I'd like to thank the Mises Institute for having me. My first scholars' conference
was in 1999, and they keep getting better over the years. I'd like to briefly explain
my interest in this topic. I deal a lot with the news media at the think tank where I work.
And one question that I'm asked, we're dealing with very abstract ideas that do have a practical
One question I'm asked all the time is, well, who are these Austrian school economists?
And I find that being able to take popular culture, examples from popular culture, and cite them to the news media helps them understand these very abstract ideas.
And one way that I've introduced Ludwig von Mises and his story to many journalists over the years is to remind them that there was a great movie,
A Great Musical, The Sound of Music. It's about the Anschluss. And of course, as Dr.
Hulsman's book notes, Ludwig von Mises got out of Vienna just ahead of the Nazis. But
it really clarifies for a lot of people in the media that I've dealt with who he is
and what we are. We're pro-freedom, pro-liberty, and we're involved with ideas as he was.
So what I'm going to do is I'm going to go through real quickly what I found in reviewing
100 years of the American Economic Review.
It's my contention that the Austrian School gets a bum ramp from people that just don't
know how many institutions, serious institutions, have taken our work very seriously.
Two papers that I presented here in the past dealt with the Austrian School in the Reviews
of the Federal Reserve System and the Austrian School in the National Bureau of Economic
Research's Business Cycle Studies. Those were published in 2006 and 2010 in the Quarterly
Journal of Austrian Economics. This paper kind of grew out of that. My question became
Well, what about the AER? The AER, which was first published in 1911, is the leading peer-reviewed
economics journal in the United States. Thirteen presidents of the AER, which publishes on
a quarterly basis, have won the Nobel Prize in Economics, and AER has been identified
as a flagship economics journal. Despite this, articles that explore academic interest in
and the Austrian School overlook the AER, so I began hoping I could correct this oversight.
Now what I found is that the AER has published a reference to an Austrian economist each
year in its 100 year history, that's my appendix, and these include references to
Benjamin Anderson, Eugene von Boehm-Bawerk, Gottfried Haberler, Friedrich Hayek, Israel
Israel Kirzner, Fritz Machlip, Carl Menger, Ludwig von Mises, Oskar Morgenstern, Murray
Rothbard, Joseph Schumpeter, Hans Senholtz, Richard Striegel, and Friedrich Wieser.
There is clarity of Austrian views for much of the AAR's history, from the first reference
in 1911 to the last, that was a reference to Hayek, in 2010 by Oliver Williamson, who
who was co-laureate in 2009, Nobel Economics Prize.
And these references include articles, presidential addresses, book reviews, abstracts, comments
and replies authored by or in reference to Austrian economists.
The range of Austrian concepts is broad and includes the business cycle, capital theory,
economic history, government interventionism, information and knowledge, marginalism, Marxism,
Methodological Individualism, Socialism and the Soviet Union, Monetary Policy and the Price System, including the Danger of Government Controls.
So here's the point, I'm oftentimes asked by members of the press, why is any of this, this is not really relevant, is it?
The Austrian School of Economics, they're from Austria, okay, right?
Well no, they are in fact, many of them are from Austria, but here's the point.
They're cited in the flagship economics journal in the United States every year from the first year the journal was published, 1911.
That might be a little, that might speak a little bit to the credibility of this school, and you should pay attention to it, is my argument.
So, I'm going to give you the first reference. The first reference to the Austrian school is Mitchell, Wesley Mitchell, incidentally, in 1916.
and he notes that Bimbawik, Menger, Wieser and Schumpeter are all affiliated with the school and he says quote among recent tendencies in economic theory none seems to me more promising than the tendency to make the use of money the central feature of economic analysis so the Austrian school is identified early on with monetary policy Ludwig von Mises' leading works including Human Action have
have been reviewed in the AER and since we're dealing this week with the 100th anniversary
of one of his books at this conference, I might mention that the first reference to
von Mises occurred in 1913, that was Lutz, and Lutz wrote, he wasn't a big fan of Mises,
but he wrote that Mises' book apparently represents an effort to develop a theory of
money which will be in accord with the utility theory of value in its most extreme subjective
The Austrian School is identified with monetary policy. In the 30s, Mises was cited on numerous
occasions and one author, Loeffler, noted that the Austrian accepts Wichsel's distinction
between the natural rate of interest and the money rate of interest, but disagrees with
with the idea the rate always tends towards equilibrium through banking operations.
And then Mises' criticism of socialism is noted in 1923, in fact, and this is how Van
Sickle describes it in the pages of the AAR, it's a quote, a complete rejection of all
forms of collectivism and all compromise with the forces which in the opinion of the author
threaten the foundation of existing society. Mises rejects socialism on two grounds. First,
because it affords no possibility of rational price fixation. Second, because there is no
possibility of an appropriate organization of production. Just as an aside, at the time
in the 1920s, there was very little understanding in the West of what was actually occurring
in the Soviet Union.
This becomes clear as you read the AER and it really puts von Mises's insight that
socialism wouldn't work in a class of its own because you just don't find these kinds
of articles or arguments even in the AER.
What you find actually into the thirties, through the twenties and thirties, are a lot
and a lot of conflicting and just confusing accounts about what is actually occurring in the Soviet Union.
You don't find a lot of the type of analysis that you would find in von Mises.
Now, Dr. Holzman's book refers to book reviews by Mises. I mentioned that his books had been reviewed.
