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This working paper – like its companion, Caldwell and Klausinger 2021 – grew out of the authors’ joint work on Hayek: A Life 1899–1950 (Caldwell and Klausinger 2022) and it contains material supplementing it. This paper examines the intellectual circles of fin-desiecle Vienna in which the Hayek family moved and which therefore shaped Fritz’s education. After looking at the academics within the Hayek family we turn towards the intellectual communities in which Friedrich’s father, August von Hayek, participated. Here we focus on the various associations of biologists and botanists and on the so-called “Brunnwinkl community.” We show that participation in these circles resulted in Fritz coming in close contact with future Nobel prize winners like Erwin Schrodinger, Karl von Frisch and Konrad Lorenz. Austrian School economists Eugen von Bohm-Bawerk and Friedrich von Wieser were also among the close friends of the Hayek family. Finally, we point out a link to Austria’s early liberal women’s movement.

In this essay I selectively survey the economic history literature on the rise of regulation in America during the Progressive Era with the goal of identifying how this literature is informed by Austrian economic theory, and how Austrian theory might contribute to our understanding of the origins and growth of the regulatory state. I argue that much of the literature on the origins of Progressive Era regulation is consistent with the positive aspects of Austrian economics, largely because Austrian theory overlaps with public choice theory, the analytical toolkit used by most studies of the rise of regulation. However, the normative implications of Austrian theory regarding the efficiency consequences of regulation are not always supported by the literature on the Progressive Era. I also discuss two ways in which Austrian theory might add to our understanding of the rise of regulation during this period. The first concerns the dynamics of how regulation evolves. The second concerns the role of entrepreneurship within the bureaucracy in shaping the evolution and enforcement of regulation.

In recent academic and to some extent public debates, mainstream economics has been accused of excessive mathematization. The rejection of mathematical and other formal methods is often cited as a crucial trait of Austrian economics. Based on a systematic discussion of potential benefits and potential drawbacks of formalization in economics, the paper concludes that - contrary to the received view - the most prominent representatives of Austrian economists including Carl Menger, Ludwig Mises, and Friedrich August Hayek neither provide a justification for a rejection of formalization tout court nor actually reject it. Those Neo- Austrians who do, seem to rely on an unconvincing Sprachgeist argument traceable to Friedrich Wieser.

Friedrich A. von Hayek’s (1899-1992) view of competition as a discovery process is well known but little used. His central thesis is that a competitive pricing system is the most effective way to coordinate economic activity and economise on the information held by market participants in a world of generalised ignorance and change. But do the tremendous advances in computing and data management undermine Hayek’s claim that the market is superior? Does his focus on prices make his view of competition less relevant to the digital economy? Even Hayek had doubts. Unlike most ‘Austrian economists’ Hayek saw a need for antitrust to deal with the exclusionary abuses of ‘non-privileged monopolies’ and restraints of trade. Yet the conceptual basis for this is vague and it jars with Hayek’s view of liberal market law as spontaneously created. Here I critically assess Hayek’s views on competition, monopoly and antitrust, and their relevance to the ‘digital economy’.

Thomas Piketty’s Capital and Ideology (2020) offers a powerful critique of ideological justifications for inequality in capitalist societies. Does this mean we should reject capitalist institutions altogether? This paper defends some aspects of capitalism by explaining the epistemic function of market economies and their ability to harness capital to meet the needs of the relatively disadvantaged. We support this classical liberal position with reference to empirical research on historical trends in inequality that challenges some of Piketty’s interpretations of the data. Then we discuss the implications of this position in terms of limits on the efficacy of participatory governance within firms and the capacity of the state to levy systematic taxes on wealth.

There is something worthwhile in making Shackle's ideas more accessible by identifying the common structural elements shared by Shackle's theory of potential surprise and mainstream orthodox and behavioural decision theory, including prospect theory. To this end, it became clear to me that some sort of reader's guide would be very useful. As such, I have turned my notes on Shackle, which will form the foundation for more substantive work, into a general reader's guide for Shackle's Decision Order and Time in Human Affairs. A reader who picks up Shackle without much prior experience quickly finds himself in uncharted territory. While reading widely in the Austrian School and other more heterodox fields on inquiry within economics will certainly help, I wonder how well this allows the reader to connect what he finds with the mainstream. Making this connection is the purpose of this reader’s guide.

This chapter is motivated by the following questions: what are the implications of an Austrian reassessment of the theory of public goods? What would be left to say that’s right about public goods? The implicit assumption in the theory of public goods being utilized is to frame it in terms of an outcome of its emergence, and neglects to address the process by which so-called “public goods” emerge. By redirecting our focus on this cumulative process, this sheds light on two important points: the non-rivalrous aspect of public goods are a by-product of overcoming rivalry in the first place, via the endogenous formation of excludability mechanisms. Secondly, and therefore, an Austrian reassessment of the theory of public goods completely transcends the inherent distinction between public and private goods, and with it, negates the economic justification of the state.

