics is deeply rooted in the historical contributions of such master teachers of economics as Adam Smith and David Hume, Jean-Baptiste Say and Frédéric Bastiat, Ludwig von Mises and Friedrich A. Hayek, and James M. Buchanan, Vernon L. Smith, and Israel M. Kirzner.
Third, once you understand the principles and the deep historical tradition of these scientific insights into the working of society, then you cannot stop thinking about economic questions. Economics is not a 9-to-5 job, but a 24/7 way of viewing everything in the world.
TBS: Milton Friedman famously said that there is no Austrian economics, only good and bad economics. You yourself prefer the term “mainline economics,” to emphasize the continuity between Adam Smith, the French liberal school of Say and Bastiat, and the Austrian school of Carl Menger, Mises, Hayek, and their American followers. Could you please give our readers a brief summary of the principles which distinguish this “mainline” economic tradition in your sense from what you call the “mainstream” (Keynesian, or interventionist) school of thought?
PJB: Well in Living Economics, I distinguish between mainline economics and mainstream economics, where “mainline” refers to a set of principles of economic science that trace back to at least Adam Smith, and “mainstream” simply represents a sociological description of what is currently fashionable and what is not fashionable in the academic discipline. Sometimes, the mainline is the mainstream, and at other times the mainline is wildly out of favor with the mainstream. I summarize mainline economics as the rationality postulate and the invisible hand theorem, which are reconciled through institutional analysis. From Smith to Hayek, that is what they viewed as the defining theoretical project of economic science. Throughout this history there were always those who challenged this project, but until John Maynard Keynes, they were largely considered outside of the main body of economic thinking. After Keynes, much of mainstream economics moved way from mainline economics. When the mainstream deviates significantly from the mainline, in my narrative, schools of thought arise to re-engage the community of economists with the mainline teachings of economics.
One of the things that really inspired me on my trip to UFM was a mural they have with the great economists (see video below). As a thought experiment, think about who is up on that wall and why, and then contemplate who isn’t up on that wall and why they aren’t. That pretty much captures what I was trying to get folks to think about in Living Economics, and what the implications are for the way we teach and practice economics.
TBS: Your technical work has focused on the Soviet command economy and its transition to a market economy. Where do you see Russia today? What could have been done differently that might have led to a better outcome?
PJB: Yes, my original studies in economics were in the economics history of the founding of the Soviet Union: The Political Economy of Soviet Socialism, and this was followed up by Why Perestroika Failed. A collection of my studies was later published as Calculation and Coordination. In my work on the failure of the Soviet system, I blend the economic calculation argument of Mises with the dispersed knowledge argument of Hayek and the logic of political decision-making from Buchanan and Gordon Tullock to explain the perverse consequences of socialism in practice.
The socialist experiment resulted in economic deprivation and political tyranny, not due to any accidents of history, but because of pursuing an economic policy regime that cannot work. However, laying bare the internal contradictions of socialism and the corruption of the system that filled in its place is one thing; laying out how to transition from that system to a functioning market economy is quite another. Like many other economists in the late 1980s and throughout the 1990s, this question preoccupied my scholarly endeavors. What I argue is that we, as economists, moved through three phases of analysis during this time.
Phase 1: Getting the price right. Here, the emphasis was on letting prices adjust to market-clearing levels. But we realized during this phase that getting the prices right is only possible within a set of institutions (namely, defined and enforced private property rights). So, we entered the next phase.
Phase 2: Getting the institutions right. Here, the focus was on property rights and the supporting institutions of contract, etc. But during this phase, economists also started to realize that institutional acceptance is a function of a deeper set of issues associated with trust and, ultimately, beliefs—what we call culture. So, this led us to the final phase.
Phase 3: Getting the culture right. And this is a very hard issue to deal with, though a lot of good work is being done related to trust and trustworthiness.
