Fascinating Vienna and the History of Economics

|Peter Boettke|

For the past few years I have been stressing to my graduate students the difference between Austrian economics and Austrian economics, mainly to highlight the career advantages of focusing their efforts on contributing to economics.  However, I am always quick to point out that both are legitimate and worthy of serious research.

In fact, at the APEE conference this year I heard a wonderful presentation by Bryan McCannon, a professor at Wake Forest University, on teaching Austrian economics in Austria.  After hearing Bryan's presentation, I came back to GMU and offered to teach such a course to our Dean, and I believe in the next few years such a course will in fact be offered.  I have been fascinated by the entire Viennese culture that gave birth to the Austrian school since my senior thesis on methodenstreit under Dr. Sennholz back at Grove City College. 

Works such as William Johnston's The Austrian Mind, and Allan Janik and Stephen Toulmin's Wittgenstein's Vienna have long been on my bookshelf and on my recommended reading list for students interested in Austrian economics.  Such scholarly interest can only be pursued effectively if the study of economics is combined with a deep knowledge of the continental philosophical traditions that were in the air (from Aristotle and Kant, to Husserl and phenomenology, to the Vienna circle, etc.) as well as the educational structures and the different active research groups that were in operation.

Think about all the great innovations in economic theory that emerged from Vienna from 1880-1938 --- the subjectivist/marginalist revolution associated with Menger, Wieser, Bohm-Bawerk, the monetary theory of the trade cycle as developed by Mises and Hayek, the formal equilibrium theorizing that emerged in Karl Menger's seminar (e.g., Abraham Wald), and the development of game theory and its application to economics by Morgenstern.

Robert Leonard's Von Neumann, Morgenstern, and The Creation of Game Theory (Cambridge, 2010) is simply a brilliant exposition of (as the title suggests) the development of game theory.  But Leonard also situates the economics and mathematical developments in the broader philosophical and historical context. Leonard's work is a brilliant blend of the history of economics and the history of science approaches to the study of the history of political economy.  I cannot recommend this book strongly enough; it is in my opinion an awe inspiring piece of scholarship.  In fact, this fall I will be leading a study group on "formal theories of the market process" and Leonard's book will be how we start the group.

It doesn't matter if you are an Austrian economists, or an Austrian economists, you have to get this book and study it closely.

Comments

[Rafe Champion]

A salute to Barry Smith as well
http://ontology.buffalo.edu/smith/BSPUBLST.htm#Books

[Rafe Champion]

It is interesting to recall the time in the 1920s and 30s when Mises spent his days trying to steer the Austrian economy and the nights grappling with the fundamentals of economics and its methods (Grundprobleme der Nationalökonomie). Not far away Karl Popper was teaching high school maths and science, then he went home to work on the fundamentals of scientifc method (Grundprobleme der Erkenntnistheorie). It seems that the two titans might as well have lived on different planets because the twain never met in any satisfactory manner.

[Stephan]

It's also always fascinating to read these blind-eye presentations of the historic evolvement of the Austrian school from Austrian economists. A lot of praise for the heros: Menger, Wieser, Böhm-Bawerk, Mises, Hayek.

But never a word about the other heros Mises classmates in Böhm-Bawerk's seminar: Otto Bauer, Rudolf Hilferding, Emil Lederer, Joseph Schumpeter. The real fascinating thing must have been to study in such a diverse group of thinkers.

Given the development in the last years in the US reading "Das Finanzkapital" from Hilferding might be as beneficial as some further Mises exegese. It's almost prophetic.

[Roger]

Stephan, Can you elaborate, please?

[Stephan]

@Roger: Elaborate what? Greetings from Vienna.

[Peter Boettke]

Stephan,

Why don't you read Leonard's book, which talks at great length about all the diverse thinkers? My post had no intended hero worship and in fact points to the great diversity of ideas - philosophical and social scientific. Not sure I understand how you read it the way you did.

Pete

[Stephan]

Pete,

I definitely will read the book! Although I just ordered Steven's book and have several others waiting. On the other hand I learned today that he's the stupidest man alive alas I might change my priorities. The more I follow US economic blogs I'm fascinated about US economists warrior qualities.

Now in regard to your writing. The problem I've is that indeed you write about diversity. But not in the context of economics. For instance Hilferding. Sorry to say that, but reading about the GFC since three years I came to the conclusion that Rudolf was not so wrong.

I'm just waiting to hear Obama say: "It's a stamokap-economy, stupid! This is Hilferding's Stamokap 2.0 released 21st century.

[Steve Horwitz]

Stephan,

You might find this early paper of mine of interest: http://hope.dukejournals.org/cgi/reprint/26/2/221.pdf

[Steve Horwitz]

And read the book first - then you're entitled to call me the stupidest man alive. If you want the insult to hurt, you have to pay the price. :)

[Peter Boettke]

Yes, Stephan, actually Steve and Dave Prychitko read all the the Austro-Marxist as part of our graduate education, and in particular the Hilferding-Bohm-Bawerk debate. But Otto Bauer and of course Otto Neurath were also read. In my 9 volume reference work on the history of the socialist controversies reprints Neurath's key writings on the 'natural economy". And Neurath is a central figure in Robert Leonard's work that I cite above.