Austrian economist Ludwig Mises’s central role in the socialist calculation debates has been consensually acknowledged since the early 1920s. Yet, only recently, Nemeth, O’Neill, Uebel, and others have drawn particular attention to Mises’s pertinent encounter with one of the most colorful characters of “Red Vienna”: logical empiricist and “skeptic utopist” Otto Neurath. Despite several surprising agreements, Neurath and Mises certainly provide different answers to the questions “what is meant by rational economic theory” (Neurath) and whether “socialism is the abolition of rational economy” (Mises). However, previous accounts and evaluations of the exchange between Neurath and Mises suffer from attaching little regard to highlighting their idiosyncratic uses of the term “rational”. The paper at hand reconstructs and critically compares the different conceptions of rationality defended by Neurath and Mises and suggests some consequent insights with respect to Viennese Late Enlightenment, contemporary rationality wars, the socialist calculation debates, and the foundations of welfare economics.

William Stanley Jevons’s “Sunspot Theory” of business cycles related the number of spots on the sun to economic activity, primarily through the weather and agriculture, but also through psychological components like optimism and uncertainty. The theory is widely discredited, but John Maynard Keynes agreed with Jevons’s underlying use of market participants’ moods to explain the transmission and magnification of the boom and bust phases of the cycle. Jevons’s use of psychology to explain business cycles originated in John Mills’s 1867 “On Credit Cycles and the Origin of Commercial Panics.” This paper establishes this connection between Mills, Jevons, and Keynes, which is not recorded in the literature that explores the origin of Keynes’s psychological “animal spirits” concept. John Mills’s “On Credit Cycles” is not well-known, so it is reviewed at length, noting points of comparison to the business cycle theories of both Keynes and the Austrian school. Another reason for the extensive treatment of Mills’s “On Credit Cycles” is that Jevons regarded it as an accurate description of the business cycle, even if he was unsatisfied with the unexplained fluctuations in “commercial moods.” If it is true that Jevons essentially founded the idea of market psychology and attitude determinants of the business cycle, then his impact on modern economic theory and policy via Keynes has been underestimated.

James M. Buchanan’s 1969 book Cost and Choice speaks directly to the socialist calculation debate from the perspective of the “London Tradition” in the theory of cost. More than this, however, it places Buchanan alongside Adam Smith, Friedrich Hayek, and Milton Friedman as an exemplar of what Thomas Sowell called “the constrained vision” in his 1987 [2007] book A Conflict of Visions. This essay explores Buchanan’s radical subjectivism in Cost and Choice, why it aligns him with Sowell’s “constrained vision,” and what this implies about Buchanan’s place within political theory generally. His radically subjectivist analysis of cost underlies his constitutional liberalism, and it obviates a more activist, interventionist political agenda.

This paper explores the relevance of Bastiat’s famous distinction between the seen and the unseen consequences of actions to modern debates about cost-benefit analysis. In cost-benefit analysis, the opportunity cost of capital describes the unseen future returns a capital asset generates. However, there is no consensus among economists as to how to account for these returns, as disagreements are wrapped up in a broader controversy surrounding the correct social discount rate. The paper provides background on these debates and explains how adherents of the two mainstream discounting approaches both fail to live up to Bastiat’s standard of a “good economist.”

This paper explores whether human entrepreneurs will be supplanted by intelligent machines. It starts by considering the capacity for machines to engage in entrepreneurial activity using big data and modern artificial intelligence techniques. A critique of artificial intelligence (AI) is then presented that draws a sharp distinction between narrow AI and general AI. Computers are currently incapable of general AI because they lack a theory of mind and self-awareness. Both of these attributes are critical for successful entrepreneurship making it unlikely that computers will displace human entrepreneurs any time soon.

In studying the development of western freedoms, perhaps no subject is more worthy of discussion than classical liberalism, which the late historian Ralph Raico wrote was “the signature political philosophy of Western Civilization.” Raico defined classical liberalism as “the ideology advocating private property, an unhampered market economy, the rule of law, constitutional guarantees of freedom of religion and of the press, and international peace based on free trade.” This ideology arose in the Middle Ages, came alive in the 16th and 17th centuries, declined at the end of the 19th century, and was reborn in the 20th century largely at the hands of one remarkable man—the Austrian-born economist and historian Ludwig von Mises. Through a reasoned and investigated reconstruction of primary sources, this paper will catalog the ideas and achievements of Ludwig von Mises to demonstrate that he was the critical intellectual link in the continuation of the classical liberal tradition. This was the case in both a chronological sense (by connecting the ideas of 17th and 18th-century thinkers through its decline in the late 19th and early 20th century to later 20th-century classical liberals such as F.A. Hayek) and in a geographical sense (by transmitting the classical liberal ideas that had primarily been developed in Europe to the United States in the 20th century). Mises was responsible for the renaissance of classical liberalism in the United States and the birth of the modern-day libertarian movement. Mises’s life work was a full-throated defense of classical liberalism, to include free-market economics, private property, and anti-imperialism.

We study a case that applies hermeneutics to social sciences, in particular to the Austrian school of economics. We argue that an inaccurate treatment of hermeneutics contributed to an epistemological downgrade of the Austrian school in the economic scientific community. We discuss how this shortcoming can be fixed and how a proper hermeneutic application to the Austrian school explains why this school of thought is neither positivist nor postmodern.

