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“If you care about your own
******g country, read Ludwig von Mises and the six lessons of the Austrian economic
school, mother******!”. So said Renato Moicano, a mixed martial artist who competes
in the Ultimate Fighting Championship (UFC), in a post-fight announcement last week.
“Wise words!” says Kristian Niemietz. The Austrian school of economics, which emerged
in Vienna in the 1870s, has today fallen out of favour with the mainstream, but we
still have a lot to learn from it. Here are three vital insights.
1. Profits are not exploitative.
Marxists see capitalists as parasitic exploiters, the equivalent of a feudal landowner who does nothing but collect rents. Eugen von Böhm-Bawerk, the leading figure of the second generation of the Austrian school, showed that the role of the capitalist in a market economy is nothing like that. If you are a salaried employee, you are, to a large extent, insulated from the ups and downs of the company you work for. When it goes through a rough patch, you collect your salary just the same. You get paid from the first day even if it takes the company years to generate any profit. The flip side of this is that when the profits do arrive, you are not automatically entitled to any. “Employment contracts are like an insurance contract between risk-takers and risk-averse people. There is nothing ‘exploitative’ about that.”
2. There can be no economic calculation without market prices. Without ma
