The second edition of the fun and fascinating guide to the main ideas of the Austrian School of economics, written in sparkling prose especially for the non-economist. Gene Callahan shows that good economics isn't about government planning or statistical models. It's about human beings and the choices they make in the real world.

This may be the most important book of its kind since Hazlitt's Economics in One Lesson. Though written for the beginner, it has been justly praised by scholars too, including Israel Kirzner, Walter Block, and Peter Boettke.

Gene Callahan is a software-technology professional in Connecticut, an adjunct scholar of the Mises Institute, and a commentator on economics issues in venues such as Marketplace and The Free Market. This is his first book.

Israel M. Kirzner (New York University): "Even a cursory examination of this book is sufficient to impress the reader that we have here a remarkably well-written exposition for the layman of the highlights of Austrian Economics."

Peter J. Boettke (George Mason University): "Written in a jargon-less and engaging style, Callahan's work provides the most comprehensive introduction to modern Austrian economics currently available to the intelligent layman."

He continues:

"Callahan's reference to 'real people' consciously echoes the more austere title of Austrian economist Ludwig von Mises' magnum opus, Human Action. For as the author explains, economics is the study of how real people act to relieve dissatisfaction. For example, dissatisfied with the inconvenience of barter, folks start using more marketable goods for indirect exchange, a practice that eventually results in one or two commodities becoming the preferred medium of exchange, usually gold or silver….

"The first half of the book sets forth basic principles; the second shows how the myriad ways of interfering with the market make matters worse, sometimes much worse. Callahan cites the 'health-care crisis' as a prime example of how 'the problems resulting from one intervention tend to lead to calls for other interventions to fix those problems.' While the hated HMOs are generally viewed as creatures of capitalism, these 'strange entities' are just a response to the soaring costs arising from the government-instituted system of third party payments."

"'We do not see AMOs in the automobile industry or CMOs in the computer business,' observes Callahan. That insight cuts to the core of what is really going on. Auto dealers might also find their professional live unbearable, just as many physicians do, if AMOs told them how to service their customers. But happily, the disease of third party payments has only infected health care."

"On the issue of government subsidizing business to build things, the author quotes from a review by Newt Gingrich of a book about the transcontinental railroad, in which the former congressman celebrates the 'public-private partnership' without which 'the railroad could not have been built for another generation.' To which Callahan responds, 'Gingrich simply assumes that a transcontinental railroad ought to have come before the alternatives that entrepreneurs might have created with those same resources."

Download Economics for Real People: An Introduction to the Austrian School (2nd edition)

PDF format, 899KB, 352Pages.

Copyright 2002, 2004 by Gene Callahan.

INTRODUCTION Stayin’ Alive

WHY READ THIS BOOK?

PERHAPS, AT SOME point, you have heard about the Austrian School of economics and are curious as to what it is. Or you may be discouraged by the economics you have encountered in textbooks and newspapers, and are searching for a more realistic view of economic life. The dominant school of economics, often referred to as the Neoclassical School, seems to describe people behaving in ways that are hard to relate to the human activity we see around us every day. The textbook humans seem robotic, rigidly obeying a set of equations that “maximizes their utility” based on a set of parameters. The equations themselves are said to “cause” supply and demand to meet at an equilibrium price— one that sets the quantity demanded equal to the quantity supplied. What place do humans have in such a system of equations? It seems difficult to relate those mathematical constructs to the world in which we live. How is the idea of man as a utility equation solver relevant to an Islamic revolution, to Mother Teresa, to Jimi Hendrix, or to your own decision to take a vacation that you “really can’t afford,” but really need?

Yet, you feel that economics ought to be relevant to real life. Doesn’t it deal with jobs, money, taxes, prices, and industry: stuff of everyday existence? Why should the subject seem so obscure?