Could Ludwig von Mises be considered a feminist economist? This paper tries to answer this question, providing many cites and arguments developed by the Austrian economist. As is pointed, Mises was aware of women’s struggle. He was a great promoter of women’s development and freedom, as he proved in his life, and especially when he devoted one chapter of his book on Socialism to address the question of marriage and violence over women. Moreover, it is shown that epistemological and methodological foundations of praxeology are very compatible with feminist economics theory and claims. Even, the feminist theory could be enriched with many praxeological ideas in order to make it a more rigorous economic current. By demonstrating that Mises could be considered a feminist economist, it will be easier to continue developing an interconnected current: Austrian Feminist Economics.

Behavioral economics rejects the Samuelsonian concept of revealed preferences, which, in turn, is a cornerstone for the development of modern neoclassical micro theory. This paper aims at criticizing the behavioral charge against revealed preferences, arguing that, while accepting the fact that neoclassical micro theory is in part not plausible, the behavioral critique is misleading and thus does not solve the problem of neoclassical microeconomics stemmed from its essence. This paper also develops a case for the Austrian concept of demonstrated preference as a middle ground between neoclassical micro theory and behavioral economics.

Given the breadth of the ideas of the Austrian School of Economics and the numerous lengthy treatises across which those ideas are scattered, it is no easy task to recommend an introductory text which clearly and quickly conveys the definitive characteristics of this school of thought. However, Murray N. Rothbard’s rarely discussed Preface to Ludwig von Mises’s book Theory and History possesses considerable untapped potential in this regard. The Preface’s merits as an introductory reading stem not only from its persuasive summary of the praxeological method and the core arguments in its favour, amongst other distinguishing characteristics of the Austrian School, but also from its brevity and Rothbard’s stylistic clarity, which make it particularly accessible to newcomers to Austrian ideas.

Kirzner (2018) has argued that one of the essentially epistemic properties of the market economy that cannot be ignored is the Hayekian division of knowledge. Despite the fact that knowledge being dispersed, tacit, existing in fractions and thus unable to be possessed by a single mind seems to be an obvious empirical observation, its significance was not fully appreciated by the profession until the publication of Hayek's (1945) The Use of Knowledge in Society. Though the initial intention of Hayek when writing the paper was to contribute to the socialist calculation debate, Hayek (1945) represents a broader point of view regarding the dynamic nature of the market. Furthermore, by calling attention to the knowledge problem, the paper of Hayek set forth a whole new path for the development of modern Austrian economics that has been continued to the present. This paper aims at summarizing such a significance and powerful influence.

The innovation systems (IS) approach—developed by Richard Nelson, Christopher Freeman and Bengt-Ake Lundvall, amongst others—has become perhaps the dominant approach in the academic literature for the study of innovation. It has also exerted considerable influence on policy. This paper examines both the theory underpinning the IS approach, which bears considerable affinities with Austrian economics, and also its policy implications. It is argued that the work of Friedrich Hayek and Elinor Ostrom in particular can be used to draw attention to some potential difficulties with the way in which the IS approach is often used to guide policy. Ideas drawn from Austrian economics, as well as the work of Elinor Ostrom, are used to help develop and improve the IS approach, both theoretically and in terms of its approach to policy.

What is the role of the entrepreneur in Carl Menger’s account of the market process? Modern entrepreneurship theory is broadly divided into two types. The Schumpeterian account of entrepreneurship takes an equilibrium state of affairs as an analytic starting point from which the entrepreneur disrupts the existing equilibrium through technological innovation. The Kirznerian account of entrepreneurship begins from disequilibrium to illustrate the equilibrating role of the entrepreneur through arbitrage. While some working within the Austrian tradition have found Menger’s account to be lacking in precisely the entrepreneurial role that would become a distinctive contribution of the school, we demonstrate that Menger implicitly accounts for entrepreneurship in his theory of price formation. In doing so, we argue that Carl Menger’s account of entrepreneurship transcends the distinction between the Kirznerian and Schumpeterian entrepreneur by incorporating not only price adjusting behavior (i.e. arbitrage) but also non-price adjusting behavior (i.e. product differentiation; variations in quantity and quality; institutional innovation). To the extent that Schumpeterian and Kirznerian entrepreneurship are distinct categories in the history of economic thought, we show how both have roots in the pioneering efforts of Carl Menger, the founder of the Austrian School.

One of the most overlooked and least analyzed elements of Mises’ economic theory is his concept of originary interest. This is distinct from the theory of the natural rate of interest proposed by Wicksell and developed by subsequent economists. The latter concept is determined endogenously by market processes and tends to manifest itself under hypothetical equilibrium conditions. For Mises, the concept of originary interest is exogenous to the economy. Neither does it result from government intervention. It determines economic conditions, rather than being determined by them. Its provenance is never completely clear from Mises’ work, although Mises seems to think that it has an innate quality. It is suggested in this paper that the basis of originary interest is in an evolutionary adaptation of the human species. There is a discussion as to why this might arise and the role originary interest might play in aiding evolutionary development. Comparison is then made between Mises’ concept of originary interest and Keynes’ theory of liquidity preference with which it shares many similarities. Finally, the theoretical structure presented is utilized to suggest approaches to the problem of consilience of economics and the social sciences in general with other disciplines.

