The Place of the Austrian School in the Evolution of Economics
1. The “Austrian School” and Austria
When the German professors attached the epithet “Austrian” to the theories of Menger and his two earliest followers and continuators, they meant it in a pejorative sense. After the battle of Königgrätz, the qualification of a thing as Austrian always had such a coloration in Berlin, that “headquarters of Geist,” as Herbert Spencer sneeringly called it.1 But the intended smear boomeranged. Very soon the designation “the Austrian School” was famous all over the world.
Of course, the practice of attaching a national label to a line of thought is necessarily misleading. Only very few Austrians—and for that matter, non-Austrians—knew anything about economics, and still smaller was the number of those Austrians whom one could call economists, however generous one might be in conferring this appellation. Besides, there were among the Austrian economists some who did not work along the lines which were called the “Austrian School”; best known among them were the mathematicians Rudolf Auspitz and Richard Lieben, and later Alfred Amonn and Josef Schumpeter. On the other hand, the number of foreign economists who applied themselves to the continuation of the work inaugurated by the “Austrians” was steadily increasing. At the beginning it sometimes happened that the endeavors of these British, American, and other non-Austrian economists met with opposition in their own countries and that they were ironically called “Austrians” by their critics. But after some years all the essential ideas of the Austrian School were by and large accepted as an integral part of economic theory. About the time of Menger’s demise (1921), one no longer distinguished between an Austrian School and other economics. The appellation “Austrian School” became the name given to an important chapter of the history of economic thought; it was no longer the name of a specific sect with doctrines different from those held by other economists.
There was, of course, one exception. The interpretation of the causes and the course of the trade cycle which the present writer provided, first in his Theory of Money and Credit2 and finally in his treatise Human Action,3 under the name of the Monetary or Circulation Credit Theory of the trade cycle, was called by some authors the Austrian Theory of the trade cycle. Like all such national labels, this too is objectionable. The Circulation Credit Theory is a continuation, enlargement, and generalization of ideas first developed by the British Currency School and of some additions to them made by later economists, among them also the Swede, Knut Wicksell.
As it has been unavoidable
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