The History of Economic Thought: From Marx to Hayek

History is not an inevitable march upward, as concluded in the 1830s. That determinist view put the stamp of approval on everything past and present. It permeates economic history. It ignores the great moral choices. History is a race between state power and social power.

The roots of Marxism were in messianic communism. Marx’s devotion to communism was his crucial point.  Violent, worldwide revolution, in Marx’s version made by the oppressed proletariat, would be the instrument of the advent of his millennium, communism.

Richard Cantillon was quite Misesian before Mises. He wrote of utility theory and the entrepreneur’s uncertainty in the 1970s. Cantillon was a great money practitioner. He became a bank and banker to the Jacobite Stuart line and to John Law who launched paper money inflation.

Carl Menger, 1840-1921, founded Austrian economics. Eugen von Bohm-Bawerk was the most important student.  Weiser was his brother-in-law, but was fairly pre-Keynesian. Mises was the great successor to Bohn-Bawerk.

The essence of Austrian economics is based on the analysis of individual action. In other words, it is about individuals doing things, having purposes and goals and pursuing them. Other schools of economics deal with aggregates, groups, classes, wholes of one sort or another, without focusing on the individual first and building up from there.

The Nobel award to F.A. Hayek in 1974 went directly against the tradition of that prize to go only to mathematical forecasters, left-liberals, and government central planners. Not only was Hayek’s work pioneering, but it is also the only correct analysis of business cycles past, present and future since they began in the mid-18th century.