Hayek’s business cycle theory does not depend on its traditional assumption of systematic predictive errors. To the contrary, the theory is also consistent with unbiased expectations where some people overestimate and others underestimate the length of an ongoing monetary expansion. The overestimating people tend to expect low real interest rates for an overly long period and invest in overly long production processes. They also tend to realize the error at the same moment—at the end of the monetary expansion, when they also liquidate the unprofitable investment. With the assumption of unbiased expectations, the theory predicts a cluster of observable errors and replicates the important features of Hayek’s canonical version of the theory.

This paper examines the question of whether a consilient theoretical framework for the study of business ethics can be developed. If a certain compatibility is to be found among the current and differing approaches to business ethics, such compatibility must be drawn from an understanding of the consilience of business ethics theory with its adjoining disciplines. In this paper human social exchange is seen as the essential linkage between human psychology and economic activity and, from there, to broader issues of social and cultural reciprocity. The method used to examine exchange is derived from praxeology as developed by the Austrian School of economics. From this level of abstraction, it is then possible to craft a definition of moral exchange in a more concrete form, as being the absence of net coercion between the parties to an exchange. Motivations driven by the notion of subjective value are applied to both the supply and demand side. This conception of value exchange is presented as being capable of integrating the elements of psychology, sociology, and culture. The resulting calculus supplies an immanent framework for deriving moral conclusions about economic activity. As a result of its starting point in social exchange, this approach is able to connect with the evolutionary past of human beings as well the higher developments of culture, including the philosophical approaches to business ethics.

The aim of this paper is to anchor the problem of indifference and choice in a time continuum. Every action is future-oriented. The choice that is being made here and now is the choice that should, from a subjective point of view, eliminate a feeling of uneasiness toward the future. As Shackle (1972) notes, it is too late for the past and even for the present. The goal of this paper will allow us to look critically at an interesting ongoing discussion about the problem of indifference and choice. Debate is conducted primarily in circles of the Austrian School. This is because Nozick (1977) addressed the problem implying the invalidity of the law of diminishing marginal utility in the absence of a presupposition of indifference to the representatives of the Austrian school. The whole genesis of the discussion on the topic can be seen at the beginning of Block (2012). This paper briefly introduces the discussion and its main problems. Stated reservations will be removed by suggested solution based on the modification of the theory of subjective value presented in greater detail in Posvanc (2019a, 2019d). It will be shown that proposed solution improves conclusions in Wysocki (2016) and Wysocki-Block (2018, 2019). It will allow to preserve elements of indifference analysis as interpreted by the neoclassical mainstream, however, it will also allow interpretation of the problem of indifference and choice based on strict preferences from the point of view of the Austrian School of Economics. This is a quite controversial conclusion, but it is a logical consequence of the proposed modification in the theory of subjective value.

Classical liberal economists have proposed a theory of intervention-crisis-disintervention cycles that allow us to find the right moment to promote market liberalization. Our project seeks to understand the Brazilian cycle since its democratic opening in the 1980s as a way of enhancing the impact of free market policies. Following the Brazilian presidential elections of 2018, Brazil is entering, in our view, a new phase of disintervention. An appropriate framing of the issue is paramount for a successful design of strategies in the pursuit of sustainable long-term liberalization.

The Austrian school of economics has played a key contribution toward an improved understanding of the characteristics of economic innovation. Over recent decades the language and concepts of innovation theory has broadened to non-market settings, among other things giving rise to a voluminous literature on “social innovation.” During the same period of time, scholars have increasingly utilised Austrian economic insights to explore the nature of social interaction and the dynamics of social change, delving into matters such as social entrepreneurship, non-price coordination, and social learning. Both social innovation and non-economic Austrian scholarship have largely been conducted independently of each other. The central claim of this paper is that scope exists for meaningful intellectual exchanges between these two sub-branches of social scientific endeavour. An Austrian perspective on social innovation centres upon entrepreneurs using their unique knowledge to create and change social norms and practices, providing micro-level foundations for broader scale social innovations of cultural and institutional character. Social innovation theory assails the limitations of market-state duality by stressing the involvement of non-market, non-state social actors in promulgating social novelties. Austrian perspectives on social theory may also gain from the social-innovation emphasis upon enhancing broad aspects of human well-being.

A recent argument by historian Quinn Slobodian contends that the modern Alt-Right movement’s genealogy derives, in part, from a posited ambiguity in the early 20th century writings of Ludwig von Mises about race and immigration. This article argues that while Slobodian has correctly identified an Alt-Right precursor in the work of Hans-Hermann Hoppe, he errs in attributing its derivation to earlier works by Mises or to the Austrian school of economics more generally. Mises’s arguments on immigration and race are shown to be in direct tension with the Hoppean position, and Slobodian’s treatments of the same rely upon misconstructions of Mises’s written works. The article concludes with an alternative genealogy of Hoppe’s anti-immigration arguments, showing that they emerged from a far-right adaptation of Habermasian discursive analysis and critical theory. As a result, Hoppe's epistemic framework may be better understood as what Murray Rothbard called a "libertarian extension" of Juergen Habermas and Karl-Otto Apel.