The book reviews that occurred in the 40s led him to end his involvement with the AER.
What happened was a critic wrote about one of his reviews and he was not given the chance to respond to that review.
And so he ended his association with the AER.
However, the AER still continued to publish references to Mises.
One of them was a gentleman by the name of Schuller who trashed, I'll just say that without reading what he actually had to say, but he trashed human action.
And this led to Murray Rothbard actually, who at that point was 25, 26 years old, he was in his mid-20s, writing in and defending Mises against Schuller.
And what Murray did, and I consider myself privileged to have known Murray from 1980 to the mid-90s when he passed away,
just reading this defense of Mises brought back a lot of memories, personal memories that I had,
but it was a 12-point defense of Mises against Shuler's criticism.
Shuler then attacked Murray, and then of course Murray, as he oftentimes did, had so many compelling arguments that he cited back against Shuler.
But if you're interested in Murray's treatment in the AER, that's the exchange to focus on.
That occurred in 1950 and 1951.
And then in 1963, Schaeffer, writing in the AER, noted that Murray's book on the Panic of 1819 represents the only published book-length economic treatise
on the remedies that were proposed, debated and enacted in attempts to cope with the crisis of 1819.
That's also true in the Federal Reserve publications. You'll find if you read the
Federal Reserve member bank reviews, Murray Rothbard is accepted in those Fed reviews as
the authority on the Panic of 1819. There is no other authority. Now real quick on Hayek,
when the AER celebrated its 100th anniversary here recently, a group of blue chip
I guess blue-chip economists including some Nobel laureates went back and with their staffs they
reviewed 100 years of the AER and they focused in on the top 20 articles in the AER's first century.
One of them was Hayek 1945. This is his article on the knowledge problem and they note that Hayek
argues that authorities lack the knowledge to plan an economy. Quote, the peculiar nature of the
The problem of a rational economic order is determined precisely by the fact that the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.
This article has been cited dozens of times in the AER by everybody from professors to
Nobel laureates. This article by Hayek is commonly cited and is an example of his work
being taken seriously. I'd like to conclude with what I'm arguing is a bizarre synthesis
that has emerged in the AER in recent decades. And these are articles that rely on econometrics,
that is mathematical modeling, that use, believe it or not, references to Austrian economics.
This was a new one even for me. I thought growing up in Detroit I'd seen everything,
but this was new, that they're actually taking Austrian School economists and citing
them in these elaborate econometric articles that are published in the AER.
So just like to point out that Austrian School economists have criticized econometrics. Mises
was unrelenting in his criticism of mathematical economics. Papandreau in 1963 in the AER observed
that Mises singled out macroeconomics, mathematical economics and econometrics, quote, as the
outstanding forms of degradation in economic thought. Mises termed econometrics a childish
Play, which at best represent an attempt to deal with history in a quantitative way. Murray
Rothbard, Mises's leading student, rejected the positivism of econometrics. So you actually
get in the AER, believe it or not, earlier in the AER's history, economists saying this
is what the Austrians say about econometrics. It's silly. But now, it starts in the mid-70s,
In the 1970s, those of you who never liked disco could relate to this, bad things occurred
in the 70s, but this is when this trend started in the 1970s of citing Austrians in these
econometric articles.
And so here's just a couple of examples of this.
Hurley and McDonough in 1995 consider the Hayek hypothesis stated by Vernon Smith in
in the AER as it relates to the, quote, favorite long shot bias in paramutual betting, which
is that favorites win more often than the betting odds indicate and long shots win less
often than the betting odds indicate.
Hubbard in 2003 cites Hayek in developing a model that examines capacity utilization gains
from On-Board Computers in the Trucking Industry, Duffy and Manso in 2007 cite Hayek's paper
from 1945 that I mentioned, and they create, quote, a simple model of percolation of information
through a large market. They write, quote, our model allows a relatively explicit solution
for the cross-sectional distribution of posterior beliefs at each time t in italics. So these
These models, as they progress, become more complicated and complex and there's less
clarity of view as to what the Austrians are actually saying.
So I'll conclude real briefly that this deviation, a bizarre synthesis, is most apparent
in these econometric articles that cite Hayek and Mises who, like Murray, noted the limitations
of mathematical economics.
Hayek's 1945 article notes economists' growing preoccupation with statistical aggregates,
a propensity he later observed in the AER to, quote, imitate as closely as possible the
procedures of the brilliantly successful physical sciences lead to nothing, really.
Mises in Human Action notes there are economists who hold, quote, the only appropriate method
of Dealing with Economic Problems is the mathematical method. These economists derided the logical
economist as literary economist. I love how he uses sarcasm in answering his critics.
He's very good at that. Mises rejected econometrics because it starts from, quote, false assumptions
and leads to fallacious inferences. And then finally, Murray Rothbard in the AER observes
mathematical equations are appropriate and useful when there are constant quantitative
Relations Among Unmotivated Variables," that's Man Economy and State from 1962.
They are singularly inappropriate in economics.
And then Murray concludes, training in math is, quote, no more necessary to the realization
of its uselessness for an inapplicability to the sciences of human action than for example
training in agricultural techniques is essential to knowing they are not applicable on board
an ocean liner.
So Austrian economics in the AAR second century, which we've now just begun, should be presented
free of the econometric straitjacket that only serves to obscure the school's insights
and should be presented with the clarity that it was for most of the journal's history.
Thank you very much.