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Introduction to Austrian Economics
Podcast surveying the basic concepts of Austrian Economics.
Where Are the Best Schools in Austrian Economics?
Where to Go for Libertarian-Friendly Higher Education
“We must raise and train an army of fighters for freedom.”
—F. A. Hayek
Frequently students or parents approach me at investment or economics conferences with the question, “Can you recommend an undergraduate or graduate program in free-market economics?” With the explosive interest in a degree in economics, it’s imperative that students get a topnotch education.* In my experience, if students aren’t exposed early to the principles of Adam Smith and Ludwig von Mises, it is often difficult for them to shed the philosophies of John Maynard Keynes, Karl Marx, and other interventionists later on.
Here in the United States most colleges and universities have a goodly number of “neoclassical” economists with a free-market bent. (There are a number of “free market” colleges and universities in Latin America, Europe, and Asia, a topic I shall pursue in a future column.) The American schools include the University of Virginia; the University of California, Los Angeles (UCLA); Florida State University; and the University of Chicago. However, anyone pursuing a degree in economics from these institutions will need to be well versed in advanced mathematics in order to understand the professional language. As New York University Professor Mario Rizzo wrote me, “Contemporary economics has become a branch of applied mathematics.”
Graduate Schools in Austrian Economics
Fortunately, there’s a growing number of schools that specialize in Austrian economics. The best-known program is located at New York University, ranked as one of the top 20 economics departments in the country. The Austrian Economics Program, under the tutelage of Israel Kirzner, David Harper, and Rizzo, has been functioning at NYU since the days of Mises. The Austrian course work attracts students from around the world.
NYU also offers a weekly Austrian Economics Colloquium and an annual summer course held at FEE. (Go to www.econ.nyu.edu/dept/austrian.) However, it should be noted that the NYU program is small, and most of the teachers there are non-Austrian.
George Mason University (in northern Virginia) is also attracting undergraduate and graduate students who want to specialize in Austrian economics, although Professor Peter Boettke, who also edits The Review of Austrian Economics, says that “what makes GMU particularly attractive are its affiliated fields of Public Choice, history of thought, and constitutional economics.” Boettke and Karen Vaughn teach the Austrian theory of the market process; Richard Wagner offers a course in institutional economics; and Walter Williams serves as chairman of the department. (Go to www.gmu.edu/departments/economics.) The Institute for Humane Studies is also located at GMU (www.theihs.org).
Another graduate Austrian program that is gaining prominence is at Walsh College of Accountancy and Business Administration in Troy, Michigan (near Detroit). Walsh College (www.walshcol.edu) specializes in business degrees—in marketing, management, finance, and economics. Under the direction of Harry Veryser, the school now offers a two-year bachelor’s degree and a master’s degree in economics. The entire faculty consists of free-market economists, with a special emphasis on Austrian economics. Students are assigned books and readings by Mises, Hayek, Henry Hazlitt, Wilhelm Röpke, Paul Heyne, and me, among others. Walsh’s program is impressive.
The Expanding Austrian Universe
With the Ludwig von Mises Institute (www.mises.org) next door, Auburn University (www.auburn.edu/business/economics) has attracted a large number of students over the years. The most prominent Austrian economist on campus is Roger Garrison, author of the new advanced macro text Time and Money. Garrison teaches the main course in macroeconomics. (Leland Yeager, former Ludwig von Mises Professor of Economics at Auburn, is now retired.) Unfortunately, Auburn recently discontinued its Ph.D. program.
There are a goodly number of colleges offering solid undergraduate courses. Two mainstays are Hillsdale College in Michigan and Grove City College, near Pittsburgh. Grove City College (www.gcc.edu) no longer has Hans Sennholz as chairman of the department, but Hans indicates that the school is still free-market oriented, and John Moore, the president, is an economist. Hillsdale College (www.hillsdale.edu/dept/economics) has several free-market professors, the most well-known being Richard Ebeling, who runs the annual Ludwig von Mises lecture series. Hillsdale also houses the Mises library.
I should also mention Northwood University, an associate- or full-degree business school with campuses in Midland, Michigan; West Palm Beach, Florida; and Cedar Hill, Texas. Founded by Gary Stauffer and Arthur Turner in 1958, Northwood stresses free-market and Austrian economics. (Go to www.northwood.edu.)