Milton Friedman went to China in the 1970s and was asked what the Chinese should do to reform their economy. Friedman said: “Privatize, privatize, privatize.” A few months before he passed away, Friedman was asked if he would change his advice about “Privatize, privatize, privatize,” and he said: “Yes, I would say today ‘Privatize, privatize, privatize—provided there is a rule of law.” Like in most things, Friedman basically hit the nail on the head in terms of what we have learned in the 25+ years since the collapse of Communism.
Now, you ask about how things could have gone differently. That is another big issue we have learned—leadership matters, and contingency is acute when leadership matters.
So, the collapse of Communism has taught political economists several things: first, that economic policy is always nested within a set of institutions—that there are economic/financial, political/legal, and social/cultural issues, which all must be taken into account; second, that leadership matters throughout the transition process; and third, that historical contingency can either work in your favor or cut against the successful transition. And I would add a fourth one: that political power corrupts even the most informed and idealistic of individuals, such that you cannot count on ideological alignment to win the day. You have instead a small window of opportunity in which ideological alignment can be utilized to establish institutions that make it difficult for even bad men to do much harm.
In other words, the goal of our political/legal institutions should not be to ensure that the best and the brightest can govern, but instead that if the worst get in power, they can do little damage. This is the idea of a “robust political economy”. In 2011, a collection of my ideas on this topic was published in the Czech language.(6)
TBS: From about 1974 up until 2008, the mainline, or Austrian, tradition underwent a remarkable revival and became broadly influential, both academically and politically.(7) Why did this happen? Did truth simply win out, or were there special historical circumstances which made the resurgence of mainline principles possible?
PJB: Well in science, like in most human endeavors, it requires entrepreneurial action. In this regard, there were two main characters on the American scene: Murray N. Rothbard and Israel M. Kirzner.
At first, they were working with one another to orchestrate an Austrian revival in the 1970s after the passing of Ludwig von Mises, and, with the aid of the Institute for Humane Studies, they started a series of conferences for aspiring economists interested in the Austrian tradition. It was also a very interesting time politically and public policy–wise in the US and the UK, as the Keynesian hegemony was fracturing and there was a counterreaction to the warfare state of the Johnson and then Nixon administrations. So, Libertarianism (more associated with Rothbard) was very attractive to many young people.
So, you have the stagflation of the 1970s and the anti-state sentiment of the anti-War generation, and with that Austrian economics seemed to be attractive to those who wanted to change the existing status quo in economics and politics. After the 1980s, the alliances shift, and Rothbard and Kirzner clearly go in different directions. Kirzner is developing his program at NYU to train PhD students to pursue academic jobs, and Rothbard, together with Lew Rockwell, establishes the Mises Institute which has a strong academic vision, but wider social goals, as well.
Folks influenced by both Kirzner and Rothbard begin to develop their own careers, and throughout the 1980s and 1990s new programs at the undergraduate and graduate level are established, new journals are begun, professional associations, etc. Everything that is associated with an intellectual community is established and there are varieties of these established throughout the world.
So, yes, I believe truth does win out, but it requires entrepreneurial action on the part of pivotal players at pivotal times, and folks like Rothbard and Kirzner provided that.
Rothbard passed away in 1995, and Kirzner retired in the early 2000s, so the past decade the movement they have inspired has gone in multiple directions and is continually evolving. The financial crisis of 2008 also saw a renewed appreciation of the Austrian theory of the trade cycle and its explanation for financial instability due to the manipulation of money and credit by the government.
TBS: In spite of this recent period of flourishing, the mainline tradition continues to be treated as a pariah both in academia and in much of the mainstream media. For example, there is hardly any mention of the Austrian viewpoint in the article on philosophy of economics in the online Stanford Encyclopedia of Philosophy, and Paul Krugman regularly dismisses Austrians as a “cult” on the op-ed page of the New York Times (for example, here). What are the reasons for this paradoxical situation? How can it be possible?
