Customer Reviews

Economics for Real People: An Introduction to the Austrian School

5 star:		(16)
4 star:		(3)
3 star:		(1)
2 star:		(1)
1 star:		(1)

 

 

The Austrian School is the most consistently free enterprise school of economic thought. Its most outstanding representative was Ludwig von Mises and its leading thinker in recent memory was Murray Rothbard. Both von Mises and Rothbard wrote substantial treatises on economics. However, there haven't been many introductory works. (Hazlitt's Economics in One Lesson focuses more on government intervention than prices, the evenly rotating economy and capital theory.)

Gene Callahan has remedied that situation with this excellent introductory work. Written in the style of Rothbard, Callahan provides a primer on methodology, economic theory, and a critique of government intervention. The examples are always vivid and at times humorous.

After finishing this book, the reader should tackle Rothbard's Man, Economy and State. Then he should try von Mises's Human Action. Human Action isn't easy, but it will present the reader with the acedmic and theoretical rigor of the Austrian school's greatest exponent. For an introductory work that is more basic that Callahan's, David Gordon's An Introduction to Economic Reasoning is excellent.

Callahan (and the Austrian school in general) explain economics in terms of human action rather than the abstract and sometimes obtuse models of classical economists. Beginning with the simplest possible scenario, a single human acting in isolation, Callahan builds a hypothetical society and uses it to explain the crucial concepts of economics in a style and language that should be accessible to anyone who has completed high school.

He explains the concept of subjective valuation with his individual on the island, then begins adding people and concepts. He quickly takes us through direct exchange, a refutation of the labor theory of value, the introduction of money (including the explanation of the criteria that make something a good choice to use as money), time preference (and how the interest rate serves as the "price" of a time preference), and so on. In the second half of the book he explains concepts that are a bit more abstract - how do central banking and fiat money work? What causes the business cycle? How does a free market system handle externals (benefits or consequences imposed upon those not party to an exchange -e.g. water pollution).

Throughout it all, Callahan cogently makes the case for a truly free market as the only means of efficiently satisfying the desires of a society's members.

There are things I would have liked Callahan to cover better, for instance, a greater discussion of how the neo-classical economists work, and how their theories influence media reporting of economic issues (think about all the indicators that we are bombarded with in the business section of the paper). However, I don't see how he could have covered that material while keeping the book small and readable. He does give an extensive bibliography for those wishing to further investigate particular points.

A handy appendix gives the five page version of the history of the Austrian movement. It seems foolish to say this with it only being April, but I expect this will be the best book I read this year. I would give it more than 5 stars if I could.

That's why you're reading this review. You know you want to. Hit that one-click button. Are you tired and confused by what passes for economics these days? Did you sit in class in college and wonder what the heck was going on? Do you believe people can't think in graphs and algebraic equations? Do you believe if you took all the economists in the world and laid them in a line they'd still all point in different directions? If you answered "yes" to these questions then you'd be interested in the Austrian school of economics (the only school, by the way, that predicted the Great Depression). And Gene's book is an excellent introduction to that school. Of course, you can just bypass this book and go straight to Ludwig von Mises, the grandmaster of the Austrian school, and read his magnum opus, the 1000+ pages _Human Action_...nah, don't do that, at least not yet. Read this book first, and once your appetite is whetted then you can move on to the graduate level stuff. You'll like this book. I promise.

Just finished the book. It is very impressive. Even if you are already familiar with the Austrian School, the book is useful because it puts in one place the latest refutations of objections to the most important, and timely, Austrian insight, the Business Cycle Theory. The rest of the book is also excellent in its consistent application of the theory of subjective value, the foundation of the Austrian School. I personally love the way the author uses quotes right from Austrian masters to reinforce his points.
For the novice, there are few places to gain a firm grasp on real economics so quickly and painlessly, it's a complete first-year course. After reading this, read, Economics in One Lesson by Henry Hazlitt and then, What Has Government Done to Our Money by Murray Rothbard. Also read the daily articles on Mises.org to stay up on current events and to reinforce your newly found expertise in economics.

Gene Callahan accomplishes the monumentally difficult task of taking what seems to be "impossible" to outsiders and makes it accessible through his use of excellent examples and word-pictures. (I'm sure the logical positivist, mathematics-based economists will despise the rationalist approach...but let's save that discussion for a few beers and a cigar...).

He builds his discussion, bit by bit, working with the average reader. You don't need to be a pre-PhD to follow what Gene is saying...the old "crawl-walk-run" idea. The sense I had was this was more of a trip where we would go from stop to stop, discussing the concept, then using that to build to the next concept. The great thing is that Callahan doesn't patronize his readers...he expects you're going to work a bit.