In California, there are two universities with an Austrian bent. Santa Clara University, under the guidance of Daniel Klein, offers the Civil Society Institute (www.scu.edu/csi), which involves a weekly colloquium, lectures series, and “coffeehouse” for libertarian ideas. Other prominent members of the faculty are Laurence Iannaccone, Henry Demmert, Fred Foldvary, and David Friedman. Charles Baird, labor economist and Ideas on Liberty columnist, is the co-chairman of the department at California State University at Hayward (www.sbe.csuhayward.edu) and director of the Smith Center for Private Enterprise Studies. According to Baird, half the tenure-track economists there are “unabashedly free-market.”
Lawrence H. White, a specialist in free banking, was recently appointed the first F. A. Hayek Professor of Economic History at University of Missouri-St. Louis (www.umsl.edu/divisions/artscience/economics). According to his colleague David C. Rose, “a number of economists are either outright Austrian or are very sympathetic to the Austrian school and free market ideals.”
If you want year-round sunshine, you can always come to central Florida and take one of my courses in investments, history of thought, or Austrian economics at Rollins College in Winter Park, Florida (near Orlando). (See www.rollins.edu/.).
Austriae est imperare orbi universo!
* See Jon E. Hilsenrath, “In Hot Pursuit of Economics Ph.D.s—Short Supply and Big Demand Mean Young Graduates Are Courted Like Royalty,” Wall Street Journal, February 20, 2001, p. B1
Comment by mgcashman on 31 July 2009:
Are there any online schools that offer undergraduate degrees in Austrian economics?
Comment by mgcashman on 31 July 2009:
Are there any undergraduate degrees, online, in Austrian economics?
Comment by mgcashman on 31 July 2009:
Are there any online degrees for undergraduates in Austrian economics?
Comment by Brandon on 11 July 2010:
I like Austrian economics, but my beef with it is that it STILL has not been empirically proven. You know, with data and statistical analysis and so forth. I’m sorry, but observation and simple logic don’t cut it for bold claims like “low Fed interest rates cause recessions and malinvestment.” WHERE’S THE PROOF???
In fact, very few empirical studies have been done on monetary policy with regards to Austrian business cycle theory, and they’re really not all that convincing. Rhetoric can’t explain everything, guys. If it could, fallacies wouldn’t spread.
Comment by Brandon on 11 July 2010:
I mean, how often do you even see data or numbers in an Austrian econ book from Hayek or Mises? not a whole hell of a lot. That kind of shit bores me to death. I LOVE data and proof in economics, not just explanation and rhetoric. How do you know your theories are true if you never test them?
Comment by robbie on 11 July 2010:
The proof austrian economics works is that Kensian economics doesn’t work.
I guess as long as we have a central bank and fractional reserve lending we will have to stick with their point of view that they are successful at their mission of low unemployment and controlled inflation. With unemployment at 9+ and real inflation much higher than 2% when you count people that use food and energy, it looks like they are very unsuccessful. Only when you step away from the rhetoric and look at the world you can see for certain that 0% interest rates is keeping our country on life support all while those in power get free money.
It looks like it’s time to try something different. How about those that are sceptic of Austrian economics test the ideas by no longer voting your support for central banks and deficit hawks.
Comment by Steve on 13 July 2010:
North Carolina State University offers a couple of Austrian courses taught by Prof. Craig Newmark, Roy Cortado and Steve Margolis that are really good
Comment by Jim on 30 July 2010:
@Brandon
Austrian economists dont say that low fed rates cause recessions, the opposite is true. Low Fed rates cause unfounded booms and mal investment and I can prove it. Would you invest $10,000 more carefully if you had $100,000 or $100,000,000?
Comment by Hubbs on 23 August 2010:
“I’m sorry, but observation and simple logic don’t cut it for bold claims like “low Fed interest rates cause recessions and malinvestment.” WHERE’S THE PROOF?”
That’s an incredibly ironic question for the times we’re living in.
1. The tech bubble pops.
2. Fed slashes interest rates in a move that is publicly described as an effort to drive investment into housing. Ballyhooed economists like Paul Krugman specifically state that the Fed’s best option to “fight off” the recession is to inflate a housing bubble.
