A Clearing in the Wildernessrnby Jeffrey A. Tuckerrn”After all, money, as they say, is miraculous.”rn—Thomas CarlylernAustrian Economics: A ReaderrnEdited by Richard M. EbelingrnHillsdale, Michigaii: Hillsdale CollegernPress; 692 pp., $19.95rnAustrian Economics: Perspectives onrnthe Past and Prospects for the FuturernEdited by Richard M. EbelingrnHillsdale, Michigan:rnHillsdale College Press;rn516 pp.. $19.95rnThe economics profession, like manyrnother branches of the social sciences,rnlong ago had to decide whether tornadopt positivist methods, as if its objectsrnof study were organisms of constantrnand predictable motion, or to accountrnfor the infinite variety in humanrnaffairs by building a theory of the patternsrnof human action. We know whichrndirection it chose: it attempted to passrnitself off as a physical science, a fact wernare reminded of every October when thernNobel Prize committee rewards anrneconomist for some path-breaking scientificrndiscovery, alongside great physicistsrnand biologists. It is all but entirelyrnforgotten that “the economy” is simplyrnthe composite choices of real human beingsrnacting to improve their lot, whichrnis not always defined b) their bank accounts.rnThe branch of economics called thernAustrian School, founded 120 years agornbut having roots in late-Scholastic economicrnthought, chose a different pathrnand as a result has been shunned by therndominant members of the profession forrndecades. The school has also shelteredrnthis century’s primary opponents of socialismrnand champions of free markets,rnmany of whom have been heroes to thernold American Right, including CarlrnMenger, Eugen von Bohm-Bawerk, Ludwigrnvon Miscs, F. A. I layek, I lenry Hazlitt,rnWilhelm Rocpkc, and a series ofrnmodern Austrian economists, includingrnJeffrey A. Tucker is editor of thernFree Market.rnIsrael M. Kirzner and Murray N. Rothbard.rnThe connection between humanernmethodology and free markets is notrnincidental. The number-crunchingrneconomist is an essential player in thernmodern project to manage the economyrnas if it were a hvdraulic machine.rnThis machine has three prinrary levers—rnfiscal policv, monetarv policy, and regulatoryrnpolicy—and an endless numberrnof secondary levers. And the mathematicalrnmodels that dominate the professionrn—whether Keynesian, monetarist,rnor supply side—assume sectors of thernceonomv to be homogeneous units subjectrnto scientific control—ignoring whornis being controlled and for what ends.rnEconomists are sympathetic to varyingrndegrees of economic planning for thernsame reason that foreign policy expertsrnlike globalist ideology: without it, thernvalue of their opinions and servicesrnwould be greatly diminished. No matterrnthat the attempt to fulfill the macromanagerialrnproject has been an abysmalrnfailure, as have economists’ attempts tornpredict the future with precision.rnThe Austrian School offers an entirelyrndifferent program. It constructs a deductiverntheory of economic laws thatrnboth applies universally and attempts tornaccount for heterogeneity in consumerrnpreferences, material resources, laborrnskills, and time horizons. It makes arnsharp distinction between theoreticalrneconomics, which requires no accumulationrnof data, and history. Conflatingrnthe two can be dangerous, as when inrnthe 1970’s economists assumed that arnpattern showing an inverse relationshiprnbetween unemployment and inflationrnwas an economic law, though in fact itrnwas only a historical contingency. Thisrnflawed assumption led policymakers tornpull their levers to create a stagflationrnconsisting of both high inflation andrnhigh unemployment. For the AustrianrnSchool, constructing an economic theoryrnfrom data is akin to constructing arnsvstem of morals from the experience ofrnone generation.rnThe school’s prominence has ebbedrnand flowed since its founding 120 yearsrnago with a smashing economic treatisernby Carl Menger [Principles of Economics)rnshowing that Adam Smith’s theoryrnof economic value (also Marx’s) wasrnfatally flawed. Economic value, Mengerrnsaid, is determined by individual preferences,rnunique to each person, and notrnby how much work is used to producerngoods. His book, still pleasurable tornread, played a role in revolutionizingrneconomic thinking. But his school fellrninto near obscurity with the Great Depression,rnwhich seemed to discredit marketrntheory and bolstered the idea thatrncentral planning should be the wav ofrnthe future.rnThe Austrian School gained new adherentsrnwhen a Nobel Prize committeernrecognized Hayek’s argument that centralrnbanking creates business cycles byrn30/CHRONICLESrnrnrn