≡ Menu

It’s Not Just An Austrian Position

Here’s a letter to a new correspondent:

Mr. F__:

Displeased with what you call my “excessive antagonism even to mild industrial policy,” you allege that I “espouse an extreme rendering, only believed by apostles of von Mises, of limits on government planners’ capability of knowing how they may allocate resources to improve the economy’s health.”


Here’s a pop quiz: Who wrote the following?

Because scarcity exists, competition is inevitable; some allocation must be made. If price competition is restricted or suppressed, political competition of one form or another will occur. When prices are arrived at by the free interaction of producers and consumers, it is possible to ascertain worth to consumers. When distribution of scarce goods and services is made by nonprice political criteria, worth to consumers remains unknowable.

Answer: The above passage was written by the late UCLA economists Armen Alchian and William R. Allen, neither of whom can credibly be accused of having been an apostle to anyone, and certainly not to Mises. This passage appears on page 416 of Alchian’s and Allen’s Universal Economics (which is the 2018 version of their famous textbook, University Economics) – a book that never, in its 716 pages, mentions Mises.

I’m sure, however, that Alchian and Allen accepted Mises’s – and Hayek’s (and, later, Don Lavoie’s) – brilliant demonstration that attempts to improve the overall economy by allocating resources in ignorance of market signals are doomed to fail. But this acceptance was hardly an “extreme” position. It was rooted in a widely held appreciation of the unfathomable complexity of modern market economies – an appreciation had not only by economists who label themselves “Austrian,” but also by many economists who do not, including Milton Friedman, Ronald Coase, Harold Demsetz, Vernon Smith, Thomas Sowell, and Deirdre McCloskey.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030