So in this case your prejudgment is slightly off.

Pete

[Stephan]

First my apologies! I just post what comes on my mind in response to your postings. I don't think it is very efficient to do a thorough research what you guys were doing in the past before posting a comment. I'm lazy and prefer to stand corrected.

In regard to insults I try to insult no one without stating why. By doing so hopefully living up to Schumpeter:

"In this and many analogous cases, of which modern economic theory is another deplorable example, economists indulged their strong propensity to dabble in politics, to peddle political recipes, to offer themselves as philosophers of economic life, and in doing so neglected the duty of stating explicitly the value judgements that they introduced into their reasoning."

[Richard Ebeling]

Many people view Ludwig von Mises as closed minded and intolerant of other views.

I have on my desk, here, a report from one of the European representatives of the Rockefeller Foundation, who was in Vienna in September 1930, and had spent an evening over dinner with Mises until 1 a.m. discussing the cultural future of Vienna.

Mises mentioned those with whom he was familiar in various fields that he considered to be "first rate" and that might, clearly, be deserving of Rockefeller Foundation support at some time in the future.

Among philosophers, he listed three:

Moritz Schlick
Rudolf Carnap
Ludwig Wittgenstein

(Schlick and Carnap were leading figures in the logical positivist movement.)

Among economists that Mises mentioned were the "usual suspects" -- Hayek, Machlup, Morgenstern, Haberler, and Alfred Schutz (obviously being a Weberian sociologist/philosopher counted the same as being an economist!).

But he also listed Paul N. Rosenstein-Rodan, who was already very much on the political "left." And indeed, shortly after this dinner Mises wrote a letter recommending Rosenstein-Rodan for a Rockefeller travel grant. Mises said in the letter that while one may not agree with all of his views, Rosenstein-Rodan's scholarship was of such a high quality that he was most certainly deserving of such financial support.

(By the way, the Rockefeller representative reported that Mises said:

"Although Mises is pessimistic as to immediate future he is convincingly optimistic regarding the long run future of Vienna as a cultural and economic center. Believes that union with Germany will ultimately take place in one form or another.")

Just thought I'd add a little bit of Austrian historical gossip, since we're talking about cultural trends in Vienna at that time.

Richard Ebeling

[Stephan]

@Richard
Very interesting. Wasn't aware of this. Anyhow I never considered Mises as a closed mind. As a government executive he was quite pragmatic and down to earth. By the way if you are the Ebeling I'm thinking you are you should correct your Wiki entry. To spell Röpke as Ropeke is not very helpful.

Hmmm ... It is really a pity. So much great minds. And now Austria and especially Vienna a bunch of xenophobic morons. Only two great economists remaining. Ernst Fehr and Stephan Schulmeister. By the way Schulmeisters last book is great: "Mitten in der großen Krise. Ein 'New Deal' für Europa". Oops New Deal? Not such a good idea mentioning this two words here ;-)

[Barkley Rosser]

Fehr is at the University of Zurich now.

[Stephan]

@Barkley
So? In respect to the working place of economists Austrian economics has a serious naming problem. Not that I really care about that. At least he's an Austrian national wrestling champion. Anyway now it's Germany:Spain and time for the first San Miguel.

[Shawn Ritenour]

I recommend Hulsmann's biography of Mises for providing a pretty good contextual picture of the Austrian milieu in which Mises developed.

[Rafe Champion]

Hulsmann provides superb background, including the minor scandal of Menger's son Karl, a nice example of unintended conseqences in more ways than one (Menger junior became a pillar of the logical positivists). It is unfortunate that Mises was over-impressed by Schlick, Carnap and Wittgenstein, even while he saw positivism as the great enemy of proper economics (replacing historicism). Actually he thought that positivism worked for the natural sciences and and he never grasped the way that Popper demonsrated that this was an error and then transformed epistemology and the philosophy of science in a way that supports Austrian economics. His ideas line up point for point with the philosophical core that Barry Smith identified in Menger's program. Of course he was an Austrian as well.

[Barkley Rosser]

Yes, Rafe, really "unfortunate" that Mises did not see eye to eye with your interpretation and view of the various logical positivists, how short-sighted of him.

[Troy Camplin]

You can't leave out Bertalanffy. His work on general systems theory was central to Hayek's developing spontaneous order theory.

[phil from austria]

I'd also recommend another standard on Vienna around 1900: Carl E. Shorskes "Fin-de-siecle Vienna - Politics and Culture."
PS: while I absolutely agree with Stephan on the 'xenophophic morons', utterly provincial I would add, I cannot understand how he can cite Schulmeister as an great economist - this guy is even blurbing more than Krugman these days. Now I really feel alone as an Austrian in austria :-)

Gruß aus Wien!

[JC]

While this blog is mainly geared to academic readers, there are a few of us lurkers that are professional academics but have a keen interest in the economics, history and philosophy. For those of us not in your graduate classes, can you briefly explain the difference between " Austrian *economists* and *Austrian* economists ? I don't get the difference. Thanks in advance.