PJB: Well, I think there are several reasons. First, the mainline-versus-mainstream issue that I talked about earlier is certainly at work. But second—and this is very important—is that there are at least two communities of Austrian economists: the academic/scientific community, who work to publish their work in scientific journals and with academic publishers; and the internet/public engagement community, who often eschew the scientific community, but are very vociferous and express strong opinions on everything from public policy (which is their right at citizens) to refinements of technical economics (which sometimes they are not qualified to talk about).
The Austrian School became a banner for Ron Paul, and to some extent the Tea Party—both of which raised serious red flags to establishment types like Krugman. But let me not overstate this issue. Krugman sees red flags with significant economists who have won the Nobel Prize, just as he did. Hayek, Friedman, and Buchanan all are viewed by Krugman as intellectually wrong, and, to be honest, most of us believe that Krugman as a journalist/pundit is wrong, and Krugman as a scientist has some very strong contributions, but also some so-so contributions. That is the nature of science—we disagree. But he blurs the line between disagreement and efforts to discredit, and he often tries to use the political enthusiasms of supporters of Ron Paul and the Tea Party for the free market ideas of Mises and Hayek to discredit a long and legitimate intellectual tradition in economic science. It is a shame and he should know better.
The Web has great benefits in the spread of knowledge, but it also has some bumpy parts, which means that you get a lot of amateur “experts” who don’t really have to invest the time and energy to earn that expertise and can pontificate. As a radical free market supporter myself, I have great sympathy with their enthusiasm for these ideas, and as someone disillusioned with the current state of US politics, I share their frustration. But I don’t believe that the vast majority of these folks have invested enough time to have a detailed position on the nature of monetary policy in the US. The “End the Fed” movement devolves into a sick form of a conspiracy theory, and it discredits legitimate probing into alternative monetary regimes in the wake of the historical record of the Fed.
Frédéric Bastiat once warned that “The worst thing that could happen to a good cause, is not to be artfully criticized, but to be ineptly defended.” I fear that we free market folks have been ineptly defended too often during the recent past. We must do better.
TBS: How big of a setback was the 2008 financial crisis for mainline economics? Given that mainliners have a better explanation for the crisis, why do you think interventionists have been able to stage such a stunning political comeback?(8)
PJB: In addition to what I said above about inept defenses, I think there are important issues related to political structure that make it very difficult to change policy in a free market direction. Think about how difficult it is to have a real conversation about our fiscal situation. If you take the literature on the “fiscal gap” seriously, we are staring at a $211 trillion dollar fiscal gap. This means that we are bankrupt now, not 25 years from now. But our political culture will not allow us to have this conversation. And if we do, it is all about questions of the size of government, when really we need to be addressing the scope of government. It is not about starving the state of resources, it is about starving the state of responsibility.
We need to have the market and civil society doing much more than the state to address social ills, if we hope to get the fiscal situation under control. We haven’t provided strong enough evidence that the market and civil society can address these issues. So, we have to work harder to prove our case and we have to be more principled in our approach.
The problem in Washington, DC, is decidedly not that there is political division and gridlock; the problem is that there is a wide and enduring consensus among both parties that we are going to have a large and ever-expanding generous welfare state, and are not going to pay for it. This cannot continue.
TBS: You have written that “[t]ruth in economics, as in all scientific endeavors, ultimately matters much more than popularity and power.”(9) Amen to that! However, you have also noted that “[e]conomics . . . gives us the key intellectual framework for understanding how we can live better together.”(10) This fact gives the teaching of good economics great practical urgency. What can be done to improve economics education in this country, both in the universities and with the public at large?
PJB: First, I think within the economics curriculum, we need to re-engage our students with the history of the discipline and with the history of economic practice. My colleague Larry White’s book, The Clash of Economic Ideas (11), is just a brilliant example of the blending of both the history of ideas and the policy history of the debates. If our students saw economics in this light, they would see its importance and also the beauty of the ideas.
