Readings and Re-Readings

If there is a book that is a an eye-opener which forever will change how you see the world, it is "The State. It's History and Development
Viewed Sociologically" by Franz Oppenheimer. I read it when I was quite young, in my early 20s. Since then I knew what was going on,
and the older I get I am learning every day that this is how it is.
A timely re-reading is the analysis of the Great Depression in  
"Banking and the Business Cycle"  by T .F. McManus and R. W.
Nelson, published in 1937.
From the Foreword: "It is a melancholy fact that each generation must relearn the fundamental principles of
money in the bitter school of experience. The inflationists, it would seem, we always have with us. It is nevertheless a duty of
economists to devote attention to periodic reiteration of the ancient truths of monetary science; it is necessary to make as familiar as
possible the workings of the financial machinery if further errors are to be avoided in the future. It is to the mismanagement of the
monetary mechanism that most of our recent troubles are chiefly ascribable."
One of the best textbooks on banking and money is
"The Mystery of Banking" by Murray N. Rothbard. Its only disadvantage is that it
was published more than twenty years ago. There had been no better book around to provide as deep an insight into money and
banking until Jesús Huerta de Soto's
"Money, Bank Credit, and Economic Cycles" appeared first in Spanish in 1998 and its
English version in 2006. The different approaches complement each other in an ideal way.
"America's Great Depression" by Murray N. Rothbard gives an account of the causes of the Great Depression that is quite different
from the story usually told in the textbooks of history and economics. Unlike Milton Friedman and others, Rothbard finds the origin of the
Great Depression in the excessive credit expansion of the 1920s. Rich in historical details, the book also provides an outline of the
Austrian theory of the business cycle.
Ludwig von Mises  tells the history of the Austrian School how it emerged in the late 19th century. Mises wrote his account at a time
when the Austrian school had almost vanished from the face of the earth and played almost no role in the public discourse of the 1950s
and 60s. Since the 1970s Austrian Economics has made a formidable come-back and the intellectual movement is getting stronger
each year finding more and more resonance in academia, media and the public. Reading
"The Historical Setting of the Austrian
School of Economics" is about more than just history. Quote: "Governments, political parties, pressure groups, and the bureaucrats
of the educational hierarchy think they can avoid the inevitable consequences of unsuitable measures by boycotting and silencing the
independent economists. But truth persists and works, even if nobody is left to utter it."
Human Action by Ludwig von Mises is the greatest work on economics that was written in the 20th century. For the 21st century, this
treatise will be the starting point for the renaissance of economics. Mises is easy to read at the surface and inspiring for the layman, yet
actually unending in its depth for the serious academic scholar. For those who know German, the original German version that Mises
wrote during his time in Geneva is a real gem:
"Nationalökonomie"  by Ludwig von Mises, first published in Geneva in 1940. When it
is said that "books have their fates", here is one of these books where this saying fully applies to. See the fascinating biography of
Mises by Jörg Guido Hülsmann:  
"Mises. The Last Knight of Liberalism". The Ludwig von Mises Institute: Auburn 2007

Friedrich von Hayek's
"Prices and Production" is the first systematic exposition of the Austrian Business Cycle Theory. It has all the
strengths and weaknesses of a pioneering book. For a full understanding of "Prices and Production" it is absolutely essential to read
also Hayek's
"Monetary Theory and the Trade Cycle". In our time these classics should be read together with the modern
exposition of this theory as it is given by Roger Garrison's
"The Austrian School: Capital-Based Macroeconomics".
A recent extension as an endeavor to make the Hayekian insights more accessible can be found in the paper "Monetary Policy and
the Business Cycle in the Perspective of Capital-based Macroeconomics"
 by Antony Mueller.
"A Critique of Interventionism" by Ludwig von Mises is the best book about economic policy ever written. It is concise, always to the
point and it reveals one myth after the other that up to our present days is brought forward to justify state interventionism.
At a time, when protectionism is about to become fashionable again, it is worthwhile to read Wilhelm Röpke's
Economic Disintegration" again. The disintegration of the international division of labor cannot be properly understood without taking
into account the preceding collapse of the international monetary order.  