Economics in China has been neoclassicalized in the past few decades. In this article, I argue that neoclassical economics is not a good theory of the market. It misleads both economists and government in understanding the economic issues. China is particularly vulnerable to its defects. In contrast, the Austrian School of economics is a better theory of the market since it studies the real market, not an imaginary market. The most important difference between the two economics paradigms is their understandings of the entrepreneurship. Entrepreneurship is missed in neoclassical economics. In the Austrian School economics and Schumpeterian economics, entrepreneurship is the soul of the market. The paradigm shift of economics is urgently needed but it will be a slow process. Chinese economists should play a role in this transformation.

Sensory education has the potential to activate chemosensory awareness in children and may lead to them developing healthier and more balanced eating habits. The increasing evidence for the effectiveness of a sensory based education was mainly shown in studies with primary school children. As there is a lack of data with older children of mandatory school age, this study focused on pupils aged 11 to 14. Therefore, 258 children from four secondary schools in Austria were selected for a trial with the purpose to evaluate the impact of a sensory education program, which was integrated in the school subject nutrition and household. The study was structured into 5 sections and included a sensory training over a period of 6 months for one part of the study population (education group) and the evaluation of gustatory and olfactory perception (all participants) at different times (baseline and follow up 1-3). The data obtained from the baseline investigation demonstrates low taste and smell identification abilities of the evaluated Austrian school children and was an essential information for planning an effective sensory training. The results from follow up 1 showed an improvement of gustatory (p

I investigate the impact of parental unemployment on children's educational attainment and long-run labor market outcomes in Austria. I find that parental unemployment shortly before an important educational decision by parents for their children lowers a child's probability of holding a university degree by more than 5 percentage points. I do not find that income is affected at the beginning of a child's labor market career along the distribution, but I find a gradual deterioration later on. A substantial share of these long-term losses can be explained by the lower parental investment decision. My results emphasize the intergenerational and longlasting consequences of parental unemployment. Ich untersuche die Auswirkungen elterlicher Arbeitslosigkeit auf das Bildungsniveau und den langfristigen Arbeitsmarkerfolg von Kindern. Es zeigt sich, dass elterliche Arbeitslosigkeit kurz vor einer wichtigen Bildungsentscheidung der Eltern für ihre Kinder die Wahrscheinlichkeit, dass ein Kind einen Hochschulabschluss erlangt, um mehr als 5 Prozentpunkte verringert. Elterliche Arbeitslosigkeit hat keine Auswirkungen auf das Einkommen der Kinder zu Beginn ihrer Arbeitsmarktkarriere, aber ich finde zunehmende und langfristige Einkommensverluste. Ein wesentlicher Teil dieser langfristigen Verluste lassen sich durch eine geringere Investitionsentscheidung der Eltern erklären. Meine Ergebnisse unterstreichen die generationsübergreifenden und langfristigen Folgen von Arbeitslosigkeit.

This paper explores the intellectual context of the Department of Economics at the London School of Economics and Political Science (LSE) during the 1930s. We will be focusing on the contributions of F.A. Hayek, along with Lionel Robbins, in fostering an intellectual environment for the transmission and incorporation of Austrian economics, particularly the works of Ludwig von Mises. In doing so we illustrate that Hayek and Robbins were attempting to craft a unified tradition of economic theory that consisted of various strands of economic thought that had either contributed to, or were consistent with, the Austrian tradition. The work done by Hayek, as well as Robbins, at the LSE not only consolidated the ideas of the Austrian tradition that had developed from Vienna. In doing so, they also rearticulated the broader theoretical contributions of classical political economy as a counterweight against an emerging neoclassical and Keynesian paradigm.

This article argues that the discussion of incentives in economics neglects a crucial question: why are some incentives felt as powerful reasons to alter actions, while other incentives have little, or even counterproductive, effect? We argue that an answer to this question can be found in recent empirical work in economic sociology, institutional economics and Austrian economics. This work studies the meaning of incentives in particular social settings and shows that incentives become meaningful in relation to those settings. We demonstrate that it illuminates why certain incentives are perceived as powerful reasons for action, while others are mostly ignored. We also explain why incentives are typically tied to certain social roles that can be identified through ideal-type analysis, and why situations of high uncertainty are of particular use for studying the activity of actors. In order to understand entrepreneurial action, financial markets, and why monetary rewards and market exchange are sometimes perceived as the wrong type of incentive, research should focus on how an uncertain future is understood by actors. We identify four building blocks in the work of Alfred Schutz, and suggest they yield a constructive research program at the intersection between economics and sociology.

