"Financial Cycles,
Business Activity, and
Asset Valuation"
To start the webcast
click on:
Financial Cycles
Business Activity, and
Asset Valuation"
To start the webcast
click on:
Financial Cycles
Do Current Account
Deficits Matter?
click on:
Current Account
Deficits
More On-line Video
Presentations:
Currency Arrangements
in Europe
Safeguarding the
Independence of the
European Central Bank
Deficits Matter?
click on:
Current Account
Deficits
More On-line Video
Presentations:
Currency Arrangements
in Europe
Safeguarding the
Independence of the
European Central Bank
The Continental Economics Institute - CEI
Business and Economic Knowledge for the 21st Century
Business and Economic Knowledge for the 21st Century
 | |  | |  | |  | |  |
Video Presentation
"Inflation and Deflation
in Capital-Based
Macroeconomics"
by Antony Mueller
To start the webcast
click on:
Capital-Based
Macroeconomics
"Inflation and Deflation
in Capital-Based
Macroeconomics"
by Antony Mueller
To start the webcast
click on:
Capital-Based
Macroeconomics
New! New! New!
- Financial Risk Management -
This new course is based on unique insights gained from
Austrian Economics. The online seminar is scheduled for
the second semester of 2008 - Contact
-----
Audio and Video Lectures in Portuguese - Aulas em Português
-----
Fundamentals of Economic Analysis:
"Introduction to the Causal-Realistic Approach to
Economics"
A Video Lecture by Joseph T. Salerno
----
Just published by the Mises Institute: The magnificent intellectual
biography of Ludwig von Mises by Jörg Guido Hülsmann:
"Mises. The Last Knight of Liberalism".
-----
The Rey Juan Carlos University in Madrid, Spain, offers a program
in Austrian Economics under the direction of Jesus Huerta de Soto
with a Masters and PhD degrees. Link to Website.
For more information e-mail to: master.oficial@urjc.es
-----
CURRENT WORKING PAPERS
"Do Current Account Deficits Matter?" Mises Institute
Working Paper
"Implementing a Regional Gold Standard. Lessons
from the European Monetary Integration"
CEI Working Paper 2007.2
"Monetary Policy and the Business Cycle
in the Perspective of Capital-based Macroeconomics"
CEI Working Paper 2007.1
ON-LINE SEMINARS 2008/09
Business Start-up -- Capital-Based Macroeconomics --
Money, Markets, and the Business Cycle --
Foreign Exchange Market Operations --
Investment Opportunities and Political Risk in
Latin America
LIFE & CAREER TOOLS
Be authentic rather than pretend perfection
The secret of success
How to live a good life
How to be happy
Manual of Economic Wisdom
How to have a perfect memory
How to boost your IQ
CASH & CURRENCIES
August 2007: A Financial Market Fairy Tale Story
Current comments and backgrounders on money, the
financial markets and central banking:
continentaleconomics.com/blog
***
READINGS and RE-READINGS
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 "International 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 money'."
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 Austrian 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.
-----
Schumpeter's "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
means?
------
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".
****
- Financial Risk Management -
This new course is based on unique insights gained from
Austrian Economics. The online seminar is scheduled for
the second semester of 2008 - Contact
-----
Audio and Video Lectures in Portuguese - Aulas em Português
-----
Fundamentals of Economic Analysis:
"Introduction to the Causal-Realistic Approach to
Economics"
A Video Lecture by Joseph T. Salerno
----
Just published by the Mises Institute: The magnificent intellectual
biography of Ludwig von Mises by Jörg Guido Hülsmann:
"Mises. The Last Knight of Liberalism".
-----
The Rey Juan Carlos University in Madrid, Spain, offers a program
in Austrian Economics under the direction of Jesus Huerta de Soto
with a Masters and PhD degrees. Link to Website.
For more information e-mail to: master.oficial@urjc.es
-----
CURRENT WORKING PAPERS
"Do Current Account Deficits Matter?" Mises Institute
Working Paper
"Implementing a Regional Gold Standard. Lessons
from the European Monetary Integration"
CEI Working Paper 2007.2
"Monetary Policy and the Business Cycle
in the Perspective of Capital-based Macroeconomics"
CEI Working Paper 2007.1
ON-LINE SEMINARS 2008/09
Business Start-up -- Capital-Based Macroeconomics --
Money, Markets, and the Business Cycle --
Foreign Exchange Market Operations --
Investment Opportunities and Political Risk in
Latin America
LIFE & CAREER TOOLS
Be authentic rather than pretend perfection
The secret of success
How to live a good life
How to be happy
Manual of Economic Wisdom
How to have a perfect memory
How to boost your IQ
CASH & CURRENCIES
August 2007: A Financial Market Fairy Tale Story
Current comments and backgrounders on money, the
financial markets and central banking:
continentaleconomics.com/blog
***
READINGS and RE-READINGS
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 "International 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 money'."
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."
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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.
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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 Austrian 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.
-----
Schumpeter's "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
means?
------
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".
****
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