Peter Boettke

George Mason University | GMU · Department of Economics

This essay is in celebration of the contributions of Mario Rizzo. I argue that among contemporary economists in the Austrian School of Economics tradition it is Rizzo that advanced, more than his contemporaries, the scientific research program of rational choice as if the choosers were human beings; the dynamic subjectivism and the agony of choice...

For over a generation, the collapse of communism in the Soviet Union and Eastern and Central Europe delegitimized the abolition of private property in the means of production and the practice of central planning as an effective way to achieve the ends of socialism. However, the aspiration of achieving the ends of socialism remains to this day. This...

This review discusses the unique features of Austrian economics and some of the recent contributions of this school of thought. We organize these contributions in different research “buckets” in the hope that this will be a useful guide to readers while demonstrating the ongoing relevance of the contemporary Austrian school of economics for advanci...

According to Nobel Laureate Edmund Phelps (2013, p. 123), Mises's critique of economic calculation under socialism renders him the originator of the economic analysis of property rights. This paper also suggests that implicit to Mises's impossibility theorem was also the origins of the theory of transaction costs. This raises the following question...

The basic teachings of the Austrian School of Economics and the refinements made over the past 150 years set the stage for a progressive research program in the social sciences and humanities in the twenty-first century. This progressive research program must be grounded in the subjectivism of value, cost, expectations, and knowledge. And thus it m...

Technological advances associated with computing power and the prospect of artificial intelligence have renewed interest on the economic feasibility of socialism. The question of such feasibility turns on whether the problem of economic calculation has fundamentally changed. In spite of the prospect of what King and Petty (2021) refer to as “techno...

Some economists argue that ignorance, real-world complexities and market failures undermine the ability of self-regulating markets to operate in a way that approximates an efficient process. In more recent discussions, cognitive processes, in the form of various biases, have become the primary focus of analytical attention. This paper counters thes...

Carl Menger’s objective in his seminal book, Principles of Economics, was to elucidate a unified account of price formation. This raises a question, which motivates our paper: to what extent, if any, can Menger account for production not directly organized by the price mechanism, and therefore a theory of economic organization and its formation thr...

Using economic reasoning, Julian Simon offered crucial insights into a range of pressing issues including the environment, immigration, and economic development. The main lesson from Simon’s scholarship is that the ultimate resource does not reside in the ground (natural resources), or even in the accumulated wisdom and knowledge in books and scien...

Macroeconomic theories picture the economy as a phenomenon tractable by their analysis and thus manageable by macroeconomic policies guided by this analysis. This approach has withstood recurrent policy failures, competing theories and several changes of policy paradigms, from Keynesianism to monetarism, because the development of economics as a di...

Carl Menger’s Principles of Economics was published in 1871, and was a central text in the marginalist revolution in economic theory. From the beginning, however, it was recognised that Menger’s “Austrian” brand of neoclassical economics stood out from the contributions of Jevons and Walras in the marginal revolution due to his emphasis on subjecti...

Economists well understand that the work of Friedrich Hayek contains important theoretical insights. It is less often acknowledged that his work contains testable predictions about the nature of market processes. Vernon Smith termed the most important one the ‘Hayek hypothesis’: that gains from trade can be realized in the presence of diffuse, dece...

The growing preoccupation with identity within public discourse raises important questions concerning its effects on democratic governance. Building on the work of James M. Buchanan, we hope to show that (1) the logic of identity politics raises costs to political cooperation, (2) the phenomenon of identity politics flows from the larger rents asso...

The purpose of this paper is to study the organization of inquiry at two centers that played a crucial role in the creation, emergence and development of the Virginia School of Political Economy (VPE): the Thomas Jefferson Center for Studies in Political Economy and Social Philosophy (University of Virginia) and the Center for the Study of Public C...

Contemporary monetary institutions are flawed at a foundational level. The reigning paradigm in monetary policy holds up constrained discretion as the preferred operating framework for central banks. But no matter how smart or well-intentioned are central bankers, discretionary policy contains information and incentive problems that make macroecono...

What is the relationship between central planning, pervasive shortages, and soft budget constraints under socialism? In this paper, we address this question by exploring the evolution of János Kornai’s work on the operation of real-world socialism. In doing so, our goal is to reframe Kornai’s contributions to the political economy of socialism by f...

This paper evaluates the contribution of Risk, Uncertainty, and Profit to the development of economic theory in the 20th century. Our argument in this paper is twofold. First, we contend that this book embodied what had been the common knowledge of early neoclassical economics prior to World War II (WWII). Second, we also argue that embryonic to Kn...

Perhaps the most important element of James Buchanan’s contribution to constitutional economics is his differentiation between pre- and post-constitutional levels of decision-making. At first glance, a tension may appear between those two levels of analysis. In one, the rules by which we live are up for debate, allowing us to exercise our creative...

We argue that the policy response to the COVID‐19 pandemic by all levels of government around the world is not consistent with recommendations from standard welfare economics. Thus, it is important to ask why such policies have been adopted. That opens the door to examining the political economy of the COVID‐19 pandemic. This requires examining the...