This is a condensed version of Salter and Tarko (2018), presented at the Austrian Economics in the 21st Century conference in Rosario, Argentina. I argue that current perspectives on banking and financial regulation, including newly popular proposals for macroprudential regulation, cannot achieve their objective. Admittedly banking and financial systems need to be governed, to overcome collective action problems that can hinder the stability of the system. But this stability can be an endogenous feature of self-regulation. I contend that the governance institutions in historical free banking systems succeeded in making those systems resilient. These institutions permit us to classify free banking systems as polycentric systems for banking and financial governance.

Classical, neoclassical and Austrian economists assume that self-interest in exchanges is alone sufficient to make markets work, because of the invisible hand of Adam Smith. This assumption has motivated market deregulation. On the contrary, we argue that Adam Smith was not assuming or explaining that markets always work (or exist). Rather, when markets happen to work apparently through self-interest, Adam Smith was hypothesizing the possible existence of an invisible hand. Similarly, Christians of the Enlightenment who observed the orderly wonders of nature, believed in the invisible hand of God. This paper argues that the invisible hand behind the social order in markets observed by Adam Smith must have a moral dimension in addition to self-interest alone. We suggest that Adam Smith’s philosophy of functioning markets presupposed the influence of morality which economists have overlooked over the centuries, leading to a mistaken conflation of free markets with free-for-all markets. A scientific theory of markets is introduced to describe and classify different functions and types of markets, including market failures or collapses. In particular, we indicate that markets do more than allocate resources – they also distribute the benefits of exchange. This latter function is a social one which makes morality or fairness an essential ingredient in social interactions, as well-functioning markets distribute the benefits of exchange mutually, equitably and sustainably. We provide the rationale for an explicit role for morality in positive economic theory.

I compare two views of the equilibrium concept: one from F. A. Hayek and the other from Fritz Machlup. I argue that Machlup’s equilibrium concept is price-theoretic, that is, it is a tool of problem-based, comparative static analysis. In contrast, Hayek’s equilibrium concept approximates the social order observed in reality. While the Hayekian equilibrium is an explanandum, the Machlupian equilibrium forms a part of the explanans. Further, Hayek’s approach is more descriptivist than problem-based. I argue that the two equilibrium concepts are not mutually exclusive alternatives. In particular, the adequacy of the Machlupian equilibrium for price-theoretic analysis is unrelated to the adequacy of the Hayekian equilibrium for analyzing the social order. In fact, I show that the two types of analysis can be seen as complementary. I conclude that the main issue is not to decide whether the equilibrium concept is useful in general but to determine the proper sphere of application of a particular equilibrium concept.

Robust Political Economy (RPE) is a research program that combines insights from Austrian economics and public choice to evaluate the performance of institutions in cases of limited knowledge and limited altruism, or “worst-case scenarios.” Many critics of RPE argue that it is too narrowly focused on the bad motivations and inadequacies of social actors while smuggling in classical liberal normative commitments as part of a purported solution to these problems. This paper takes a different tack by highlighting the ways that RPE as currently understood may not be robust enough to particularly bad conduct. It suggests that depending on the parameters of what constitutes a worst-case scenario, classical liberal institutions, especially a minimal state, may turn out to be less robust than some conservative or social democratic alternatives.

This article presents a new approach to the socialist calculation debate. I focus particularly on the question of how to integrate information of consumers’ preferences and argue that the objections raised by Austrian economists against the socialist model proposed by Oskar Lange can be addressed within the current level of technological development. I propose that preferences of consumers can be revealed by their web search queries and also that, given the amount of information available, it would be possible to analyze consumers’ preferences in terms of hierarchical choices that distinguish between needs and subneeds.

The socialist calculation debate occurred simultaneously with the development of increasingly idealized neoclassical market models in the early decades of the 20th century. Nonetheless, free market neoclassical economists were conspicuously absent from that debate, leaving the pro-market case to be made by Austrian economists. This paper puts forward an interpretation of the neoclassical school's relative absence based on certain shared philosophical premises of neoclassical market models and Marxism. It argues that the two schools' shared Platonic influences render the more devout exponents of static, perfectly competitive market models unable to contribute substantively to the defense of markets against advocates of socialism.

Max Weber, the Austrian School, and the institutional economists described the influence of culture on the economy. Culture may be regarded as an economic asset–a type of capital cultural. It is an intangible public good, shared by the members of a social group. International experts agree that cultural action is an effective factor for social and economic integration, a genuine way of promoting territorial cohesion and engine for local development. At the EU level, the Culture Programme 2007-2013 continues the previous Culture 2000 Programme. The goal of the European Commission is to promote a new approach to cultural action focused on its socio-economic role and on the creation of a common cultural space. It promotes cultural dialogue, the creation and dissemination of culture and mobility of artists and their works, European cultural heritage, new forms of cultural expression. This paper presents a brief analysis of the impact on economic development, at the national level and for development regions, of cultural factors and creative sectors in Romania. Both the direct effects (turnover generated by the creative and cultural sectors, their contribution to Romania's GDP, their growth rate, the number of people employed in these sectors) and indirect effects (interdependencies with the information and communication technology, attracting investment and tourism development) of culture on economic development are analyzed.