3. The Fed accomplishes its goal.
4. The housing bubble pops, as bubbles are wont to do.
5. Undeterred by one of the most shockingly obvious examples of widespread malinvestment caused by credit manipulation in recorded history, people still ask “WHERE’S THE PROOF?” when it comes to the mathematical inevitability of debt-fueled growth.
Comment by Scott Seward on 27 August 2010:
@ Brandon: Where’s the proof you ask? Without writing an essay, a central argument to the Austrian Theory is that artificially manipulated interest rates create boom bust cycles and savings over debt is the only true way for organic market growth. The school has been screaming for anyone to pay attention since then FED chairman Greenspan lowered rates to near 0% in early 2000. The warning? That the economy would have an artificial boom with massive mal-investment and a horrific recession needed to correct the mal-investment due to the increase in the money supply via lower rates and easy credit. The result: Our economy had an artificial boom with massive mal-investment which is now being corrected via the recession and a contraction in debt spending. The end.
Comment by Adam on 30 August 2010:
So if Austrian economics is so awesome, how come there aren’t significant Austrian contingents at Harvard, Yale, Princeton, MIT, CalTech, Stanford, etc? It’s not like it hasn’t been around long enough.
Most of the places you listed above aren’t even Austrian, just free-market, but I think you’ll agree that the economics taught at the University of Chicago have little to do with Austrian theory. Why is the Austrian presence in academia so minuscule?
Comment by Robert H. Schell on 1 September 2010:
@Hubbs, I will fully grant you the timeline you presented in the development from the dot-com crash to the housing bubble-credit crunch. I would even extend it back to the savings and loan crisis of the 80′s or beyond. But as seemingly obvious and intuitive as those correlations are, they are NOT proof.
@ Jim, thought experiments are not proof either. If they were, we would still have an astronomy of Ptolemy and not Keplerian one.
Brandon is right, that the Austrian perspective has relied only on rhetoric that does not cut it in modern science. Give me a full panel regression showing a clear CAUSATION (not correlation) between expansionist monetary policy and crashes and the argument will have been improved one hundred-fold. Until then, Austrianism–as correct as it may be–will continue to be a fringe in an economics field that is increasingly statistical and scientific.
Comment by Dren on 9 September 2010:
Austrian economics is based on human action, it is not based on a bunch of numbers and theoretical equations. Equations are great for physics because they are bound by exact laws. Human action is not, cannot and will never be exact. Understanding how humans tend to act and react to situations forms the very basis of Austrian economics. The ideas and theories build from that. After all, humans interacting through trading form the economy. The proof is found in what takes place, not in a bunch of numbers in an equation. This is where other economic theory goes wrong. You realistically cannot model it. But it sure looks good on paper.
Comment by Anthony on 25 September 2010:
@Adam,
Mainstream economics prevails at “Harvard, Yale, Princeton, MIT, CalTech, Stanford, etc” due to its self-serving nature. These institutions aren’t producing graduates that go on to be productive in labor, they go on to reap the benefits created by those who are enriched by the artificial manipulation by the Fed and through excessive government regulation that hampers free-market competition.
Mainstream economics has become the financial-industry equivalent to the good-ole-boy system that unjustly enriches one small sector of the population at the expense of others and their hard work. It’s interest that the products of “Harvard, Yale, Princeton, MIT, CalTech, Stanford, etc” that you mentioned are on the receiving end.
It’s obvious why Austrian Economics will never be found in those schools – it would mean the death of the goose and her golden eggs.
Comment by Mike on 2 October 2010:
@all. very fair questions of the Austrian Approach and darn good replies. As I understand, the Austrian Approach builds from simple logical truths and expands on them, as mentioned above by Dren. One of these logical truths is that all valuation is subjective. So how does one measure subjectivity and apply a calculus-style math to it to collect data? And how does a Mule (Asimov Foundation Series) or Black Swan (Taleb) fit into the equation? The Austrian Approach is a much more social approach with a focus (among other things) on the individual, an emphasis on voluntary contract, and a disdain for taking aggregate data samples and comparing them to one another and inferring causation, when at best, only correlation can be inferred. Take stagflation, for example. Lowering the interest rate tends to increase employment, yes, but this is only a tendancy, and the workings going on behind the process are just monetary tricks (false signals) to fool employers into hiring and investing. the inflation is a false signal because the new money looks like real income, but since it has not had time to circulate long enough, prices have not adjusted to reflect the new qty of money, and so, no real growth has occured. Then we get the bust, only after prices have adjusted showing only the same or worse profit margines before the queer was printed.