What can we learn about applied price theory from the Bourgeois Era? In this paper, we contend there are three important lessons that can be extracted from McCloskey’s work on the Great Enrichment. First, transaction costs are not constraints, but objects of choice. Second, property rights are not merely a “bundle of sticks,” in that private proper...

James M. Buchanan argued that not only the study of public choice, but also property-rights economics as well as law and economics, can be traced directly to the work of scholars associated with the Thomas Jefferson Center for Studies in Political Economy and Social Philosophy at the University of Virginia (UVA). We draw attention to that point by...

Using archival material from the Thomas Jefferson Center for the Study of Political Economy and first-person recollections from relevant figures, we reconstruct James M. Buchanan’s mission (in partnership with G. Warren Nutter) to “save the books” in the related but distinct disciplines of economics and political economy. From his graduate days at...

Our focus in this chapter will be on the methodological role that Stigler played in validating what he regarded as the science of economics that he had inherited from his own teacher, Frank Knight, and how this affected his understanding not only of economic theory but also public policy. Stigler’s understanding of economic science, viewed from a K...

This paper explores the intellectual context of the Department of Economics at the London School of Economics and Political Science (LSE) during the 1930s. We will be focusing on the contributions of F.A. Hayek, along with Lionel Robbins, in fostering an intellectual environment for the transmission and incorporation of Austrian economics, particul...

This paper reconceptualizes and unbundles the relationship between public predation, state capacity and economic development. By reframing our understanding of state capacity theory from a constitutional perspective, we argue that to the extent that a causal relationship exists between state capacity and economic development, the relationship is pr...

Economics as a social science is about exchange and the institutions within which exchange relationships are formed and transactions are executed. Yoram Barzel's contribution to economics and political economy reflect this focus on exchange and institutions. In this paper, I will sketch a theory of real-existing socialist economies from a property...

Classical liberalism entails not only a view about the proper scope of government and its relationship with the market but also a distinct theory about how government should operate within its proper area. This book presents the basic governance theory and political economy principles underpinning this vision. Building upon the works of diverse aut...

Chapter 2 shows how a governance doctrine trapped in a search for pure forms of private organization or public organization, transfixed on the ideal types of the “public” and “private,” would be deficient both normatively and empirically. The chapter shows how it instead makes sense to take an approach that pivots on (a) the variety of (real and po...

Chapter 5 illuminates the specific nature of the synthesis attempted by the Ostroms’ and their associates and discusses the successes as well as the failures of their endeavors. Their effort to promote the public choice perspective in public administration, and the public administration perspective in public choice and to advance on that basis a pa...

Chapter 8 explores the issue of independent regulatory agencies. Independent regulatory agencies are seen as a serious challenge to democratic administration. They are government organizations of unelected officials, they often resist even mild audit attempts and they are very vulnerable to corruption, rent-seeking, regulatory capture and revolving...

Chapter 3 present a set of key notions to be employed in framing and approaching the dynamic governance process, and the phenomena associated with it, in ways that are particularly relevant for governance analysis and design: (a) the very idea of process-focused, dynamic governance itself, having at its core the voluntary action principle; (b) the...

Chapter 1 introduces the building blocks of an updated approach to public governance in the classical-liberal tradition: (a) the repudiation of the “seeing like a state” or “synoptic” vision of social order and governance; (b) the embracement of normative individualism as an axiomatic principle and of its corollaries, freedom of choice and freedom...

The public administration principles articulated in the previous chapters are sufficiently distinct to validate the notion that there is indeed in nuce a classical-liberal theory of public governance to be derived from the foundational liberal philosophical and theoretical writings and from the public rhetoric and positions inspired by them. Furthe...

Chapter 7 focuses on the problems of metropolitan governance, one of the first domains in which the polycentrism theoretical lenses were applied. The example of the police services is used as an overture, as the chapter revisits the field and the literature fifty years after the Ostroms engaged in the “metropolitan reform debate” and launched their...

Chapter 6 elaborates the conceptual framework and the apparatus emerging from the Ostroms’ efforts, especially the pivotal notion of polycentricity, as a unifying and organizing framework or principle for governance theorizing. First, it explicitly articulates the elements of a theory of value heterogeneity as a foundational component of the entire...

Chapter 9 pushes further the frontier of the discussion into a new, growing and controversial governance debate area: that of corporate social responsibility. One of the most sensitive issues in polycentric governance systems, with their hybrid institutional arrangements at the dynamic interface between the “public” and the “private,” is to specify...

Chapter 4 documents the conceptual territory at the interface of public administration and public choice and puts the Ostromian contribution in an interpretive context that anchors it in the intellectual history of public administration. Identifying areas of convergence and affinities between the two intellectual domains, it charts the ground opene...

