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How Viennese Culture Shaped Austrian Economics – Article by Erwin Dekker

How Viennese Culture Shaped Austrian Economics – Article by Erwin Dekker

The New Renaissance HatErwin Dekker
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Schools of thought are frequently named after their country or place of origin. The Chicago School, the Frankfurt School, and the Scottish Enlightenment are just some of the many examples. The geographical place is a simple shorthand for something that would otherwise be difficult to specify and name. That is also the case for the Austrian School of Economics. Or at least that is what we commonly believe. Austrian is nothing more than a shorthand for a school of economics that focuses on market process rather than outcomes, emphasizes the subjective aspects of economic behavior, and is critical of attempts to plan or regulate economic processes. Sure it originated in Austria, but it is largely neglected there today, and currently the school lives on in some notable economics departments, research centers, and think tanks in the United States. The whole ‘Austrian’ label is thus largely a misnomer, a birthplace, but nothing else.

But what if Austrian, or more specifically Viennese, culture is essential to understanding what makes this school of thought different? What if the coffeehouse culture of the Viennese circles, the decline of the Habsburg Empire, the failure of Austrian liberalism, the rise of socialism and fascism, and the ironic distance at which the Viennese observed the world, are all essential to understanding what the school was about? It would be exciting to discover that the Vienna of Gustav Mahler, Ludwig Wittgenstein, Sigmund Freud, Gustav Klimt, and Adolf Loos, would also be the Vienna of Carl Menger, Ludwig von Mises, and Friedrich Hayek. And if that is so, how would that change how we think about this school and about the importance of cultural contexts for schools of thoughts more generally?

That is the subject of my recent book The Viennese Students of Civilization (Cambridge University Press, 2016). It demonstrates that the literature, art, and cultural atmosphere are all essential ingredients of Austrian economics. The Viennese circles, of which the most famous was the Vienna Circle or Wiener Kreis, are the place where this type of economics was practiced and in which it came to maturity in the interwar period.

The hands-off attitude first practiced at the Viennese Medical School, where it was called therapeutic skepticism, spread among intellectuals. They dissected a culture which was coming to an end, without seemingly worrying too much about it. As one commentator wrote about this attitude “nowhere is found more resignation and nowhere less self-pity.”¹ One American proponent of the Viennese medical approach even called it the ‘laissez-faire’ approach to medicine.² The therapeutic skepticism, or nihilism as the critics called it, bears strong resemblance to the Austrian school’s skepticism of the economic cures propounded by the government. Some of the Austrian economists, for instance, have the same ironic distance, in which the coming of socialism is lamented, but at the same time considered inevitable. That sentiment is strongest in Joseph Schumpeter. But one can also find it in Ludwig von Mises, especially in his more pessimistic writings. In 1920, for example, he writes: “It may be that despite everything we cannot escape socialism, yet whoever considers it an evil must not wish it onward for that reason.”³

That same resignation, however, is put to the test in the 1930’s when Red Vienna, the nickname the city was given when it was governed by the Austro-Marxists, becomes Black Vienna, the nickname it was given under fascism. The rise of fascism posed an even greater threat to the values of the liberal bourgeois, and at the same time it demonstrated that socialism might not be inevitable after all. One of my book’s major themes is the transformation from the resigned, and at times fatalistic, study of the transformation of the older generation, to the more activist and combatant attitude of the younger generation. Friedrich Hayek, Karl Popper, Peter Drucker as well as important intellectual currents in Vienna start to oppose, and defend the Habsburg civilization from its enemies. That is one of the messages of Freud’s Civilization and its Discontents, of Hermann Broch’s novel The Death of Virgil, of Malinowski’s Civilization and Freedom, of Hayek’s The Road to Serfdom, Drucker’s The End of Economic Man, and of course Popper’s The Open Society and its Enemies. It is also the message of the most famous book of the period on civilization The Civilizing Process by the German sociologist Norbert Elias. These intellectuals fight the fatalism and the acceptance of decline, and instead start to act as custodians or defenders of civilization.

In the process the relationship between natural instincts, rational thought, and civilization undergoes a major transformation. Civilization — our moral habits, customs, traditions, and ways of living together — is no longer believed to be a natural process or a product of our modern rational society. Rather, it is a cultural achievement in need of cultivation and at times protection. Civilization is a shared good, a commons, which can only be sustained in a liberal culture, and even there individuals will feel the ‘strain of civilization’ as Popper put it. That is the strain of being challenged, of encountering those of different cultures, and of carrying the responsibility for our own actions. Hayek adds the strain of accepting traditions and customs which we do not fully understand (including the traditions and customs of the market). Similar arguments are made by Freud and Elias.

If that is their central concern then the importance and meaning of their contributions is much broader than economics in any narrow sense. That concern is the study, cultivation and, when necessary, protection of their civilization.

To some this might diminish the contributions of the Austrian school of economics for they might feel that they were responding to a particular Viennese experience. The respected historian Tony Judt for example has claimed that: “the Austrian experience has been elevated to the status of economic theory [and has] come to inform not just the Chicago school of economics but all significant public conversation over policy choices in the contemporary United States.”⁴ He maximizes the distance between us and them, saying that they were immigrants and foreigners with a different experience than ours. But that response only makes sense if the alternative is some disembodied truth, outside of historical experience.

My book, to the contrary, argues that what is valuable, interesting, and of lasting value in the Austrian school is precisely its involved, engaged approach in which economics is one way of reflecting on the times. And those times might be more similar to ours than you might think, as the great sociologist Peter Berger has argued. Troubled by mass migration, Vienna experienced populist politics. The emancipation of new groups lead to new political movements which challenged the existing rational way of doing politics. A notion of liberal progress which had seemed so natural during the nineteenth century could no longer be taken for granted in fin-de-siècle and interwar Vienna. That foreign experience, might not be so foreign after all.

