The Five (okay, ten) Essential Books in Austrian Economics
By Steven Horwitz
(In case you missed it, here are Professor Horwitz’s suggestions for the best introductory books in Austrian Economics.)
The task of picking five basic books in Austrian economics is not a difficult one, at least for the first four. After that, matters get more tricky. So I’m going to cheat a bit as readers will discover below. First, the Big Four:
Carl Menger, Principles of Economics, 1871.
This is where it all began, as Carl Menger’s Principles was the founding text of what became known as the Austrian School. It remains both readable to the non-specialist and a continuing source of insight to those of us who are decades deep into the tradition. I honestly don’t believe that Austrians, and economists in general, have really, deeply understood all that he was trying to say here. One of the great things about the revival in Austrian economics of the last few decades is how much the tradition has recovered the insights about knowledge, uncertainty, and disequilibrium processes that Menger glimpsed at the start.
I suggest these together for two reasons. First, they came out at almost the identical time, and second, they were the two books most responsible for the revival of Austrian economics that really began 25 years later. The Hayek book is a collection of his academic articles from the 1930s and 40s that includes not just the three papers on socialist calculation, but the three papers on knowledge and competition that provide the defining insights for the last 40 year of Austrian economics. The Mises book, of course, is the treatise and intellectual tour de force that has become the near-encyclopedic touchstone for the modern Austrian school. It offers everything from the philosophical foundations of economics to the place of economics in the world of ideas to coverage of the core principles of the discipline. Together, these two volumes are the defining texts of the modern Austrian tradition.
Israel Kirzner, Competition and Entrepreneurship, 1973.
If the Hayek and Mises books set the stage for the revival, Kirzner’s work, and this book in particular, showed how those ideas in those volumes could be put to work in the context of modern economics. Not only is Kirzner’s book important for developing the central roles of competition and entrepreneurship in the Austrian vision, it also demonstrated how the Austrian theory differed from the then-current work on the topics in the mainstream of the discipline. The book is a model of scholarly engagement between Austrians and neo-classical economics that enabled Austrian ideas to be taken seriously by the broader profession.
And here is where I cheat. I want to offer six books that have been produced by more recent generations of Austrians that are important advances on the ideas of the four books noted above. For each, I will give just a sentence of description.
5a. Lawrence H. White, Free Banking in Britain, 1984. Published with Cambridge University Press, Larry’s book reframed the Austrian contribution to monetary theory and opened the discussion about free banking, while making the case for fractional reserves in a deregulated banking system. It also was a model for young scholars of how to do serious work that engaged the mainstream and was published by a top academic press.
5b. Gerald P. O’Driscoll and Mario Rizzo, The Economics of Time and Ignorance, 1985. This book offered a dramatic reinterpretation of the Austrian tradition, emphasizing the issues of knowledge and uncertainty going back to Menger and connecting them to then-current issues in the Keynesian and other traditions. It also provided an important look at the role of institutions in overcoming our ignorance.
5c. Don Lavoie, Rivalry and Central Planning, 1985. Don’s revision of his dissertation under Kirzner fundamentally transformed the professional conversation around the socialist calculation debate by connecting up the Austrian critique of socialist planning with the unique Austrian insights of Hayek and Mises in the two books noted earlier. This book almost single-handedly persuaded other economists that, in the words of socialist Robert Heilbroner, “Mises was right.”
Those three books defined the generation of Austrians that I was part of in graduate school in the late 1980s. Since then, I would point to three books that have been published that have taken Austrian ideas to yet another level.
5d. Peter Lewin, Capital in Disequilibrium, 1999. The Austrian theory of capital has long been an area in which the differences between Austrians and the mainstream were most profound. Peter’s book not only lays out those differences, it advances the Austrian theory in two important areas by applying it to both the theory of the firm and the theory of human capital.
5e. Roger Garrison, Time and Money, 2001. Roger’s book offered a number of important contributions to Austrian macroeconomics. The three key ones were: 1) his four-quadrant diagrams illustrating the Austrian business cycle theory and other macroeconomic phenomena; 2) the way those diagrams nicely illustrated and clarified the differences between the Austrians and other schools of macroeconomics, such as the Monetarists and Keynesians; 3) the application of those diagrams to fiscal policy. All future discussions of Austrian cycle theory will have to grapple with Roger’s contribution.
5f. Steven Horwitz, Microfoundations and Macroeconomics: An Austrian Perspective, 2000. I have never been accused of being overly modest, so I will live up to that reputation by including my own book. It serves as a companion to Roger’s, exploring what is more properly called “monetary theory” as opposed to macroeconomics or cycle theory, though those topics are addressed. I focus on the role of money as a medium of exchange and how excesses and deficiencies in the money supply spill over to distort prices and microeconomic coordination. I use this perspective to discuss inflation and deflation, as well as how the book’s approach matters for the free banking vs. central banking debate.
These ten books would make an excellent two-semester curriculum in Austrian economics for almost anyone interested in learning about the school. I think it’s helpful to have taken a little bit of economics to really get the most from them, but it’s not absolutely necessary. Finally, I apologize to all my good friends and colleagues who are now going to complain about being left off this list!
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.