Choice in Currency
The Ultimate Foundation of Economic Science
I. Carl Menger and the Austrian School of Economics
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.
II. The Conflict with the German Historical School
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.
III. The Place of the Austrian School of Economics in the Evolution of Economics
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.
The Historical Setting of the Austrian School of Economics
“Competition policy” is one of those great Orwellian terms that means the opposite of what it seems to mean. In most countries, antitrust policy is designed not to enhance competition, but to stifle it, by protecting privileged incumbents from upstarts or from their established rivals.
Just as certain conservatives have attempted to latch on to Ron Paul’s anti-Fed movement (purely for populist political gain), some also recently discovered that the non-bank known as the Export-Import Bank represents (gasp) a form of corporate welfare!
III. Utility Theory
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.
IV. Welfare Economics: A Critique
It is now generally accepted among economists, at least pro forma, that economics per se cannot establish ethical judgments. It is not sufficiently recognized that to accept this need not imply acceptance of the Max Weber position that ethics can never be scientifically or rationally established. Whether we accept the Max Weber position, or we adhere to the older view of Plato and Aristotle that a rational ethics is possible, it should be clear that economics by itself cannot establish an ethical position.
