histofthought1

Introductionxiered 'proto-Austrians', with a sophisticated subjective utility theory of valueand price. Furthermore, some of the scholastics were far superior to currentformalist microeconomics in developing a 'proto-Austrian' dynamic theoryof entrepreneurship. Moreover, in 'macro', the scholastics, beginning withBuridan and culminating in the sixteenth century Spanish scholastics, workedout an 'Austrian' rather than monetarist supply and demand theory of moneyand prices, including interregional money flows, and even a purchasingpowerparity theory of exchange rates.It seems to be no accident that this dramatic revision of our knowledge ofthe scholastics was brought to American economists, not generally esteemedfor their depth ofknowledge ofLatin, by European-trained economists steepedin Latin, the language in which the scholastics wrote. This simple pointemphasizes another reason for loss of knowledge in the modern world: theinsularity in one's own language (particularly severe in the English-speakingcountries) that has, since the Reformation, ruptured the once Europe-widecommunity of scholars. One reason why continental economic thought hasoften exerted minimal, or at least delayed, influence in England and theUnited States is simply because these works had not been translated intoEnglish. 7For me, the impact of scholastic revisionism was complemented andstrengthened by the work, during the same decades, of the German-born'Austrian' historian, Emil Kauder. Kauder revealed that the dominant economicthought in France and Italy during the seventeenth and especially theeighteenth centuries was also 'proto-Austrian', emphasizing subjective utilityand relative scarcity as the determinants of value. From this groundwork,Kauder proceeded to a startling insight into the role of Adam Smith that,however, follows directly from his own work and that of the scholasticrevisionists: that Smith, far from being the founder of economics, was virtuallythe reverse. On the contrary, Smith actually took the sound, and almostfully developed, proto-Austrian subjective value tradition, and tragicallyshunted economics on to a false path, a dead end from which the Austrianshad to rescue economics a century later. Instead of subjective value, entrepreneurship,and emphasis on real market pricing and market activity, Smithdropped all this and replaced it with a labour theory of value and a dominantfocus on the unchanging long-run 'natural price' equilibrium, a world whereentrepreneurship was assumed out of existence. Under Ricardo, this unfortunateshift in focus was intensified and systematized.If Smith was not the creator ofeconomic theory, neither was he the founderof laissez-faire in political economy. Not only were the scholastics analystsof, and believers in, the free market and critics of government intervention;but the French and Italian economists of the eighteenth century were evenmore laissez-faire-oriented than Smith, who introduced numerous waffles