Read Part 1.

Getting the facts largely right is a necessary condition for writing good history, but it is not a sufficient one. Historians inevitably have to make choices about which facts to include and exclude. More fundamentally, their own intellectual and ideological frameworks will guide them to look at some things and not others. Good histories are narratives and how a historian links together the facts to tell an overarching story is just as important as the facts themselves. It is here that Wasserman’s book is at its most frustrating, especially to those who are sympathetic to the Austrians. One of the implicit themes of the book, demonstrated by everything from the historical events and connections he focuses on, to his choice of adjectives, to what he leaves out of his account of modern Austrian economics, is that the classical liberalism of the Austrians serves the interests of capital and the powerful more generally. In that way, it is inherently conservative and the more recent strong rightward drift of the Rothbardian wing of the school is something of a logical outcome.

Consistent with much left-wing thinking, Wasserman appears to believe that a capitalist market economy primarily serves the well-being and interests of the capitalists rather than the population as a whole. When Austrian economists offer arguments for liberalism and the market economy, they are, perhaps unwittingly but perhaps not, doing the bidding of those with economic power and influence. Because he also appears to view economies as something akin to zero-sum games, the fact that those at the top gain from the system is an explanation for the poverty of the rest. Therefore, when Austrians accepted funding from wealthy businessmen to support their research, they were not engaged in a scientific enterprise but an ideological one. Compared to their predecessors in Vienna, the American Austrians who struck up many such arrangements had sold their soul to the powerful. Again, this argument is never made explicitly, but it permeates Wasserman’s word choices and emphases throughout the book.

As one somewhat small example, consider his description of the headquarters of the Foundation for Economic Education as an “opulent estate” in a “wealthy suburb” (212). Why is it relevant to the work that FEE was doing and the ideas it was promoting that it was headquartered in a mansion or in a wealthy suburb? (And it’s worth noting that Wasserman could not have ever been to FEE because, for all of the positive memories I have of that place, it was far from “opulent.”) It can only be relevant if you want to suggest that it’s not the ideas that matter but the class interests of those promoting them. This strategy also becomes a way to indicate that the Austrians ideas were wrong without ever having to confront them directly. The claim by the Austrians that the market order would lead to prosperity and progress for all is reduced to ideological cover for the interests of the powerful.

There are two problems with Wasserman’s view of these issues. First, is it really true that the market predominantly serves the interests of capital? And second, the Austrians of the 20th century were very clear about their opposition to privilege and their belief that the market order predominantly served the interests of the populace as a whole.

With respect to the first question, there is a large empirical literature demonstrating the ways in which the market economy has dramatically raised the living standards of both the average and poorest households in the advanced economies. Recent data on the reduction in global poverty provides evidence about the rest of the world. One need only consider Nordhaus’s famous study showing that innovators capture only about 2 percent of the total value they create to see that the benefits of markets are spread wide and far.

Although not as clear in the work of the early Austrians, the 20th century Austrians were also quite clear in differentiating “free markets” from “what was good for business people.” Mises’s emphasis on “consumer sovereignty” demonstrates who he thought were the primary beneficiaries of the market economy and he consistently opposed what he (and early liberals) termed the “privileges” sought after by private owners wishing to use the state to limit competition. In Hayek, we see a similar argument about who the real beneficiaries of markets are. He too explicitly opposes privileges that serve the interests of capital. In Law, Legislation, and Liberty Vol. 1 (62), he wrote:  “[The term] ‘capitalism’ is…always misleading because it suggests a system which mainly benefits the capitalists, when in fact it is a system which imposes upon enterprise a discipline under which the managers chafe and which each endeavors to escape.” Similar arguments can be found in modern Austrian work as well.

One hypothesis that Wasserman does not entertain is that the business people who backed the Austrians genuinely believed that freer markets would make the world a better place independently of what it would do for them personally. After all, if they were simply interested in lining their own pockets, seeking after government privileges, such as subsidies, monopolies, or costs imposed on their competition, would seem to be a much more effective short-run strategy. This whole set of problems with Wasserman’s argument is ironic in that he ends up doing precisely what he criticizes the Austrians of doing: abandoning more objective arguments in favor of ideology.


Steven Horwitz is Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University in Muncie, IN. He is also an Affiliated Senior Scholar at the Mercatus Center in Arlington, VA, and a Senior Fellow at the Fraser Institute of Canada.