Viennese-Students-Civ

For more information on my book, The Viennese Students of Civilization: The Meaning and Context of Austrian Economics Reconsidered, click here.


Erwin Dekker is a postdoctoral fellow for the F. A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics. He is assistant professor in cultural economics at the Erasmus University in Rotterdam, the Netherlands.


References

1. Edward Crankshaw. (1938). Vienna: The Image of a Culture in Decline, p. 48.
2. Maurice D. Clarke. (1888). “Therapeutic Nihilism.” Boston Medical and Surgical Journal 119 (9), p. 199.
3. Ludwig von Mises. (1920). Nation, State, and Economy. p. 217.
4. Tony Judt. (2010). Ill Fares The Land. p. 97–98.

The Single Bullet That Killed 16 Million – Article by Edward Hudgins

The Single Bullet That Killed 16 Million – Article by Edward Hudgins

The New Renaissance Hat
Edward Hudgins
June 27, 2014
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A century ago, on June 28, 1914, Serbian nationalist Gavrilo Princip shot and killed Archduke Franz Ferdinand, heir to the emperorship of Austria-Hungary, along with his wife, on their visit to Sarajevo.
Gavrilo Pirincip fires on the Archduke and Archduchess, June 28, 1914
Gavrilo Pirincip fires on the Archduke and Archduchess, June 28, 1914

World War I led to 16 million military and civilian deaths, plus nearly 20 million wounded. And the misery and horror of that war resulted in another casualty: confidence in the Enlightenment enterprise and human progress.

Enlightenment Europe

In the late seventeenth century Isaac Newton’s discovery of the laws of universal gravitation dramatically demonstrated the power of the human mind. Understanding of the world and the universe—what we call modern science—became a central Enlightenment goal.

At the same time, the struggle for Parliamentary supremacy in England led John Locke to pen his powerful treatise on individual liberty. Creating governments limited to protecting life, liberty, and the pursuit of happiness also became a central Enlightenment goal, which culminated in the creation of United States.

Enlightenment values were not limited to Britain or America. They were universal and created a European-wide culture of individualism, freedom, and reason.

Collectivist anti-Enlightenment

But Enlightenment thinkers and activists not only had to fight entrenched oligarchs and rigid religious dogma. Starting with Jean-Jacques Rousseau, a school of thought—if thought it could be called—arose that opposed individualism with the good of “society,” or the group, and rejected reason in favor of emotion and instinct.

The French Revolution starting in 1789 saw Enlightenment ideas losing ground to reactionary and collectivist forces. The result was the Terror and the guillotine, dictatorship and a new monarchy, and the carnage of the Napoleonic wars–the first great modern global conflict, which ended in 1815 at Waterloo.

In the century that followed Europe suffered only short regional conflicts, most relating to the unification of Italy and of Germany. The Industrial Revolution was creating prosperity. Governments were granting citizens rights to political participation and were recognizing their civil liberties. By the early twentieth century, continued progress seemed inevitable.

Pernicious nationalism

But the pernicious collectivist ideology combined with a major European cultural defect: nationalism. This form of collectivism meant more than just an appreciation for the aesthetic achievements—art, music, literature—of the individuals in one’s ethnic group. It meant putting one’s group or one’s country, right or wrong, ahead of universal values and principles. Kill for King or Kaiser!

There’s an irony in the fact that poor Franz Ferdinand wanted to recreate Austria-Hungary as a federation in which the minority groups—that were always either dominated by Viennese elites or at one another’s throats—would have autonomy similar to that enjoyed by the American states. If only Princip had waited a while.

Unfortunately, the volatile combination of nationalism, an interlocking treaty system, and the Britain-Germany imperial rivalry only required a spark like the Sarajevo assassination to set off a global conflagration.

Collectivism vs. collectivism

After World War I, individualism and “selfishness” got much of the blame for the conflict. And science was no longer associated only with progress. It had created machine guns, tanks, and poison gas, and made possible a fearful slaughter.

Idealists created the League of Nations to prevent such wars in the future. But they tried to cure the problem of nationalism with more nationalism, simply accentuating the problem. Indeed, Hitler used the principle of self-determination of peoples as an excuse to unify all Germans into one Reich by force. His form of collectivism also entailed enslaving and wiping out “inferior” races.

The catastrophe of World War II was followed by a Cold War, which saw the Soviet Union asserting another form of collectivism, pitting one economic “class” against another. Western Europe opposed the brutal Soviet kill-the-rich socialism with a kinder, gentler, loot-the-rich democratic socialism. The Soviet Union with its communist empire collapsed in 1991, and Western European democratic socialism is going through a similar disintegration in slow motion.

Still recovering from the Great War

Today, Enlightenment values are making a comeback. The communications and information revolutions, and the application of new technologies in medicine, transportation, and other fields, again demonstrate the power of the human mind and the benefits it confers.

Furthermore, many of the new entrepreneurs understand that it is they as individual visionaries who are transforming the world. And while their achievements benefit everyone, they strive because they love their work and they love to achieve. They pursue happiness. They hold Enlightenment values—though in many cases their politics still need to catch up.

The world is still digging out from the consequences of that single bullet a century ago, which led to the deaths of millions. Putting our country and the world back on the path to liberty and prosperity will require a recommitment to the Enlightenment values that created all the best in the modern world.

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Dr. Edward Hudgins directs advocacy and is a senior scholar for The Atlas Society, the center for Objectivism in Washington, D.C.

Copyright, The Atlas Society. For more information, please visit www.atlassociety.org.