Lesson 1 of 6
The shortest honest path
Three primary works and one critic, in order, with what each one gives you and what it does not. Under three hundred pages for the whole set.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
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In one minute
- Start with the two short papers, not the big books. Together they are under a hundred pages and they contain the two arguments everything else develops.
- Read one critic early rather than at the end. Reading a tradition for a year before meeting its objections is how a reader becomes a partisan without noticing.
- Every item here was obtained and read for this track, and where an edition matters the edition is named.
A reading list that opens with a thousand-page treatise is a reading list nobody finishes. This one is ordered by what each work gives you per page.
The path, in order
- FirstHayek on knowledgeThe 1945 paper in the American Economic Review, collected as chapter four of Individualism and Economic Order, 1948. About twelve pages in the journal, and the most influential thing the tradition produced.
- SecondMises on calculationThe 1920 paper, in the English translation printed in Hayek's Collectivist Economic Planning, 1935, and reprinted since. About forty pages, and the origin of a twenty-year argument.
- ThirdThe cycle itselfHuman Action, 1949, chapter twenty, on interest, credit expansion and the trade cycle, with a section named for the monetary or circulation credit theory.
- FourthA critic, earlyCaplan's essay on why he is not an Austrian economist, published on his university page, which sets out what a sympathetic former adherent thinks does not work.
Why this order
The knowledge paper first because it is short, self-contained and the one part of this tradition that the rest of economics accepts. It also gives a reader a fair test: if the argument that knowledge is dispersed and that prices carry it seems obvious, the reader has absorbed more economics than they realised, and if it seems wrong, there is no point continuing until that is settled.
The calculation paper second because the whole of the fourth course in this track is about what happened to it, and because it shows the tradition making a claim precise enough to be answered. Read it with the reply in mind: Lange's essay is longer and available in the 1938 volume, and a reader who wants the argument whole should take both.
The cycle chapter third rather than first, which is the opposite of how most reading lists are built. The cycle theory rests on capital, interest and money, and reading it before those foundations produces the slogan version that the critics in the previous course are answering.
And a critic fourth, before any further reading rather than after it.
What each one does not give you
The knowledge paper has nothing about money, credit or the cycle in it, and a reader who arrives at this track through that paper alone will be surprised by how contested the rest is.
The calculation paper is an argument about socialism, not about business cycles, and its relevance here is indirect: it is where the tradition's account of what prices do was forced into the open.
The cycle chapter is a statement rather than a defence. It does not engage the objections in the case against course, most of which were published after it or in a different literature.
And the critic's essay is one person's account of why a tradition failed to convince him. It is not a survey of the criticism, which is what the fifth lesson of this course is for.
Check yourself
Why does this path start with the 1945 knowledge paper?
- Because it is the tradition's most controversial claim
- Because it is short, self-contained, and the part of the tradition the rest of economics accepts
- Because it explains the business cycle
Show the answer
Answer: B.
It contains nothing about money or the cycle. It is first because it is the cheapest way to find out whether the tradition's way of thinking is for you.Why is the cycle chapter third rather than first?
- Because it is the longest
- Because it rests on capital, interest and money, and reading it first produces the slogan version
- Because it was written last
Show the answer
Answer: B.
The theory is a conclusion drawn from foundations. A reader who meets the conclusion alone has met the version the critics find easiest to answer.When should a reader meet the critics?
- After finishing the primary sources
- Early, alongside the primary sources
- Only if the theory seems unconvincing
Show the answer
Answer: B.
Reading a tradition for a year before meeting its objections is how a reader acquires a position without having tested it.Sources
- Hayek, 'The Use of Knowledge in Society', American Economic Review, 1945, reprinted in Individualism and Economic Order, 1948, chapter four.
- Mises, 'Economic Calculation in the Socialist Commonwealth', German original 1920, English translation in Hayek (editor), Collectivist Economic Planning, 1935.
- Mises, Human Action, 1949, chapter twenty, on interest, credit expansion and the trade cycle.
- Lange, 'On the Economic Theory of Socialism', 1936 and 1937, reprinted in Lange and Taylor, On the Economic Theory of Socialism, edited by Lippincott, 1938.
- Caplan, 'Why I Am Not an Austrian Economist', an essay published on the author's university page at George Mason University.
What this leaves out
- This is a heterodox tradition. The mainstream account of the same phenomenon differs, and nothing here is a forecast or a view on any security.
- This is a path into one theory, not a survey of the school. Whole areas of its literature are outside it.
- Every work listed here was obtained and read for this track. Where a work named elsewhere in the track could not be obtained, the lesson concerned says so.