1. The chief root of monetary troubles is the scientific authority the Keynesians gave the superstition that increasing the quantity of money can ensure prosperity and full employment.
2. The superstition was fought successfully by economists for two centuries of stable prices during the age of modern industrialism and the gold standard.
3. Before then inflation largely dominated history
4. Keynes’s (macro-economic) error was to suppose that labour demand and supply can be equated (and unemployment avoided) by managing total demand.

1. The Beginnings

What is known as the Austrian School of Economics started in 1871 when Carl Menger published a slender volume under the title Grundsätze der Volkswirtschaftslehre.

1. The German Rejection of Classical Economics

The hostility that the teachings of Classical economic theory encountered on the European continent was primarily caused by political prepossessions. Political economy as developed by several generations of English thinkers, brilliantly expounded by Hume and Adam Smith and perfected by Ricardo, was the most exquisite outcome of the philosophy of the Enlightenment. It was the gist of the liberal doctrine that aimed at the establishment of representative government and equality of all individuals under the law.

1. The “Austrian School” and Austria

When the German professors attached the epithet “Austrian” to the theories of Menger and his two earliest followers and continuators, they meant it in a pejorative sense.

Utility theory, over the last generation, has been split into two warring camps: (1) those who cling to the old concept of cardinal, measurable utility, and (2) those who have thrown over the cardinal concept, but have dispensed with the utility concept as well and have substituted an analysis based on indifference curves.