Second, despite what I said above about the Web and information that is too cheaply earned, I do think public engagement is an important part of what it means to be an economist. So, I think a major role of the economist is to think clearly about economic principles, speak clearly about economic principles, and write clearly about economic principles, to our peers in the science, to our students in the classroom, to public-policy makers, and to the general public.
I stressed “think, speak, and write,” but I also repeatedly stressed clearly. We need to learn to communicate across audiences and not hide behind our specialized jargon of the professional economist. There are issues that are for the specialists and professional discourse, but there is no need for that mode of discourse to completely cloud our ability to communicate with the public. Milton Friedman is the exemplar here. The tight connection between his scientific contributions and his public engagement is also to be emulated.
TBS: You have also written eloquently about the inherent contradiction between good economics and “good politics” (in the sense of politics likely to get an office-seeker elected, i.e., by distributing favors to special-interest groups).(12) Can nothing be done to make politics good in the proper sense of the word—that is, a politics that incentivizes politicians to act for the long term in accordance with the principle of equality under the law? What reforms would help most to make a “good politics” in this sense possible?
PJB: My teacher, James Buchanan, divided economic policy analysis into two realms: analysis over the rules, and analysis within rules. We can only change the outcomes if we change the rules of the game. Given the existing rules of the game, the incentives are aligned in such a way that we are going to get the policy outcomes we have independently of what party is in power. So, we need to focus our intellectual energy on changing the rules, such that the incentives are aligned differently.
If we think about how to improve, first, let me say that government can raise revenue in only three ways: by taxing, borrowing, and inflating. When government has monopoly control over the printing press, what politicians prefer is to run deficits, accumulate public debt, and then debase the currency in an effort to monetize the debt. This results in the economically unhealthy cycle of deficits, debt, and debasement. Adam Smith warned about this, and we are living proof that the problem hasn’t been abated.
So, we need to fix the crisis in our fiscal state through binding rules on the government’s ability to engage in this cycle of deficits, debt, and debasement (Adam Smith referred to it as the juggling trick that all governments practice). How do you stop the juggler from juggling?
First, take the balls out of their hands, and, second, tie their hands. This is what we must do.
Additionally, both Hayek and Buchanan strongly advocated a “general norm” to guide political decision-making, namely: No policy can be adopted which benefits some without benefiting all. So, no discriminatory politics.
Ultimately, we want a political system that exhibits neither dominion nor discrimination. This is the goal which a constitutional order of a free people should strive for.
TBS: This year marks the 100th anniversary of the Federal Reserve banking system. Some have argued that it is time for conservatives to make their peace with Leviathan, since it is not going away.(13) On the other hand, the rise of the Tea Party movement might be taken to indicate that mainline principles have more political purchase than ever before. Do you believe a true rollback of the interventionist state and the institution of a minimalist, “night watchman” state is politically feasible at this point in history? If not, is it something we ought to strive for anyway?
PJB: Yes, we should strive for it. Whether it is the “best” solution, or if a better, more perfect vision of a free society is possible, should not deter us from pushing right here and now for a minimalist state.
The bottom line is, we want a society of free and responsible individuals who have the opportunity to prosper in a market economy based on profit and loss, and who can live and be actively engaged in caring communities. An obtrusive state prevents that. We must unleash not only true capitalism, but also civil society. The American ideal of self-government should once again capture citizens and guide their actions.
On the history of the Fed, I recommend the work of George Selgin and Larry White, as well as my good friend and graduate school classmate, Steve Horwitz. I think the history of the Fed does not bode well for any claim to policy perfection. We can, and must, do better.
In Capitalism and Freedom (14), Milton Friedman has a great line where he says basically that any political institution where a sincere error by those in charge can threaten the entire society is perhaps an institution we cannot afford to have. I agree with Friedman. I think the time is ripe for us to reconsider alternatives to the Fed. But I think the time is ripe for us to consider alternative political arrangements for a lot of the Progressive Era institutions that were established around the same time as the Fed.
