On election day, 1978, Libertarian party candidates for congressional, state, and local offices amassed 1.25 million votes throughout the country. Richard Randolph was elected to the Alaska House of Representatives on the LP ticket, and Edward Clark piled up 377,960 votes for governor of California. After the LP presidential ticket gained 174,000 votes in 32 states in 1976, the sober Congressional Quarterly was moved to classify the fledgling Libertarian party as the third major political party in America.

Thus, America, above all countries, was born in an explicitly libertarian revolution, a revolution against empire; against taxation, trade monopoly, and regulation; and against militarism and executive power. The revolution resulted in governments unprecedented in restrictions placed on their power.

We can now see that the rapid growth of the libertarian movement and the Libertarian party in the 1970s is firmly rooted in what Bernard Bailyn called this powerful “permanent legacy” of the American Revolution. But if this legacy is so vital to the American tradition, what went wrong? Why the need now for a new libertarian movement to arise to reclaim the American dream?

But after achieving impressive partial victories against statism, the classical liberals began to lose their radicalism, their dogged insistence on carrying the battle against conservative statism to the point of final victory. Instead of using partial victories as a stepping-stone for evermore pressure, the classical liberals began to lose their fervor for change and for purity of principle.

The Austrian School of economics arose in opposition to the German Historical School; and Carl Menger developed his methodological views in combat with the rival group. I thus wish first to discuss the philosophical doctrines of the Historical School, since this will deepen our comprehension of the contrasting Austrian position.

The German Historical School included among others, Adolf Wagner, Karl Knies, and Gustav Schmoller. Although most people think of the group as confined to the nineteenth century, it lasted substantially longer. Werner Sombart, the most important member of the younger Historical School, died in 1939. Sombart, incidentally, was an acquaintance of Mises and the teacher of Ludwig Lachmann. Another economist, Othmar Spann, who was quite sympathetic to the Historical School, lived until 1951.

The Austrian School stood diametrically opposed to the German Historical School. 7  In view of the vast divergence of the two schools in economics, one might expect substantial differences in philosophical background. This is indeed what one does find. The leading philosopher who influenced Carl Menger was Franz Brentano.

Menger applied the concept of intentionality to economic value. He did not take value to be a feeling of pleasure or pain that comes into one’s mind automatically when one perceives an object. Quite the contrary, a preference in Menger’s system is a judgment: I like X (or I dislike X). The judgment in question is an act of preference: as the intentionality of thought grasps an object, so does a judgment of preference “move” toward an end.