When it comes to economic theory, which is distinct from political theory due to the fact that the former is value free (that is, its analysis is not dependent on an ethic) and the latter is driven by ethics, it can be difficult to know where to start; especially for those that are new to libertarianism. For most people, coming to libertarianism as a political theory makes them realize that they may need to rethink everything they ever thought about politics and political economy. And thus, they find a great opportunity to relearn the economics that they thought they knew.
Strictly speaking, libertarianism is a political theory, not an economic theory. But in addressing politically-related issues, one must not only be familiar with the ethics of the State, but also with the economic effects of the State. At this site, and for libertarians as a whole, while libertarianism is our political theory, our economic theory is Capitalism. What we mean by this is that the “system” that we believe yields the most prosperous results for civilization is one in which individuals “are free to use their private property without outside interference” (Murphy, page 1) and toward whichever ends they think is the most useful in achieving their individually valued goals. Now, while Capitalism is the “system” we advocate, the approach we use to describe the benefits of Capitalism and the detriments of State intervention is known as “Austrianism.”
What we mean with this label is that we follow the economic methodology of the “Austrian School,” which is the school of thought that originated with Carl Menger in Austria in the 19th century. His most famous student, Eugene Bohm-Bawerk, was the professor under whom the most famous of all Austrians, Ludwig von Mises, studied. Mises, a Jew, almost single handedly (seriously) carried the Austrian School insights from Europe to the United States by narrowly escaping Austria during the Hitler years. When he came to the United States, he was poor, and couldn’t find an academic position. And yet, he fought on for the principles of capitalism and freedom which he sincerely believed. It is seriously a remarkable story. But at any rate, his efforts blossomed through F.A. Hayek and the brilliant Murray Rothbard (who was, especially in epistemology, more “Misesian” than Hayek) and have been promoted at stunning levels through the educational efforts of Ron Paul. The most important insight of the Austrian School is the “Austrian Business Cycle Theory” (ABCT) which was advanced by Mises and F.A. Hayek. We will touch on the ABCT in this series.
I have decided to post a 16-part series on Capitalism, which will cover all the basics. However, I will not take the time to delve into the methodological (and therefore epistemological) starting points of economic theory (labeled by Mises as the study of Praxeology), which I have done in other places around this website. Rather, I will keep it basic and broad.
One of the very first books that I read on economics, during the summer between High School and College (I majored in Public Policy and Economics, my dissertation was on the Federal Reserve), was The Politically Incorrect Guide to Economics by Robert P. Murphy. When I first picked it up, I was embarrassed. Apparently I have a pride issue. It seemed as if I was about to read an “economics for dummies” book. But it was nothing of the sort. It was probably the most succinct and logically concise presentation of the basics of Capitalism I have read in my life. This is a meaningful statement, as by now, 7 years later, I have been through many of the Austrian School works including Mises’ treatise, Rothbard’s treatise, Bohm-Bawerk’s treatise on Capital, Hayek’s Prices and Production, and a decent amount of other Austrian School works in general. But Murphy’s book is the best introduction. Now, of course, Bob Murphy is an associated scholar at the Mises Institute and runs a wonderful economic blog. He has a fantastic ability explain difficult Austrian insights in a simple way.
Usually, I recommend Henry Hazlitt’s Economics in One Lesson. But Murphy’s book serves a very important role as well. Hazlitt’s book teaches you how to think as an economist. Murphy’s book gives you the application of the principles laid out in Hazlitt (among other Austrian economists). I am not sure about every book in the Politically Incorrect series, but it sure was a great opportunity for the advancement of the Austrian School that an Austrian economist was able to author the Capitalist book. There are other approaches to “Capitalism” but Austrianism is the most pure, consistent, and logical. Murphy also wrote the Great Depression book in that series, Tom Woods wrote the American History book, Kevin Gutzman wrote the Constitution book, and Brion McLanahan wrote the Founding Fathers book. Those are the only ones I can recommend at this point (the others I have either not read or didn’t really agree with overall).
In presenting this 16 part series, I am going to use the structure and format of Murphy’s 16 chapter book, because it is very useful for an introduction of Capitalistic principles and insights. We will touch on the following concepts:
- Prices and Profits
- Unions and Labor and Slavery
- Anti-discrimination laws
- Capitalism and Environmentalism
- Health and Safety regulation
- Federal Deficits and National Debts
- Money and Banking
- The Business Cycle and Depressions
- Popular Government programs
- The difference between a business and bureaucracy
- Antitrust and monopoly laws
- International trade wars and outsourcing
- Investors and financial markets.