TBS: Interventionists point to the tremendous growth in our prosperity over the past 60 years, while the welfare state was rapidly expanding. How should a mainline economist respond to this historical argument? Adam Smith said “there is a great deal of ruin in a nation,”(15) but even so, can we go on indefinitely as we are, or is a real catastrophe inevitable? What is the time horizon of the “long run” which Keynes famously dismissed?(16)
PJB: I think the more appropriate passage from Adam Smith is as follows:
The natural effort of every individual to better his own condition, when suffered to exert itself with freedom and security, is so powerful a principle, that it is alone, and without any assistance, not only capable of carrying on the society to wealth and prosperity, but of surmounting a hundred impertinent obstructions with which the folly of human laws too often incumbers its operations; though the effect of these obstructions is always more or less either to encroach upon its freedom, or to diminish its security.(17)
This explains the past 60 years in my mind. As long as the gains from trade and the gains from technological innovation outpace the stupidity of government policies, economic growth will continue. Not as great as otherwise would be the case, but still to such an extent that tomorrow will be better than today.
But as the obstructions go from a hundred to thousands, there are costs of this stupidity. And if the stupidity outpaces the gains from trade and the gains from technological innovation, then we enter into a stagnation period. Read carefully my colleague Tyler Cowen’s book, The Great Stagnation (18), and note that his examples are from government-heavy-involvement industries (health, education, and governmental services).
If we take the fiscal gap literature seriously, and we are facing a $211 trillion gap between our future fiscal obligations and our ability to pay for those obligations, then we have to take very seriously the costs that the age of economic illusion has forced upon us. We have constantly traded off long-run growth for short-term relief from necessary economic adjustments.
We have to wake up, and but fast.
TBS: In a remarkable essay published in 1978, Louis Spadaro called on Austrians to spend less time critiquing mainstream economics and more time developing their own theory.(19) Has his advice been taken over the past 35 years? What areas of mainline economics still need the most work?
PJB: Great question about the science of economics and political economy. We have to work much harder on the integration of money and capital theory, and I would say that there is still much work to be done at the level of institutional theory. But I think our most important current battles are methodological, rather than method-specific.
The battle that Mises and Hayek waged against scientism (the inappropriate application of the methods of the natural sciences to the sciences of man) is still with us, and it destroys the discipline.
TBS: Is economics a science? How can a field that includes viewpoints as diametrically opposed as yours and Paul Krugman’s deserve the name of “science”? If economics is a science, what sort of science is it?
PJB: It is a science, but it is a philosophical science. I recommend that folks look at Michael Polanyi’s “The Republic of Science”(20) and also his Personal Knowledge (21) , to get a sense of what science is all about.
Economics is definitely a science, but it is a science that follows different epistemological procedures than physics—precisely because it is a science where we are who we study. Fritz Machlup, in answering a similar question years ago, wrote an essay with a title that asked us to imagine “If Matter Could Talk.”(22)
TBS: Though he showed some familiarity with early developments in the theory of self-organization, nevertheless famed Austrian economist and Nobel Prize–winner F.A. Hayek leaned heavily on Darwinian selection theory to underpin his notion of “spontaneous order.” Apart from a few volumes coming out of the Santa Fe Institute, not much seems to have been done to bring Hayek’s insights up to date in this respect. Why is this? Do you see dynamical systems theory, nonequilibrium thermodynamics, and similar disciplines as potential resources for a deeper understanding of praxeology, Mises’s term for the science of human action(23)?
PJB: Great question again. I think the future of complexity science is one positive direction that followers of Mises and Hayek could go, but so is a more anthropological direction for empirical research. The key issue to me is not the methods of analysis, but the substantive propositions being explored: rational choice, invisible hand, and reconciliation of individual interest and the common good through institutional analysis.