Quote: "(The) World economy was, by dint of the prevailing gold standard, virtually a payment community. On the basis of parities fixed
within the narrow margin of the gold points and because of the well-known arrangements preserving those parities, the coexistence of
different currency systems was neutralized in its effect on trading operations, so that changes in the exchange value of money did not
enter as a new element into trade transactions; nor, since there was confidence that those changes would not occur under normal
circumstances and that every responsible country would play the game of the gold standard, did even the expectation of possible
changes in the exchange value of money, at least not in those countries which formed the bulk of world economy. In monetary security
world economy was, for all practical purposes, equal to the national economy; the gold standard was a working fiction of a real 'world
This book, published in 1942, exposes economic nationalism and national economic stabilization policies as the main roots of the
collapse of the international monetary order and consequently of international economic disintegration.
Wilhelm Röpke's
"Crises and Cycles" is an ever-lasting classic although largely unknown to the general public including the
economics profession. "Crises and Cycles" is an "insider book". Once you've read it you can only smile about or ridicule what is told by
the dominating media and you may  think for yourself that these  guys and girls who write the headlines and the textbooks are light years
away from truth. Quote from the preface: "There is another danger of which both author and reader must beware: that of viewing the
matter in the wrong perspective; that is to say, attaching too much importance to the events of the moment and consequently failing to
see things in their historical perspective." In our anti-historical age, this is a valid warning. For decades now we have trained
economists without any historical perspective, without any foundation in morals and without any concern for the principles of human
existence, and for that we are paying a high price.
Our common political fate is written in two books: the money supply and the government budget. In order to understand the pivotal
events of history, one is well advised to go to the roots: money and taxes.
"Money and Man. A Survey of Monetary Experience"
by Elgin Groseclose is one of the rare books that brings monetary history to life in this sense and allows us to understand better what is
going on around us in our present time. This book was first published back in 1934 under the ominous but precinct  title "The Human
Conflict". Concerning these issues for the United States, the best account is to be found in Benjamin Anderson's
"Economics And the
Public Welfare. A Financial and Economic History of the United States, 1914-1946"
Most people read about history as political and military history and thus learn to understand history as a series of battles, monarchs or
presidents. John T. Flynn in his
"Men of Wealth"  (first published in 1941)takes a different avenue. He portraits twelve carefully
selected "men of wealth" according to the criterion as how they best represent the era in which they accumulated their wealth. The
series begins in the 16th century with Jacob Fugger of Germany and ends with J. P. Morgan. Along the way one learns more about
relevant history than in most of the typical history books. Flynn is an excellent writer and in his portraits bring such figures to life as John
Law (a must read), Vanderbilt, the Mitsui dynasty,  and Rockefeller, among others. Quote: "I have been guided not merely in my
selections but in the method of treatment by may conceptions of the means by which wealth is created and the mechanisms by which it
is drawn off into the hand of rich men" (and women, because with Hetty Green also a woman is presented, interestingly enough as an
example of the miser).     
"The Economics of Illusion"  by L. Albert Hahn is a profound critique of Keynes and his school. A pre-Keynesian himself, Hahn could
observe first-hand in the 1920s what this theory, when put into practice, will bring about: hyperinflation with all its disastrous economic,
social and political consequences.  Being both, a banker and a university teacher, he was also well aware of the difference between
beneficial deflation -- a long-term moderate decline of the overall price level due to productivity gains and the bad deflation when the
economy is already pushed into recession and depression. This book is enlightening and a joy to read. Just have a look at this quote
as a teaser: "Generally speaking, I cannot help thinking that what is today praised as the 'Keynesian Revolution' should, more
accurately, be called the 'Keynesian General Confusion'. Not every paradox is correct just because it is a paradox. And what may be an
interesting and intriguing mental exercise for specialists who are certain never to lose the firm ground of common sense and
fundamental economic insight, becomes irritating and misleading heresy when swallowed whole by minor minds and fanatics. In fact, I
sometimes think Keynes wrote his book with his tongue in his cheek. He was doubtless often surprised at the seriousness with which
his colleagues took his theses."  
Hahn also points out that a major problem in economic policy making is the short memory of the public and of the acting authorities
including many an university economist.
What is the use of reading a book that deals with the 1920s and 1930s? It simply is that such a lecture broadens our understanding of
what is going on in the world beyond that of our recent lifetime experience. Anyone with a serious intellectual curiosity must be deeply
thankful to the Mises Institute to bring on-line such treasures.
