In the world since the 2017 publication of Democracy in Chains, Nancy MacLean’s near-slanderous “history” of public choice economics and the contributions of James Buchanan, it is understandable that a reader sympathetic to Austrian economics might approach Janek Wasserman’s 2019 history of that school of thought with some trepidation. The good news is that Wasserman’s book is a far better effort than MacLean’s, as he suffers from none of her problems with accuracy of source material and he understands the economic ideas he’s working with well enough to convey them accurately to a general reader. His careful work with archival sources provides a richly detailed account that adds to our understanding of the Austrian school’s evolution and the roles its members played in influencing 20th century economic policy. The book is not without its flaws, however. In much the same way that MacLean starts with the assumption that classical liberal ideas are racist and otherwise evil (rather than attempting to provide evidence for that claim), Wasserman’s progressivism affects his broader narrative, though in much more subtle ways than MacLean’s. In particular, he assumes that the liberalism of the Austrians was simply ideological cover for defending the power and privileges of the elite. As a result, his history of the school’s evolution in the 20th century tells an incomplete tale.
The Marginal Revolutionaries tells the story of the evolution of the Austrian school, focusing on both the way in which its emphases changed over the 20th century and the related role its members took on as influencers in the worlds of ideas and public policy. The thesis, or at least the narrative arc, of the book is that the Austrian school was once a vibrant, diverse, and scientific approach to economics that was deeply embedded in the world of ideas of its time, particularly early 20th century Vienna. As it migrated to the United States, it lost that identity and became more ideological and less scientific, culminating in the flirtation of the modern-day Rothbardian wing with the seedier sections of the political right. For Wasserman, it’s no surprise that a version of Austrian economics became attractive to people he sees as quasi-fascists. In his view, Austrian economics in the 20th century was always about trying to preserve the power of the elite, so the dalliance with the worst of the right wing was a logical outcome of that evolution.
Before turning to the problems with that narrative, there are several strengths of the book worthy of further discussion. Wasserman’s history of the first generation or two of the Austrian school provides some valuable historical detail on the prominent contributors, such as Menger, Bohm-Bawerk, and Wieser, as well as the various institutions they created in their attempt to establish a true school of thought. His more limited discussion of some of the other less well-known figures of the first and second generation of the school is also useful, as the usual narrative leaves them out. He documents the relationship between all of these early Austrians and those with economic and political power in turn-of-the-century Vienna. That is worthwhile historical context, but it also serves his larger narrative in several ways.
One of the other themes of the book is about the attempt to re-create Vienna. Wasserman persuasively documents the fantastic intellectual environment that surrounded the Austrian school in early 20th century Vienna. Much of this history is known, but Wasserman ties it to the influence that the early Austrians had and their commitment to developing a scientific research program untainted by ideology. After that community was destroyed during World War II, Wasserman sees much of what the Austrian school emigres tried to do in the US and elsewhere as an attempt to re-create the atmosphere of Vienna. None of those attempts succeeded, and he at least implies that it was due to the increasing role that ideology was playing in their self-understanding, especially for Mises and Hayek.
One other strength of the book is its serious treatment of what we might call the “extended” Austrian school. In prior histories of the school, such as Karen Vaughn’s Austrian Economics in America, people like Fritz Machlup, Gottfried Haberler, Oskar Morganstern, and even Joseph Schumpeter are relegated to cameos in favor of a Mises-Hayek-Kirzner centered narrative. No doubt those three are the core of the modern Austrian school, but Wasserman’s more extensive treatment of these other scholars offers some important history of their interactions with people like Mises and Hayek, but also their important roles in the economics profession and the world of public policy. This conception of who was in the Austrian school might strike some as overly broad, but part of Wasserman’s point was that the school was in fact broad enough to encompass them in a meaningful way.
Wasserman also gets much of the later 20th century and early 21st century history right, at least on the facts. His description of the migration of the Austrians to the US, and Hayek’s eventual return to Europe, provides important details that have not always been emphasized. In both cases, however, the tone surrounding Wasserman’s description of the outside funding of their positions, particularly Mises’s, matches his larger narrative of them being beholden to the interests of capital. The implication, of course, is that Mises (and to a lesser extent Hayek) had abandoned serious scholarship for being a lackey for the capitalist class. This ignores a couple of important facts. One is that whatever the nature of his position at NYU, Mises was still allowed to oversee PhD dissertations, so clearly his NYU colleagues thought he was a serious scholar worthy of doing that work. The other is that he was named a Distinguished Fellow of the American Economic Association in 1969, which has often been a precursor to a Nobel Prize. This fact is not mentioned by Wasserman, even though the somewhat more praiseworthy (in Wasserman’s view) Fritz Machlup was named a Distinguished Fellow two years earlier, as was Oskar Morgenstern in 1976.
Overall, though, Wasserman’s facility with the archival material and other primary sources has enabled him to provide important new details to the early and more recent history of the Austrian school. In this way, it’s an excellent complement to both Vaughn’s book and Bruce Caldwell’s Hayek’s Challenge.
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.