Freedom of inquiry remains one of the core tenants of the liberal project. However, in a 1960 letter, James M. Buchanan argued that free inquiry was important for more than just philosophical reasons. In fact, freedom of inquiry and the ability to participate in collective choice processes was at the heart of Buchanan’s methodological commitments t...

Liberalism correctly understood is little more than the persistent and consistent applications of the principles of economics of the affairs of men be they domestic or international. These include mutually beneficial exchange, the absence of political privilege, and toleration. The institutional precondition of these principles is the rule of law,...

What explains the simultaneous critiques of economic theory and liberalism during the 1930s? Early neoclassical economists had a common understanding of the proper institutional context undergirding a liberal market order. From the marginal revolution emerged a growing emphasis on analyzing markets as equilibrium states rather than processes. Becau...

Do markets generate a “just” wage? The answer to this question will depend upon the particular theory of the market that the political economist employs. When comparing actual labor markets with the neoclassical theory of competitive equilibrium as its normative benchmark, Joseph Heath (2018) argues that factor pricing is orthogonal to normative is...

Hayek was a major player in the rebirth of the classical liberal project. His The Constitution of Liberty (1960) and Law, Legislation and Liberty (1973–1979) served as the foundations for the subsequent work of other classical liberal thinkers. Hayek developed a liberal (as opposed to illiberal) view of classical liberalism in which the end goal is...

In order to understand Hayek’s intellectual journey, one must appreciate his formation in Vienna during the early twentieth century, one of the most vibrant intellectual centers of the time. Hayek was familiar with the debates on the role of epistemology in the natural sciences, and these arguments influenced his own understanding of the scope and...

Hayek was born in Vienna, Austria, in the last year of the nineteenth century. His academic career would take him first to London, then to Chicago, Salzburg, and finally, Freiburg. In Vienna, he studied under Friedrich Wieser, one of the leading economists of his generation, and then began research under the direction of his intellectual mentor, Lu...

Hayek spent much of his intellectual life trying to identify the institutional foundations of a society of free individuals. In doing so, he ended up investigating topics beyond the scope of economics proper and entered into the realm of legal and political theory. During this time, he came to realize that a society that optimizes both on the degre...

Hayek’s project is a challenge to the scientistic understanding of economics and political economy, and a rejection of constructivist rationalism in social philosophy. It is a project full of tensions, but also of great promise. As a social scientist, he emphasized the limits of our knowledge in devising institutions. As a political economist, he m...

Hayek’s understanding of the nature of the market process developed as a critique of the economic theory of market socialism. These market socialists believed that a centrally planned economy, organized around the rational economic order described by neoclassical economics, would outperform the anarchy of the free enterprise system. To Hayek, this...

Hayek’s economics is fundamentally price theoretic. Economy-wide dynamics can only be understood as the result of individual agents, each endowed with dispersed, subjective, and often contradictory knowledge, carrying out their plans according to the information conveyed by the price system. This insight has been extremely influential to the develo...

What would Hayek have to say about financial crises and the Great Recession? In the mind of the public policymakers, the Great Recession constituted the most serious challenge to free market ideas since the Great Depression. The bust of the housing bubble led to a financial market crash, which in turn led to a severe economic downturn. Markets seem...

Hayek belongs to a long tradition of social scientists who saw themselves as contributing to the “invisible hand theorizing” of Adam Smith. In this, he was influenced by other Austrian economists, particularly Carl Menger and Ludwig von Mises. Menger was the first economist to develop an evolutionary theory of institutional formation, which he used...

The Road to Serfdom is by far Hayek’s most successful work. It is also deeply misunderstood. Critics and advocates of his position alike interpret Hayek as saying that any step toward the concentration of economic power into the hands of the government must necessarily lead to totalitarianism. In short, Hayek’s argument is seen as a slippery slope...

Friedrich Hayek’s ideas played a fundamental role in all major debates over economic policymaking throughout his lifetime and beyond. They were developed in a precise historical context and were the result of the intellectual influence of his teachers and colleagues. Unfortunately, they are surrounded by the following misconceptions: his economics...

This paper explores James Buchanan’s contributions to monetary economics and argues these contributions form the foundation of a robust monetary economics paradigm. While often not recognized for his contributions to monetary economics, Buchanan’s scholarship offers important insights for current debates, especially the renewed interest in narrow b...

We restate Mises’ argument about the impossibility of socialist calculation through the lenses of modern developments in microeconomic theory. In so doing, we provide an alternative interpretation of the debate between Austrians and Market Socialists, which we believe should inform economists’ understanding of the market process.

Schumpeter’s theory of socialism pivots on his response to Ludwig von Mises’s claim that rational economic calculation is “impossible” in a socialist economy. Mises held that because socialism eliminates market prices for the means of production, it is impossible under socialism to know the relative scarcities of productive inputs, and thus to dete...

Do markets generate a 'just' wage? The answer to this question will depend upon the particular theory of the market that the political economist employs. By comparing actual labor markets with the neoclassical theory of competitive equilibrium as its normative benchmark, Joseph Heath (2018) argues that factor pricing is orthogonal to normative issu...