The Austrian School of Economics is a significant economic movement founded by Carl Menger in 1870. It centers on the individual and their economic behavior. It is based, among other things, on the subjective theory of value, which holds that the value of a good depends on the individual assessment of market participants.
Characteristic of the Austrian School, as it is also known, is its emphasis on the role of the individual, the analysis of incentives and opportunity costs, as well as a critical stance toward state intervention in markets. In contrast to Keynesian theory, the Austrian School advocates for self-regulating markets and decentralized knowledge distribution.
This collection presents ten concise statements from prominent advocates of the Austrian School and places them in their historical and economic context.
This quote comes from Friedrich August von Hayek (1899-1992), one of the most influential economists of the 20th century and Nobel laureate of 1974. It emerged in the 1970s, a period of intense debate between advocates of free market economics and proponents of socialist economic planning. Hayek argued that a system of voluntary market transactions represents the most efficient form of economic organization. Price formation through supply and demand enables optimal coordination of economic activities and efficient allocation of resources. With this quote, Hayek expresses his conviction that understanding economic relationships inevitably leads to the rejection of centrally planned economic systems.
Argentina has been struggling with high inflation for decades, reaching over 200% in 2023. The country has a long history of monetary expansion to finance government spending. With this analogy, Milei, who has served as Argentina's president since 2023, criticizes the notion that complex economic problems can be solved by simply increasing the money supply. The mere expansion of the money supply does not create real wealth, but rather leads to a redistribution of purchasing power. Just as a diploma without the underlying education is worthless, additional money without corresponding value creation cannot bring about sustainable improvement in living standards.
The quote illustrates a central contradiction: Many government programs and social benefits can only be financed through additional money creation, as direct tax increases are politically more difficult to implement. With this observation, Mises, the Austrian economist (1881-1973) and one of the most influential representatives of the Austrian School, describes a recurring mechanism in democratic systems. People support these programs without considering the inflationary consequences. Yet at the same time, they complain about precisely this inflation.
This brief quote describes the systemic dependence of the state on inflation. In today's monetary system, the state can finance its expenditures through money creation. With this analysis, Rothbard, American economist (1926-1995) and one of the most prominent representatives of libertarianism, hits a central point: In a system with a limited money supply like Bitcoin, this would not be possible - the state would have to limit itself to taxes or would become insolvent as soon as it can no longer compete. Thus, inflation is not a random phenomenon, but a necessary condition for the continuation of the modern state in its current form.
The quote reflects Hayek's conviction that state control of money inevitably leads to its deterioration. As long as the state maintains a monopoly on money creation, it will abuse money for its own purposes. Hayek argued that only decoupling money from state influence could restore money's quality as a store of value and medium of exchange. Today, this prediction is celebrated as visionary, especially in the Bitcoin community, as Bitcoin is the first monetary system that actually achieves a complete absence of state intervention in monetary policy.
The quote comes from Hazlitt's influential work "Economics in One Lesson" and addresses a core problem of economic policy decisions. The American economic journalist (1894-1993), who made the ideas of the Austrian School accessible to a broad audience, criticizes the tendency to consider only short-term effects or impacts on certain interest groups. This frequently leads to poor decisions, as long-term negative consequences or effects on other market participants are overlooked. Hazlitt advocates for a holistic economic analysis that must be comprehensive both temporally and in terms of affected groups.
With this central quote, Menger, the Austrian economist (1840-1921) and founder of the Austrian School, opposes the classical labor theory of value. The value of a good is not created by the invested labor time, but by market demand. An illustrative example: Ten hours of labor with a hammer on wood create no value if there is no demand for the result. Therefore, resources and labor are usually only invested in the production of a good when there is corresponding demand and thus value.
The quote demonstrates that markets are a fundamental element of human interaction. Long before the emergence of "modern" capitalism, markets existed as a natural order of exchange between individuals. Wherever people offer and demand goods or services, a market automatically emerges. This decentralized form of coordination has developed as a fundamental characteristic of civilizational development, independent of specific economic systems.
The quote addresses the fundamental differences between free market systems and planned economy approaches. In free markets, prices coordinate societal needs and resources in a decentralized manner. Historical examples like the Soviet Union and the GDR demonstrate how state intervention in this price mechanism led to misallocation and supply shortages. Mises argues that only voluntary market transactions enable efficient distribution of resources according to people's actual needs.
The quote illustrates the fundamental mechanism of economics: The primary driver of all economic action is the satisfaction of one's own needs. However, in a market economy, one can only satisfy their own needs by serving the needs of others. Every profit and income is based on offering goods or services that others consider valuable. This link between self-interest and the interests of others is the essential mechanism of economic exchange.
Thank you for taking the time to read these quotes from some of the most influential thinkers in economics - we hope they have inspired you and love to provide some additional recommendations from our editors on the Austrian School:
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