Review of Austrian Economics, 11: 19–30 (1999)
1999 Kluwer Academic Publishers
Should Austrians Scorn
LELAND B. YEAGER
ustrian economists try to explain how a whole economic system functions.
They do not focus narrowly on the circumstances of the individual household
or the geometry of the individual ﬁrm. They investigate the coordination of
the mutually inﬂuencing yet separately decided activities of many millions of
they investigate general interdependence.
General equilibrium is a somewhat narrower concept. (“GE” is a convenient abbrevia-
tion for both “general equilibrium” and, as context requires, general-equilibrium theory or
approach.) By GE I mean work by and in the tradition of L´eon Walras, Vilfredo Pareto,
Gustav Cassel, Gerard Debreu (1959), Robert Kuenne (1963, 1968), Kenneth Arrow and
Frank Hahn (1971), and others. Distaste for GE among Austrian economists is familiar,
as it was among Chicago economists such as Milton Friedman and George Stigler (who
assumed that it somehow stood in rivalry with Marshallian partial-equilibrium analysis).
Austrians sometimes state explicit reasons for their scorn, but often they take the reasons
as too well known to need repeating.
I myself have been accused of a GE mindset in a
context that takes such a mindset for granted as a bad thing. (Salerno (1994, pp. 115–120))
Examples of scorn
Jes´us Huerta de Soto provides an example of scorn in his 1992 Spanish book on socialism,
economic calculation, and entrepreneurship. It is an excellent and insightful book, apart
from some methodological preaching. Huerta de Soto regrets
the negative effects that mathematical formalism and the pernicious obsession with ana-
lyses based on full information and on equilibrium have had on the development of our
science. It is likewise necessary to abandon the functional theory of price determination
and replace it with a theory of prices that explains how these are established dynamically
as the result of a sequential and evolving process driven by the force of the entrepreneurial
function, that is, by the human actions of the actors involved, and not by the intersec-
tion of mysterious curves or functions lacking any real existence, since the information
Austrians pursue a line of research marked out by Adam Smith, trying “to explain how a system of ‘Natural
Liberty’, a market economy based upon private ownership and the self-interested pursuit of utility and proﬁts,
could become coordinated in such a way that it generates ever-expanding circles of productivity, efﬁciency and
growth” (Boettke and Prychitko (1998, p. x)).
Reasons are reviewed by Boettke and Prychitko (1998) and in several of the articles reprinted in the volumes
that they edited. Their Introduction, those articles, and the present article reinforce and supplement each other.