One doesn’t need math to understand this. It’s simply not needed. What one needs to understand is inflation and money. Why an Austrian should study economics-math is to be able to unravel the mysterious voodoo put out by the mainstream approach. Not that I can do it…
Comment by Brian on 4 November 2010:
Austrian economics is not a science, It’s a philosophy. It’s the Chicago School Monetarists (Freidman, et.al.) and Austrians who brought on the current recession with their laissez faire markets. This allowed banks to take unreasonable risks and to create the atmosphere for widespread fraud. If you want to study economics, study your math and then go to a good school which exposes you to all forms. Personally I find Austrian economics is what brought on the Great Depression.
Comment by Bob on 9 November 2010:
Brian, it’s actually the heavily mathematics based economics(Keynesian) you’re so in love with that brought on the current mess.
Comment by James Madison Fan on 9 November 2010:
Brian,
I would offer that politics is the problem rather than economics.
Baby Bush, Frank, Waters, and others pushed banks to take these unreasonable risks using inflamaroty rhetoric including accusations of racism. Greenspan warned them about the bubble in 2005 and he got shut down by Shumer.
If the talking heads in Washington had been using an economic model rather than a political one this wouldn’t have happened. Everytime these politicians put votes ahead of what experts tell them, they screw things up. The Economy, Iraq, Afghanistan, Health Care, you name it. At some point it would be nice if we had someone in office that made decisions based on if they are the right ones for the Country, not how many seats his Party will pick up or lose in the next election. I am really getting sick of this “Party First” politics.
Comment by Ted on 17 November 2010:
Brian, if you think Austrian influenced economics caused the current mess then you don’t understand Austrian economics. In fact Peter Schiff warned this would happen years ago (as did Ron Paul).
In an Austrian model you would not have had Government backed agencies like Fannie Mae and Freddy Mac insuring toxic mortgages. You would not have a Federal Reserve encouraging malinvestment thru low interest rates and you certainly wouldn’t have those same Government agencies then bailing out the companies that got all that false liquidity from them in the first place.
Austrian Economics had pretty much nil to do with the financial collapse.
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Comment by LTB on 18 January 2011:
Brandon,
If you care about empirical proofs in economics you don’t understand economics and specially austrian economics.
Comment by Allan H on 30 April 2011:
You can judge economics scientifically through objective mathematical and scientific calculations after the event has taken place. The matter of mathematically and scientifically trying to predetermine peoples’ actions, on the other hand, is a vein prospect.
Comment by Blue_Aurora on 20 August 2011:
Whilst this comment is late…why isn’t Loyola University New Orleans on the list? I don’t consider myself a follower of the Austrian School of Economics, but I do know that Loyola University New Orleans does have faculty that support the Austrian perspective.
Comment by Blue_Aurora on 20 August 2011:
Why isn’t Loyola University New Orleans mentioned? I know that school does have faculty who support the Austrian School of Economics.
Comment by John on 8 December 2011:
Why isn’t Austrian econonmics prevalent you ask? How is you elementary and high school education funded? Through taxes raised and through support of the Government. What does Keynesian economics basically say? Oh with government intervention and controls you can grow and stop an economy from going into recession. It promotes bigger government in an indirect way (direct from some ppl’s point of view). What does any government want? More control of course. But, I will say some of those theories are true in very limited specific instances. It is not true all the time especially since you have a mountain of debt. You are going to fund debt with more debt? Look at Japan’s lost decade (or lost decades to some people).
You need to cut wasteful spending from the government… and there is a ton of it. Like any masters management course you take, you are told to always overspend on a budget so you can raise your budget for next year…
Everyone says the artificially low interest rate now is to create easy money so there is not a credit crunch. Yes, but more importantly it is being artifically low because if goes to 6% (or above), the US is looking at INTEREST payments well over a TRILLION dollars. The US only takes in 2.5 trillion a year from taxes and is paying about 600 billion in interest at the moment (at this artificial low rate). Who will buy US treasuries when most of the US’s income will be going towards interest payments? NO ONE! That is real reason why it is being kept low. This is bad because the US will just keep piling on more debt till it is insolvent (it is already but not everyone has lost confidence in it). Everyone will dump bonds and or dollars in the market. Now people say others will buy those bonds in the open market. They will not because the risk will be too high and or interest rates will skyrocket, thus bankrupting the US still. The US will be bankrupt (OFFICIALLY) and have to mandate every retirement fund in the US to buy US treasuries, along with more $$ printing (destroying any savings that are left). The US will also mandate it is illegal to have any foreign accounts in any other curreny; along with owning precious metals.
