Public Choice98: 467–469, 1999. 467

Book reviews

Karen I. Vaughn,Austrian economics in America: The migration of a tradi-tion. Cambridge University Press, 1994. xiv + 198 pages. $54.95 (cloth).

Karen Vaughn defines Austrian economics as a distinct set of ideas that isnot a subset of mainstream economics or that even has any overlap withneoclassical economics. In doing so she defines an empty set and falls intothe black hole of nihilism.

The problems with this book begin with its title. It is not an analysis ofTheMigration of a Tradition. The book does not tell of the exodus of the Austrianschool from Vienna and its spread to America. It is more of an attempt tocraft and chart the Austrian school’s future course, but in this reviewer’sevaluation, the attempt flounders on the hard rocks of reality.

The author tries to rewrite what Austrian economics is and ignores thehistory and effect of what the Austrian migration was. The book is an effortto build a new Austrian economics on the foundation of hermeneutics, ultrasubjectivism, radical uncertainty, and the economics of time and ignorance.In her tightly focused vision, true Austrian economics did not originate inVienna, Austria, but in Vienna, Virginia, at Vaughn’s own George MasonUniversity.

Vaughn astonishes in accomplishing this feat. Most people associate themodern Austrian school with Ludwig von Mises and Murray N. Rothbard,but not our author. She spends an entire chapter proving that she either hatesthe work of Ludwig von Mises work or doesn’t understand it, labeling hismonumentalHuman Actionas flawed. Mises, in her view, was much toomuch of a neoclassical and relied strictly on equilibrium constructs. The onlypositive statement appears in a footnote where she concedes that his seminarwas attended by a high percentage of women.

Just as odd is her portrayal of Mises’ great American students MurrayRothbard and Israel Kirzner. Rothbard did not achieve great professionalrecognition and was only great as an ideologue and energizer of students.She concludes that when it comes to economics, his version of Austrianeconomics, like that of von Mises, was in principle not very different fromneoclassical economics. Again, his problem was that he worked within thecontext of equilibrium theorizing. Kirzner has achieved professional recog-

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nition but did so by working within the confines of neoclassical analysis andby introducing the concept of entrepreneurship as the mechanism that helpsestablish the dreaded equilibrium tendency of markets in neoclassical models.

F.A. Hayek and Carl Menger hold some promise for Vaughn and thefuture of Austrian economics, but both men fell far short of providing thetrue basis for that future. Vaughn attempts to anchor the new revolutionaryAustrian economics on the work of Menger, but she is forced to concede thatMenger could be read as a “primitive,” “naïve,” and “incomplete” neoclassi-cal. Hayek likewise has some insights into the revolutionary issues of timeand ignorance, but he too falls short. Hayek even offers a new conception ofequilibrium called plan coordination, but it remains an equilibrium notion.Despite the importance of these two economists to the profession at large,Vaughn thinks that their important revolutionary ideas have fallen on deafears.

It is unfair to criticize most books for being incomplete, but in this case thecriticism is valid and crucial. The author could be excused for downplayingthe roles of Friedrich von Wieser and Eugen Böhm-Bawark, because, despitetheir tremendous contributions to Austrian economics and influence on theprofession at large, neither migrated to America. Not surprisingly, Vaughnpresents them as purveyors and developers of Menger’s mainstream views.She does not accept the profession’s label for them as the founding fathers ofAustrian economics and they certainly are not the revolutionary heroes she islooking for.

Also overlooked are most of the Austrians that migrated to America suchas Gottfried Haberler, Fritz Machlup, Oscar Morgenstern, Paul Rosenstein-Rodan, and Joseph Schumpeter. Haberler taught at Harvard and was an im-portant writer on topics such as monetary theory and business cycles. Machluptaught at most of the top universities of America and made path-breakingcontributions to many areas of economic analysis and methodology and wasan editor of theAmerican Economic Review. Oscar Morgenstern taught atPrinceton and did path-breaking work in game theory, equity markets, andthe problems with empirical economics. Paul Rosenstein-Rodan was a utilitytheorist at the Massachusetts Institute of Technology and although far frombeing a pure “Austrian,” Joseph Schumpeter taught at Harvard University andis arguably one of the best and most influential economists of this century.These Austrian economists, along with Hayek and Mises, had a tremendousimpact on the American economics profession, but are only mentioned inpassing by Vaughn.

Vaughn’s goal is to have a new school built on notions of ultra subjec-tivism, radical uncertainty, time and ignorance, spontaneous order, and evo-lution, untainted by neoclassical economics. The leading light for Vaughn is

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Ludwig Lachmann. Lachmann was a student of Hayek whose early writingswere of a genuine Austrian character. After coming under the influence ofGeorge Shackle, Lachmann became increasingly sure about the value of ul-tra subjectivism and radical uncertainty. For Vaughn, Lachmann has all thecorrect ingredients, ultra subjectivism, radical uncertainty, pervasive igno-rance and an opposition to both equilibrium constructs and the market’s ten-dency towards equilibrium. Ultimately, however, Lachmann (now deceased)is found lacking because he is not able to offer a full-blown theory of themarket process and the order that it might not produce.

Other contenders to lead the future of Austrian economics are Mario Rizzoand Jerry O’Driscoll with their economics of time and ignorance and DonLavioe with hermeneutics. The vast majority of the economics profession hasnot heard of any of these men and probably never will. Vaughn herself findstroubling difficulties with all of their contributions and is not very optimisticabout their future prospects. To the credit of the author, she recognizes thatnone of these “promising” strands of thought actually has made any progresstowards or is in any danger of establishing a new school of economic thought.

What remains in the rubble of her analysis is an opposition to the use ofequilibrium constructs in theory and the application of the equilibrium ten-dencies of markets to understanding the real world. I share her opposition tothe excesses of the economic orthodoxy and her desire for a distinct Austrianschool. However, I am not willing to throw out the equilibrium baby with theorthodox bathwater. Equilibrium constructs are essential to economic theo-rizing. Further, it is the corpus of economic theorizing that allows us to knowthat markets have a tendency towards “equilibrium” and that governmentinterventions can disrupt this tendency. I also admit that I take great relishwhen I see the influence of Austrian economics on the economic mainstreamand I don’t pout if I just happen to learn something new from a mainstreameconomist. Intellectual exploration is a good and necessary thing. Every pro-fession has the oil field equivalent of dry holes and every profession shouldhave the ability to discern the differences between a dry hole and a gusher.The best test of the vitality of an economic methodology is in the productionof theory and economic analysis and here the Austrian school clearly makesthe grade. A history of the Austrian school and its migration to Americawould detail that production and some of the ideas that have been absorbedby the mainstream. Catchphrases like spontaneous order, plan coordination,radical uncertainty, evolutionary rules, kaleidic society, and Bergsonian timeare certainly neat phrases, but they are largely hollow in terms of knowledgeand thin in producing genuine economic analysis. So is this book.

MARK THORNTON, Ludwig von Mises Institute, Auburn University, Auburn,AL 36849-0000, U.S.A.