Spanish Abstract: La gestion de fondos es clave para la canalizacion del ahorro de una sociedad, tanto a nivel particular como a nivel corporativo. La aplicacion correcta del conocido como “asset allocation” es la piedra angular para obtener calidad y consistencia en los resultados de las inversiones. A nivel general, la corriente de inversion que ha obtenido una estabilidad y eficacia en sus resultados a lo largo del tiempo ha sido la conocida como inversion en valor o “value investing”. Las gestoras de fondos que siguen esta filosofia de inversion, tienen estrechos vinculos con la vision de la Escuela Austriaca de Economia, como es el caso del analisis de la existencia de desequilibrios en los mercados y la imposibilidad de hacer predicciones consistentes para el futuro. Por lo tanto, el presente trabajo tratara de realizar un estudio de la relacion existente entre dicha tecnica de inversion y la Escuela Austriaca de Economia. English Abstract: Fund management is the key for the channeling of the savings of a society, both at a personal and at a corporative level. The right application of the asset allocation is the answer to obtain quality and consistency in the results of the investments. Overall, the investment strategy that has achieved stability and efficiency in its results over time has been known as value investing. The fund managers which follow this investment philosophy have close links with the Austrian School of Economics. This is the case of the analysis of the existence of imbalances in the markets and the impossibility of making consistent predictions for the future. Therefore, the present project will try to make a study of the existing relationship between this investment technique and the Austrian School of Economics.

Friedrich Hayek’s research focus shifted from a formal analysis of the capital structure in the early 1930s to the study of the economy of knowledge in 1945. He never, as it is too often said, abandoned economics. The abandonment narrative impedes understanding of Austrian economics generally and Hayek’s works more specifically. Toward correcting the false narrative, we explore connections between his 1945 thesis and the price fan simile he set out in 1931 to facilitate understanding of the role played by emerging input prices as more capitalistic methods of production are adopted. Expanding on the price fan simile, we also seek to deepen the understanding of the allocative marvel that prices achieve in the free market system, and, consequently, the utter impracticality of using socialist calculation in place of the free market.

Menger, among the founders of marginalism, was the least mathematical and the one most interested in individual subjective valuations. These characteristics allowed for the development, by his successors, of what has become known as the Austrian School of economic theory. Among their notable contributions to economic thought were the integration of financial theory with the real economy and the emphasis on the disaggregation of capital to explain the dynamics of the economy. Nevertheless, in moving from micro to macroeconomics, the followers of Austrianism came to depend heavily on marginal theory in what were labelled the higher orders of production. The initial subjective evaluation of goods by consumers was imputed to these higher orders with the additional value distributed among them through market forces. This held true across the economic spectrum, from employment to the production of plant and equipment. Subjective value was brought to bear only at one point, final consumption. For the remainder of the transactions, the economic actors were little different from the homo economicus of what eventually became neo-classical economic theory. This paper examines this defect in Austrian theory in detail and constructs a micro-economic model which allows for the full bilateral application of subjective value. The result is an economic theory which is far more flexible and dynamic, and which generalizes in a fuller way to other areas of human action in which exchange and reciprocity play a critical role.

Max Weber’s relationship to economics in general and to the Austrian School in particular has received more attention recently. However, this literature as conducted by Weber scholars and by Austrian economists exhibits two major deficiencies. First, the studies are often either purely ahistorical or use superficial historical expositions. Second, the conceptual focus is often motivated by Weber’s importance for the theoretical edifice of Ludwig von Mises, a motivation which leads the analyses in a rather narrowly confined direction. The current paper attempts to provide a solid biographical foundation of Weber’s relationship to the early Austrian School as seen from a channel rarely studied systematically before: His relationship to economist and economic sociologist Friedrich von Wieser. Such a perspective sheds light on the multiple levels of interaction between Weber and the early Austrians between 1876 and 1920: 1) Weber’s formative years at Heidelberg and his early professorship at Freiburg; 2) several institutional contexts, especially the Verein fur Socialpolitik; 3) the cooperation with Wieser during the Grundris der Sozialokonomik project 1909-1914; 4) Weber’s brief stay at the University of Vienna 1917-1918. This portrayal shows not only biographical proximities and affinities, but also several levels of substantive overlap between Weber and Wieser. Their projects of “Social Economics” are studied comparatively, with a special focus on the concepts of power(s) and order(s) that are central for both. The goal is twofold. First, the “Heidelberg-Vienna” connection offers important insights for the development of “Social Economics” and of the early economics of the Austrian School. Second, this connection enables new interpretations of the later evolution in the German-language politico-economic discourses, especially of the “Freiburg-Vienna” connection between the ordoliberals and later generations of the Austrian School.