Basically the US is like Rome. Rome started to dilute the precious metal content of it’s silver and gold coins (similar to $$ priniting). This allowed them to have more coins. But then it took more coins to buy goods and with. Also, everyone was being paid the same coin with less gold and silver. Thus losing purchasing power. Two hundred years later Rome was insolvent. The FED is about 100 years old now. It is all a matter of history repeating unless the current course is sharply shifted in the opposite direction. Denial will not solve the problem or kicking the can down the road.
You call that growth? The US should file for bankruptcy now. This does not mention the huge trade defecit, political grid lock, and the mountain of unfunded liabilities (Social Security, Pensions). Basically a perfect storm for the fall of the Dollar.
Comment by Carlo on 26 December 2011:
Boy,
Conspiracy theories to explain why Austrian economics is not mainstream? How can you beleive that by far most of the brightest minds that study economics worldwide are in a conspiracy against Austrians? Something does not pass the smell test.
Why isn’t Austrian economics prevalent you ask? Simply because it does not make sense. While other economic theories kept evolving, improving methods, systems, models,(yes, models are extremely important regardless of the Austrians trying to deny it, using empirical data, etc. the Austrian school stayed in the dark ages. And yes, there is an important role for math and statistics and whatever method can give you the edge to explain and understand economics better. The ones that know statistics understand why it can be applied to social events. What you look for is not an exact answer but a better understanding of the issue in question.
Instead of thinking about conspiracy theories, at least try to understand why the brightest minds do not accept the Austrian school. You may learn some from that exercise.
Comment by Westie on 27 December 2011:
Carlo speaks Pure Statism. Keynesian Economics=Failure=AWB Climate Change=Totalitarianism.
Comment by Dr.T.V.Mathew on 2 January 2012:
Mainsream economic analysis seems to take for granted the socio-cultural melieu.As a result contextualization of propositions is missing.Credit should go to economic anthropologists in critically analyzing and introspecting on the mainstream approaches.What endears somebody to Austrian economics is that it is not just based on numbers and equations but on human interactions through trade, and it assumes significance especially in a global age we inherit today where the slogan is “trade is the engine of growth”. In spite of forecasting techniques,modelling like Risk prediction models we have failed to visualize or anticipate the global economic downturn with all its dimensions and impacts.No doubt contemporary economics has become a branch of applied mathematics as pointed out by Marrio Rizzo.To upturn the economic downturn we need more scholars with an Austrian bent who could influence economic policy.
Pingback by Why do people think countries need centrally planned money? - Page 58 - Political Forum on 11 January 2012:
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Comment by Andrew on 17 January 2012:
Hey guys, I’m just getting into economics ( on the Austrian side at the moment) and I found these comments quiet interesting. I have noticed that the Austrian literature has very few numbers. Can anyone provide any stats/research proving that Keynesian economics doesn’t work?
Thanks
Comment by Tony on 23 January 2012:
The cold truth is the Austrian model has never been proven to work and Keynesian consistently has. Do you believe that there should be no borders between countries? Do you believe that countries shouldn’t issue currency, companies should only produce script? Well those are only two of the wacked out beliefs Hayek maintained. The only real lesion Austrian Economics seams to forward are the dangers involved in dismantling economies after a global conflict and that’s it. It’s funny how few, if any, of these “Austrian” experts have actually read The Road to Serfdom, fewer seem to understand it.
Comment by Jim on 26 January 2012:
Proof that Keynesian doesn’t work?
Well take a look at the failing economy of the U.S.
There is your proof.
Comment by Renier on 26 January 2012:
I also think these Misesians have crackpot ideas. I think expressing these ideas should be declared illegal. You know just in case some of the lesser minds in society are led astray and start believing that freedom is the answer.
Long live equations of exchange!
Sieg Heil!
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