How do you study how the purposive behavior of individuals that is oriented toward social cooperation and away from violence and conflict? Works such as Scott E. Page’s Diversity and Complexity (24) point in one direction—to study how the gains from social cooperation can be realized—but so do the field studies of Lin Ostrom on common-pool resources (25), or Deirdre McCloskey’s work on bourgeois virtues (26), or my colleague Virgil Storr’s work in cultural economy (27).
I am a more traditional economist and political economist—and one greatly influenced by Mises—so in my own work, I tend to focus on conceptual clarity in theory, an appreciation of the history of thought on these issues, and applications to economic history and/or contemporary affairs. I am a verbal economist, who relies on natural language primarily in exposition, as opposed to formulas, graphs, etc. But I do strive to follow the strictures of deductive logic in my theorizing, and thus produce sound economic arguments.
TBS: I asked before how we could improve education in mainline economics. What about education, more generally? Do mainline principles provide any guidance for us, as we struggle with the abysmal situation in our public schools?
PJB: First, I think our school problem can begin to be addressed with one simple policy: tuition tax credits. Give parents and kids a choice in education. Second, we are witnessing a great social awakening in the home-schooling movement, and we should take notice. Third, new educational approaches are coming online (Khan Academy, for example), and peer-to-peer teaching, etc.
Give people freedom to make their own choices in education, as in every other walk of life, and you will see great experimentation and problems solved.
TBS: What is your forecast for the future? Where will mainline economics be in 10 years’ time? In 50 years?
PJB: I don’t have a crystal ball, but I am very optimistic about the future of economics and political economy. The world is too interesting for folks to disregard the greatest tool available to help us understand man in all his coming and goings, in all walks of life, and across all times and all cultures. The economic way of thinking is too powerful a tool to be lost.
I don’t know the precise zigs and zags that will take place, but I do know that new names will go up on that mural at UFM and make legitimate claims to “sit in the seat of Adam Smith” and contribute to the living body of scientific economics.
TBS: Thank you very much!
1. Boettke’s intellectual lineage may be traced as follows: Carl Menger (1840–1921) — Eugen von Böhm-Bawerk (1851–1914) — Ludwig von Mises (1881–1973) — Hans Sennholz (1922–2007); Israel Kirzner (b. 1930) — Peter Boettke (b. 1960). In addition to Sennholz and Kirzner, Boettke also studied under Don Lavoie (1951–2001), who falls in between the Sennholz/Kirzner and Boettke generations.
2. This and all other biographical details are taken from Peter J. Boettke, “Reflections on Becoming an Austrian Economist and Libertarian, and Staying One,” in Walter Block, ed., I Chose Liberty: Autobiographies of Contemporary Libertarians (Ludwig von Mises Institute, 2010), pp. 58–66.
3. Grove City College is ranked #18 on TheBestSchools list of “The 50 Best Colleges in the United States.”
4. See his The Political Economy of Soviet Socialism: The Formative Years, 1918–1928 (Springer, 1990); Why Perestroika Failed: The Politics and Economics of Socialist Transformation (Routledge, 1993); and Calculation and Coordination: Essays on Socialism and Transitional Political Economy (Routledge, 2001).
5. See The Economic Way of Thinking, 12th ed. (with Paul Heyne and David L. Prychitko) (Prentice-Hall, 2009); The Review of Austrian Economics;The Elgar Companion to Austrian Economics (Edward Elgar Publishing, 1998); and Handbook on Contemporary Austrian Economics (Edward Elgar Publishing, 2010), respectively.