The Austrian School of economics is an alternative to the mainstream approach. It places economics on a sound, human basis. It avoids the traps that plague most of modern economics: the assumption of selfishness as the basic human motivation, a narrow definition of rational behavior, and the overuse of unrealistic models. This book is an attempt to introduce you to the main ideas of the school.

The Austrian School is so-named because most of its early members hailed from—you’ve probably guessed by now— Austria. The Nazi occupation of that country, however, scattered the practitioners. Today we can find prominent Austrian School economists all over the world. I will use “Austrian economist” to mean a member of the Austrian School, whether or not the person in question ever lived in Austria.

My focus will not be on the history of the school, although I have included an appendix with a brief overview of that history.Nor is my goal to convince professional economists of other schools to “convert.” It is instead intended to be the proverbial “guide for the intelligent layman.” While I have always tried to be precise, I have tried to avoid entering into the fine details of esoteric debates from the economics profession, which would only create a schizophrenic book.

Because of the nature of this book, it cannot explore Austrian economics in the same depth as do systematic treatises such as Murray Rothbard’s Man, Economy, and State or Ludwig von Mises’s Human Action. If this book succeeds in interesting you in this subject, it will have done its job; I urge you to then pick up one of these masterworks on the topic. (There is also a bibliography at the end of the book recommending further reading.)

But there are advantages to the approach taken by this book. First of all, Rothbard’s and Mises’s tomes are huge: you don’t really want to be hauling a book like that to the beach, now, do you? Second, most people are not attempting to become professional economists. You probably have a very limited amount of time and effort you are willing to put into the subject, at least until you sense of how it might benefit you to know more. Last, neither of those great works has anything about the hit TV show Survivor 1 in it, nor does either of them so much as mention the actress Helena Bonham-Carter. I guarantee that this book will be free of both of those flaws.

Speaking of Survivor (see, you didn’t even have to wait long before I took care of the first problem!), I’m going to ask you to imagine a slightly different conclusion to the series. In the original television show, the winner—the fellow who “survived” the longest—was a guy named Rich. In our alternate universe Rich is still the winner, but, as the film crew packs up, they decide that they are fed up with his antics. Instead of transporting him home, they quietly slip off of the island while Rich is getting in a last session of nude sunbathing.

Rich arises to find that he is alone. He is now facing the most elementary human problem, how to survive, in the most basic of settings. What can economics say about his situation? Is our science rooted in man’s nature, or is it just a creation of certain social arrangements that we can change at will? If someone isn’t concerned with becoming as wealthy as possible, or rejects consumerism, is economics still relevant to them? These are some of the questions that this book will attempt to answer.

We will come back to Rich in Chapter 2, but first, we will examine the question of what, exactly, economics is.

Visit Ludwig von Mises Institute's Web Site

About Ludwig von Mises Institute:

 "How does a world-class think tank end up in east Alabama? ...having such an outfit so far away from the country's usual hubs is in itself a rejection of the central planning and authority Mises spent his life fighting. He might never have visited Auburn, but something tells me he wouldn't have put this institute any other place." Kyle Wingfield, Wall Street Journal Europe, August 4, 2006

The Ludwig von Mises Institute is the research and educational center of classical liberalism, libertarian political theory, and the Austrian School of economics. Working in the intellectual tradition of Ludwig von Mises (1881-1973) and Murray N. Rothbard (1926-1995), with a vast array of publications, programs, and fellowships, the Mises Institute, with offices in Auburn, Alabama, seeks a radical shift in the intellectual climate as the foundation for a renewal of the free and prosperous commonwealth.

It is the mission of the Mises Institute to restore a high place for theory in economics and the social sciences, encourage a revival of critical historical research, and draw attention to neglected traditions in Western philosophy. In this cause, the Mises Institute works to advance the Austrian School of economics and the Misesian tradition, and, in application, defends the market economy, private property, sound money, and peaceful international relations, while opposing government intervention as economically and socially destructive.

Comments (0)

Show/Hide comments

Name

Email

Website

Title

Comment

smaller | bigger

Add Comment