Overall, despite my many years of reading Austrian economics texts & pamphlets, I found this back-to-basics approach to be very helpful in bringing my thinking down the stairs of the ivory tower & back onto the streets, making economics the true "beer-and-pizza" description of reality it is (P=MC doesn't taste as good anyway!).

Callahan writes easily readable prose, couching his economic points in entertaining anecdotes to which most readers will be able to relate. I learned a lot even as I enjoyed it and now eagerly lend my copy out.

Read Mises, Hoppe, Popper, Hayek and be happy. Callahan does a great job introducing you to the Austrian School. Win a large bet that your politically active friends won't have a clue as to what you're talking about. There's no guarantee that Austrian School will be fully implemented in our life by a major country because there's currently a trillion dollar industry setup supporting the status quo that is keenly dependent on maintaining big government. Good job finding this book. Callahan's book will introduce you to the rest of what you need to know to complete the journey.

This book provides an introduction to Austrian economics which is sometimes funny to read.

The first parts lay the philosophical (logical) foundations of Austrian economics and build up a picture of the market economy. This is done by looking at a person living alone on an isolated island (like Robinson Crusoe). Later more people, goods, and money are introduced. In my opinion, this is one of the best explanations of Ricardo's "Law of Comparative Advantage" and the history of money.

According to Austrian economics, the market process does never establish a general equilibrium. Sure, there will sometimes be equilibria in distinct markets, but these cannot last for long. The price informs entrepreneurs of new profitable undertakings, thus destroying the equilibrium. New data will have the same effect. The price will cause entrepreneurs to gradually adjust to their customers' wishes. There is thus no need for a general equilibrium (nor does is actually exist) as in conventional economics for the market process to be beneficial. Unlimited information, perfect competition, and instantaneous action aren't necessary either. The market process consists of learning, discovering opportunities, and adapting to new information. Austrian microeconomics is much more realistic than neoclassical models. (You might guess from this that there are no figures of demand and supply curves within this book. Your guess is correct.)

Later parts introduce the government and show its role in manipulating prices and money, regulations, minimum wages, etc. Callahan's explanation of inflation and deflation is much better than in conventional economics textbooks. The market process will destroy monopolies, because their profits attract new competitors. Only monopolies privileged by the government will survive. Therefore, Austrian economics rejects antitrust laws.

The "Austrian Theory of the Business Cycle" states that recessions are caused by central banks via manipulation of interest rates. Artificially low interest rates cause entrepreneurs to think that there are a lot of savings which they can use for investments. Later on, the central bank detects an "overheating economy" and raises the interest rates, thereby initiating a recession during which unemployment is likely to occur. According to Austrian economics, all agents (consumers, capitalists, workers, and entrepreneurs) have a time preference which causes aggregate savings and investment to equal in the loan market. The resulting price for time is the interest rate. If the central bank alters the interest rate, the capital structure of the economy (consumption today versus future consumption via investment) is distorted and does not correspond to consumers' wishes any longer. The subsequent recession merely restores the normal structure of capital. Thus the problem is the artificial boom and not the inevitable bust following it. Callahan considers critics of the "Austrian Theory of the Business Cycle" and refuses them by pointing to their fallacies. In my opinion, the "Austrian Theory of the Business Cycle" seems to be correct. It is much better than the conventional theories we discussed at university.

I recommend this book to all readers interested in economics. It is especially illuminating for students of economics.

The author writes in any engaging style and uses many of the same instructional models used in the "canon" of Austrian economics. The style is so snappy that it is easy to forget Mr. Callahan is covering a tremendous amount of tremendously important ideas. This is the first book I recommend to anyone who wants a quick and easy introduction to the Austrian school in particular, or economics in general.

Wow! This was definitely the best book on Economics I have ever read! It was so addictive that I could not stop reading it. It's well written, very accessible, easy to read, entertaining and extremely stimulating as the ideas presented go against conventional wisdom. The ideas are not only logical but they are grounded on real life episodes. It presents Economy as a human social system, centered around the individual free choice. It stresses the importance of looking beyond what is seen to look at what is not seen, which is just important. Today, with the current crisis, more than ever this book is fundamental in order to understand how the world came to this point, and where it's moving towards to. A few key points:
- Real economic growth can only be achieved through Production and Savings and not through Consumption and Debt
- The only real money is attached to a real collateral, such as gold as opposed to the current paper money that the central banks are happy to print out of air
- Central banks should not have the power to "print money" or fix interest rates
- Government intervention should be minimal - subsidies, protectionism, price fixing, regulation, public spending are to be avoided
- Free Markets with the Law of Supply and Demand will tend to maximize the value and wealth of both the individual and society