_Human Action_ and The Mises-Hayek Revolution In Economic Science

An appreciation from Israel Kirzner:

.. if the immediate post-World War II scene appeared so wholly inhospitable to a distinctive Austrian economics, both Mises and Hayek were in fact working, independently but along parallel paths, toward a revolutionary reinterpretation of their intellectual heritage. (.. it would be a serious mistake to fail to note that the “drama” we have seen in the appearance of Mises’s book [Human Action] had its parallel in the appearance of Hayek’s 1948-49 volume of essays, Individualism and Economic Order. I have elsewhere discussed the complementarity between those two contributions in “Ludwig von Mises and Friedrich von Hayek: The Modern Extension of Austrian Subjectivism,” republished as chapter 7 in my The Meaning of Market Process: Essays in the Development of Modern Austrian Economics.)

The “socialist economic calculation debate” that raged in the prewar decade had, it seems reasonable to believe, induced the revolutionary revisions in their understanding of markets. The uncritical acceptance by the economics profession of the Lange-Lerner thesis – that socialists can plan efficiently by modeling their plan after general equilibrium conditions (postulated by mainstream theorists as governing competitive market systems) – taught Mises and Hayek that their own understanding of how markets work differed fundamentally from that of their neoclassical colleagues. Mises, in particular, now realized that mainstream neoclassical theorists do not subscribe to the same understanding of the economic principles governing markets to which Austrian economists (or, at any rate, he) subscribe. Mises wrote Human Action to articulate with utmost conviction his refusal to accept that mainstream neoclassical interpretation of how markets work. Human Action was a defiant declaration of theoretic independence–a declaration spelling out explicitly what had hitherto (at least in Mises’s view) been implicit in earlier neoclassical (and particularly in Austrian) market theory. (See Frank M. Machovec’s Perfect Competition and the Transformation of Economics.)

This explicit articulation constituted a dramatic, revolutionary deepening and extension of existing Austrian theory. That it came to inspire the late-twentieth-century revival of Austrian economics, although ignored and overlooked when it was first published, is in large part what made the publication of Human Action an episode of intellectual drama.

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[The questions of 'social philosophy''] are ‘philosophical’ only in the sense that certain widely but erroneously held beliefs are due to the influence of a philosophical tradition which postulates a false answer to questions capable of a definite scientific treatment. — F. A. Hayek

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