Hans-Hermann Hoppe's 23 pages paper  
"The Misesian Case against Keynes"  provides a clear-cut rejection of some of the most
popular notions of Keynesianism. Quote: "It is my goal to reconstruct some basic truths regarding the process of economic
development and the role played in it by employment, money, and interest. These truths neither originated with the Austrian school of
economics nor are an integral part of only this tradition of economic thinking. In fact, most of them were part and parcel of what is now
called classical economics, and it was the recognition of their validity that uniquely distinguished the economist from the crank."
The year 2007 marks the 75th anniversary of the publication of Lionel Robbins's classical text on the methodology of economics:
Nature and Significance of Economic Science. This book provides probably the best exposition of the use of methodological
individualism in economics. It was Robbins who brought Friedrich von Hayek to the London School of Economics, and in the early
1930s almost everyone of the economists at the LSE adhered to the Austrian economics paradigm which was seen as the best
expression of modern economics. Economic analysis in terms of macroeconomic averages and aggregates that was popularized by
Keynes and his followers almost completely wiped out methodological individualism, but this approach has made a huge comeback
during the past decades not only with the renaissance of Austrian economics but also with pubic choice theory and in many other areas
of economic investigation.
Probably the best example to demonstrate that economics is primarily a theoretical science and not an empirical one is still to be found
in Frédéric Bastiat's essay about the
broken window. In fact, one would not need economics at all if the observable facts would tell the
whole story right away. Economics can only claim to be scientific in a serious way if it finds out, by theoretical reasoning, what is not
seen by simple observation and what are not the immediate but the long-term consequences. Want to read the original and learn about
the difference between a good and a mediocre economist? Go to
"Ce qu'on voit et ce qu'un ne voit pas".
The Mises Institute has brought a book on-line that is a real treasure.
"The Menace of the Herd"  by Erik Ritter von Kuehnelt-Leddihn
who published it in 1943 under the pseudonym of Francis Stuart Campbell. It is a grandiose book and anyone who wants to gain a
deeper understanding of what happened in the 20th century would do well to study it thoroughly. Highly erudite, the author nevertheless
has a brilliant style of writing and hardly any of his insights should be ignored, particularly in our times, because the cultural,sociological
and ideological forces that brought about the past catastrophes are still virulent. Not everybody will like the main thesis of this book,
nevertheless, serious scholars should at least take up the intellectual challenge and think about it.
Peter G. Klein has written a fine
foreword to the new edition of Carl Menger's "Principles of Economics".
Carl Menger is the founding father of the Austrian school of economics with its distinctive kind of analysis that is "causal-realistic",
deductive, teleological and in a fundamental sense humanistic.
It is not so that history moves in a linear form fluctuating around a positively inclined line called progress. It is rather so that all the
potential for human follies and all the potential for human advancement is always present at the same time. This way, no ideology is
dead for good and may reemerge anytime albeit under a different label. All too often bad ideologies come to power not because of their
inner strength but because of the timidness of the representatives of the sound model. The consequence is
Planned Chaos as
analyzed by Ludwig von Mises.
Matthew Hisrich, Senior Policy Fellow of The Flint Hills Center for Public Policy, has published a nice short paper about
Economics as a minor literature. In the text the author explains the modernity of the Austrian approach and highlights some of the
basic epistemological principles of Austrian Economics with the help of the language of post-modernism. In this view, Austrian
Economics is a "minor language" and a different language that thrives, however, within the greater stream of neoclassical economics.
As such Austrian Economics represents an essential point of reference to challenge the claim of absoluteness and the pretense of
certainty that comes with the methodology (mathematical language) of the current mainstream neoclassical analysis.
Mises on Money  by Gary North is a straightforward introduction to the monetary theory of Ludwig von Mises and represents a primer
on the macroeconomics of the Austrian School.
The Theory of Money and Credit by Ludwig von Mises is the foundational text of the Austrian monetary theory.
Economics in One Lesson is a must reading for any economist, and particularly it is an essential reading for the student who really
wants to understand economics and the economy.
Fiat Money Inflation in France by Andrew Dickson White is not only of historical interest. This essay of 77 pages gives a concise
account about the monetary conditions in France before the revolution of 1789. White lucidly demonstrates how monetary expansion
leads to asset inflation first and consumer price inflation second, how by this process the capital structure of an economy gets distorted,
and what impact the asset shuffling exerts on the morals of the common man. From this essay we can conclude the following
sequence: inflationary credit expansion - asset inflation - economic distortions - moral confusion - consumer price inflation - economic
crisis - social crisis - political crisis - revolution.and/or dictatorship.