In the first half of the twentieth century, economists associated with the Austrian school argued information necessary to effective economic calculation requires the use of market prices and cannot be centralized in a way that would make central planning a viable alternative. It followed from this conclusion that socialism, in any meaningful sense, is impossible. But new technology leads some to question that claim. Voices from Lange in the 1970s to those more contemporary hold that if only technology could become advanced enough, central planning would work. Given the large technological leaps of the past few decades, the socialist claim has never seemed more plausible. The rise of the Internet of things, ever-faster supercomputers, and gigabit Internet access provides a glimpse into the now radically connected world in which precise information about minute details of goods is transmitted around the world at near the speed of light. Some on the socialist side are now claiming that the very information that the Austrians told them had to be decentralized and conveyed by market prices can now be assimilated by computers. This paper analyzes whether current, or any conceivable, proposals that the radically connected modern age could solve the knowledge problem and make central planning a viable method of economic organization. It finds that claims that technology can solve the problems with central planning simply miss the point of the Austrian critique. Central planning, using the Internet or any other means, still cannot dispense with the competitive market process without which the discovery of the information necessary for economic calculation is impossible.

This paper uses the theory of complex systems as a conceptual lens through which to compare the work of Friedrich Hayek and Vincent and Elinor Ostrom. It is well known that, from the 1950s onwards, Hayek conceptualised the market as a complex adaptive system. It is argued in this paper that, while the Ostroms began explicitly to describe polycentric systems as a class of complex adaptive system from the mid-tolate 1990s onwards, they had in fact developed an account of polycentricity as displaying most if not all of the hallmarks of organised complexity long before that time. The Ostromian and Hayekian approaches can thus be seen to share a good deal in common, with both portraying important aspects of society — the market economy in the case of Hayek, and public economies, legal and political systems, and environment resources, in the case of the Ostroms — as complex rather than simple systems. Aside from helping to bring out this aspect of the Ostroms’ work, using the theory of complex systems as a framework for comparing the Hayekian and Ostromian approaches will be shown to serve two other purposes. First, it can be used to show how one widely-criticised aspect of Hayek’s theory of society as a complex system, namely his account of cultural evolution via group selection, can be strengthened by an appeal to the work of Elinor Ostrom. Second, it also helps to show how to resolve a tension — ultimately acknowledged by the Ostroms themselves — between some of their explicit methodological pronouncements and the actual, substantive approach they adopted in their analysis of polycentric systems.

The most prominent previous versions of Austrian Business Cycle Theory (ABCT) are analyzed with the conclusion that, while containing interesting insights, were excessively aggregative and based on confusing constructs. This work develops a more realistic version of ABCT centered on the actual mistaken investment projects that should lie at the heart of the cycle and the errors that lead to them. The resulting theory is then illustrated by means of a computer model in order to verify the logical coherence of the core mechanism and unearth the potential tacit assumptions. Finally, a methodology is proposed for applying it to particular historical episodes, and the U.S. Great Recession and the run-up to it are considered in its light. There is considerable evidence from those events suggesting that there was a cluster of ABCT-described projects in non-residential construction and a cluster of associated troubled loans. While the cluster appears to be insufficient in itself to explain the scale of the U.S. Great Recession, the finding is still significant given that the bulk of excess credit during the preceding phase was not allocated to it.

Strategic management is a relatively youthful discipline that has steadily matured over the past fifty years. The field has become consolidated over this period, while simultaneously expanding the range of topics analyzed and research methodologies used. Different theories and approaches, addressing different research topics, have been developed to explain the reasons underlying firms’ competitive advantage and success. In this paper, we posit the existence of two pendulums in constant motion that, on the one hand, reflect the tension that has historically existed between the focus on internal firm factors and external environmental attributes respectively and, on the other hand, the tension between a more macro level of analysis, i.e., the firm and its environment, and a more micro level one, i.e., individuals and their relations within the firm. The frontier of research in strategic management is shaped by the simultaneous movement of both pendulums.

The rise of mass schooling is an important contributor to modern economic growth. But its form, content, scale and manner of provision are all matters of public policy that are subject to politics. The rise of modern schooling is frequently cast as a product of broadened suffrage and stronger political voice of the masses, which overcame the political opposition from old ruling elites. We investigate this hypothesis, using the case of a school reform undertaken in Imperial Austria in 1869. We show that while landowners were less likely to vote for school modernization than urban and business interests, the strongest opposition came from the rural areas where the suffrage was in fact most numerous. The reform passed in spite of their opposition but, interestingly, post-reform developments suggest that passive resistance to it continued in the countryside in spite of the alleged benefits that education was billed to bring the masses.

International trade has been a key area of concern for businesses. The recent technological advancements have enabled the development of a global market place through which transactions can be carried out across wide geographical coverage. This has reduced the world's individual markets into an integrated global village. The spread of businesses outside their local boundaries through foreign direct investment has been mainly enhanced by the desire to satisfy the consumers' needs thus achieving the requirements of the Austrian Economic School of Thought. The development of international trade has caused an overall rise in the rate of economic growth.

Deirdre McCloskey's Bourgeois Dignity deploys Israel Kirzner's theory of entrepreneurial discovery in her explanation of the Industrial Revolution. This essay examines whether Kirzner's theory can bear the analytical load that McCloskey would place on it. I identify two potential incongruities between Kirzner's theory and McCloskey's historical account but find them both unconvincing. Kirzner's entrepreneur is a good fit for McCloskey's story. I argue further that the fit can be strengthened by incorporating further elements of Kirzner's theory, including entrepreneurial alertness.