6. See Robustní Politická Ekonomie pro 21. Století (Prague: CEVRO Institut Academic Press, 2011).
7. From the end of World War II until the early 1970s, the Austrian tradition in economics had been largely eclipsed by Keynesianism (the doctrine that the market is inherently prone to “failure” and that government must intervene through its fiscal and monetary policies to “correct” this “failure”). Two events mark the dramatic revival of Austrian theory within the academic and public policy communities: a highly successful international conference that was held at Royalton College, in South Royalton, Vermont, in 1974, and the award of the Nobel Memorial Prize for Economics to F.A. Hayek that same year. The proceedings of the South Royalton conference may be consulted in: Edwin G. Dolan, ed., The Foundations of Modern Austrian Economics (Sheed & Ward, 1976). Ever since that time, Austrian economics has been a “growth industry,” witnessed by the publication of numerous distinguished articles and books, as well as the founding of many new journals, graduate programs, and research institutes. Since the financial crisis in 2008, however, Keynesianism has staged a rapid academic and political comeback.
8. Generally speaking, the Austrian explanation of the “boom-and-bust” business cycle, or “bubbles,” is that government intervention in the economy leads to distortions in prices, and so to investment by entrepreneurs in projects that are economically unsustainable because they do not correspond to real consumer demand. Such misallocation of investment must be allowed to work itself out through bankruptcy and redirection of entrepreneurial efforts. Renewed government intervention in the form of deficit spending (“stimulus”) and artificially low interest rates, by doubling down on previous mistakes, only compounds the problem and worsens the inevitable day of reckoning.
9. Peter J. Boettke, Living Economics: Yesterday, Today, and Tomorrow (Independent Institute, 2012); p. 388.
10. Ibid.; p. xviii.
11. Lawrence H. White, The Clash of Economic Ideas: The Great Policy Debates and Experiments of the Last Hundred Years (Cambridge UP, 2012).
12. For example, Living Economics, op. cit., p. 10.
13. For example, William J. Voegeli, Never Enough: America’s Limitless Welfare State (Encounter Books, 2010).
14. Milton Friedman, Capitalism and Freedom (University of Chicago Press, 1962).
15. Adam Smith, Correspondence of Adam Smith, ed. by Ernest C. Mossner and Ian S. Ross (Liberty Fund, 1987); p 262, note 3.
16. “In the long run we are all dead,” from John Maynard Keynes, A Tract on Monetary Reform (Macmillan and Co., 1923); p. 80.
17. From Wealth of Nations, Book IV, Chapter V.b, “Digression concerning the Corn Trade and Corn Laws,” Section IV, Paragraph 43 (=Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, ed. W.B. Todd [Liberty Fund, 1981]; Vol. I, p. 540). Wealth of Nations was first published in 1776.
18. Tyler Cowen, The Great Stagnation: How America Ate All the Low-Hanging Fruit of Modern History, Got Sick, and Will (Eventually) Feel Better (Dutton, 2011).
19. Louis M. Spadaro, “Toward a Program of Research and Development for Austrian Economics,” in idem, ed., New Directions in Austrian Economics (Sheed Andrews & McMeel, 1978), pp. 205–227.
20. Michael Polanyi, “The Republic of Science: Its Political and Economic Theory,” Minerva, 1962, 1: 54–73; reprinted in idem, Knowing and Being: Essays by Michael Polanyi (University of Chicago Press, 1969), pp. 49–72.
21. Michael Polanyi, Personal Knowledge: Towards a Post-Critical Philosophy (University of Chicago Press, 1959).
22. Fritz Machlup, “If Matter Could Talk,” in Sidney Morgenbesser, Patrick Suppes, and Mary Terrell White, eds., Philosophy, Science, and Method: Essays in Honor of Ernest Nagel (St. Martin’s Press, 1969), pp. 286–305.
23. See Ludwig von Mises, Human Action: A Treatise on Economics (Liberty Fund, 2007). Human Action was originally published by Yale University Press in 1949.
24. Scott E. Page, Diversity and Complexity (Princeton UP, 2010).
25. See, for example, Elinor Ostrom, Rules, Games, and Common-Pool Resources (University of Michigan Press, 1994).
26. See, for example, Deirdre N. McCloskey, The Bourgeois Virtues (University of Chicago Press, 2006).
27. See, for example, Virgil H. Storr, Understanding the Culture of Markets (Routledge, 2012).