The Dao of Capital: Austrian Investing in a Distorted World

Chapter Seven

“The Market Is a Process”

For more than a century the Austrian School has been dismissed as antiquated and unscientific because of its fundamental methodology. Mainstream economics—epitomized first in the early twentieth-century career of John Maynard Keynes (whose famous book The General Theory was literally named as an allusion to the revolution of Einsteinian relativity theory) and ultimately in the mid-twentieth-century career of Paul Samuelson (the first American to win the economics Nobel, in 1970)—moved emphatically beyond the Austrians’ aprioristic approach. Its new direction was toward a distinct alignment with other sciences—the “physics envy,” as it has been called, of quantitative and empirical techniques. But while the physicists make steady advances in their field, the “expert” fine-tuning of the mathematical economists has plunged the world back into years of repeated financial crisis and labor market stagnation—the very problems they told us they had solved after studying the Great Depression. Consumers and producers, with their subjective expectations and preferences, do not conform well to mathematical models. It is the very nature of economics as a social science that requires the logical, deductive, a priori approach of praxeology, the term Mises used for the scientific study of human action. Mises inherited the theories of Carl Menger and Eugen von Böhm-Bawerk involving value, capital, and time. As an independent-thinking disciple, Mises refined ...