Epistemology may seem a remote affair, but it lies almost always at the heart of any matter: the question what and how can we know
about a specific issue. Many nonsense has been accumulated in the past, many false steps have been taken because people do not
know how to know. For economics
this book by Ludwig von Mises gives us a key to learn how to do economics. It is an essential and a
necessary reading for anyone who is seriously interested in economics and the related fields.
"Economic Science and the Austrian Method"  by Hans-Herman Hoppe presents a concise, modern introduction to Austrian
methodology and brilliantly refutes the positions of competing schools.
The Use of Knowledge in Society is a classical text by Friedrich von Hayek. Quote: "The peculiar character of 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. The economic problem of society is thus not merely a problem of how to allocate "given" resources—
if "given" is taken to mean given to a single mind which deliberately solves the problem set by these "data." It is rather a problem of how
to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals
know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality. "
Comment: Hayek's article appeared in the American Economic Review in 1945, and had been largely neglected till the 1970s. It is now,
however, with the spread of the Internet, that Hayek's insight has become obvious.                                
The socialist calculation debate is probably the best access to gain an understanding of what Austrian economics is about, what it has
to say, and where its strengths clearly emerge.
This article by Murray Rothbard provides a primer on the subject.
The full text of Ludwig Lachmann's
"Capital and its Structure" is now online. The book was first published in 1956, at a time when
economics had fallen under the sway of Keynesianism, and consequently  Lachmann's theory of capital was almost completely
ignored. Reading Lachmann today reveals how modern his approach is: the role of expectations, subjectivity, and entrepreneurship; the
heterogeneity of capital, error, adaptation and process analysis.
Friedrich von Hayek's
"The Mythology of Capital" is an article of 30 pages that addresses his controversy with Frank Knight. It
appeared in the same year (1936) that marked the publications of Keynes'
General Theory. Keynesian theory contributed strongly to the
theoretic elimination of the capital structure and the entrepreneur, and has established a tradition that lives on in monetarism leaving
huge blind spots in macroeconomics, which render a large part of current macroeconomics analyses false and misleading.
 "Economic Doctrine and Method"   is the right place to start to learn about how economics evolved and what kind of
disputes have arisen concerning its appropriate methodology.  Although first published in 1912, it is all there to improve our
understanding of modern controversies. After all, isn't econometrics the continuation of the old historical school with other
Schumpeter's fascinating account about the origins of imperialism that first appeared in the German language in 1919 is now online in
the English language. Schumpeter explains that with very few exceptions, military expansions have no rational reason and cannot be
explained by utilitarian arguments. In his view, imperialist adventures have more to do with atavism and are related to classes and the
leading families in the ruling classes:
Imperialism and Social Classes.                                                               
"The Conquest of the United States by Spain" by William Graham Sumner -  
This essay from the year 1899 is a real eye-opener about when the United States hit the road towards imperialism and is prophetic
about the consequences. An essential reading in the present time.                   
The Free Man's Library by Henry Hazlitt offers an extensive critical bibliography of classical books that treat individualism
Gold and Economic Freedom is a beautiful essay that Alan Greenspan wrote in 1967. More than two decades later, when Alan
Greenspan was already the Chairman of the Board of the Federal Reserve System, he was asked whether he still would believe in what
he wrote back then. Greenspan's uncompromising answer was "yes".    
I, Pencil by Leonard Read  ”has become", as Milton Friedman rightly asserts, "a classic, and deservedly so. I know of no other piece of
literature that so succinctly, persuasively, and effectively illustrates the meaning of both Adam Smith’s invisible hand—the possibility of
cooperation without coercion—and Friedrich Hayek’s emphasis on the importance of dispersed knowledge and the role of the price
system in communicating information that “will make the individuals do the desirable things without anyone having to tell them what to
Leftism from de Sade and Marx to Hitler and Marcuse by Erik von Kuehnelt-Leddihn was published in 1974 at the height of the leftist
student movement. Kuehnelt-Leddihn's main thesis is that the diverse groups within the leftist movement are competitors, not enemies
who are united by a common leftist mind.

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