 Hello, and welcome to my first video in a series where I will endeavour to explain the basics of the various concepts that make up the Austrian School of Economics. I've already done an informal preamble to the series in a video called Demystifying Economics, where I talk about how to open your mind as to what economics actually is, and that it is not some sort of arcane mystery only understood by members of Mensa. Economic theory can be understood by anyone when it's presented as a string of logical concepts about how humans behave. So, if you find yourself feeling intimidated at the prospect of trying to understand the Austrian School of Economics, go ahead and watch that video and hopefully it can put you more at ease and get you motivated to learn. So, to introduce the school, we have to outline where it comes from, aside from Austria obviously, understand what it stands for, some of its definitions, learn the key thinkers and their contributions, and then in the next episode we will begin exploring the subjective nature of value. So yes, as the name suggests, you can probably tell that the Austrian School started in Austria, but ironically it began as a resurrection of various French Enlightenment ideas. The founding of the school is considered to be with the publication of Karl Menger's book, The Principles of Economics. Menger was born on February 23rd, 1840 in what was then Galicia, a region of the Austrian Empire, but is now in modern-day Poland. In his early professional life, Menger worked as a journalist reporting on and providing analysis of financial markets. During his time as a reporter, he increasingly realised contradictions in how the classical economists explained where prices and value come from and how people actually behave towards them. Up until then, the price of a good was mostly believed to be derived from the cost of creating it. Also on the rise was the Marxist labour theory of value that any value a good has comes directly from the amount of labour a worker puts into it. Menger shattered these views in what he called a rediscovery of the subjective theory of value and marginal utility from French liberal thinkers such as Richard Cantillon, Anne Robert Jacques Turgot, Jean Baptissé, Antoine de Stoutetrasse, and Frédéric Bastiat. And I have no idea if I pronounced any of those correctly. But to cut it short, Menger espoused that any claim of an item's objective value is impossible, as every individual person values everything differently and uniquely and it is therefore subjective. This notion, when accepted and fully realised, halts in its tracks any ideas that an economy can or must be planned in its production, because people have to choose for themselves what they will buy and that tells producers what it is they should be producing. Choice is not just a civil convenience to Menger, it is an economic necessity. Profit and loss are signals of what consumers are willing to buy, and this process is what steers the famous invisible hand of Adam Smith. Menger's marginalist ideas helped restore economics to its status as a social science, a study of human action based on deductive logic, and not a hard science as it was coming to be viewed, something to be calculated and planned by the intellectuals of society, rather than left to work on its own devices. It's an absolute tragedy that if you study economics today, you will probably never even hear of Karl Menger. His contributions flipped the table of all economic thought and started what is known as the marginal revolution. One of the earliest and most important concepts you'll be taught in economics is marginal utility and indifference, and it would not be this way if not for him. But thankfully for us now, his groundbreaking economic ideas found many contemporary followers, and he taught many other influential members of the early Austrian school such as Friedrich von Weisser and Jürgen Bumberwerk, who went on to be the finance minister of Austria-Hungary and who famously applied the Austrian theory of price determination amongst other ideas to utterly rebuke Karl Marx's economics and exploitation theory in his works Capital and Interest and Karl Marx and the close of his system. One particular student of Bumberwerk was the titan of Austrian economics and perhaps its most acclaimed member, who expanded the school significantly greater than any of those who came before him, Ludwig von Mises. Mises' contributions to the school make up a very long and very revered list. Chief among them are the Austrian business cycle theory, the regression theorem of purchasing power, the evenly rotating economy concept, economic epistemology, an even more brilliant and utterly crushing rebuttal of socialism using the now famous economic calculation problem, refining deductive economics into praxeology, and along with his even more famous student Friedrich von Hayek successfully predicted the Great Depression of the 1930s. Mises was a total academic powerhouse. His breadth of knowledge was marvellous and he brought it all back to reinforcing the Austrian school in its methodology, analysis, a priori and a posteriori justifications, and its empirical truth. His early writings were so powerful that he finally broke the Austrian school out of Austria, giving the school and himself great recognition around the world, especially in America and Britain as the major Austrian school works were finally translated into English. He and his contemporaries had to flee Austria in the 1930s as the Second World War approached. Hayek left for England and Mises went to Switzerland, where he started writing his masterpiece Human Action, which is widely considered to be the premier cornerstone of the entire school. Meanwhile in London, Hayek found himself incredibly preoccupied with being the prime intellectual opponent of the economist John Maynard Keynes and his many followers. Keynes's ideas had completely taken over the whole economic discussion in Britain after his involvement with FDR, the New Deal and the Great Depression. Keynes saw the boom and bust cycle as being driven by crashes in consumer demand and being an inherent flaw in the market economy system that governments had to regulate and smooth out. Given that alongside Mises, Hayek had successfully predicted that government intervention of credit and the money supply would cause the Great Depression and claimed that the boom and bust was almost entirely the fault of external meddling in the market, it's safe to say that Hayek posed a substantial threat to Keynes and subverted almost everything he stood for and had become so famous for. The Austrian and Keynesian battle of these two men almost solely shaped how all economic thought would develop in the rest of the 20th century. Yet even still, this is perhaps not what Hayek is most famous for. His 1944 book The Road to Serfdom is perhaps the most widely recognised book published by any Austrian school author and set the stage for all libertarian thought that came after it. It was even the first libertarian book I ever read and is so often my first recommendation to new readers. It's described as a warning of the danger of tyranny that inevitably results from government control of economic decision making through central planning and it rescued the idea of capitalism from the encroaching jaws of Marxist socialists and nationalist socialists who were literally tearing the world apart at the time. After the war's conclusion, Hayek went to the University of Chicago not long after they took on the massively famous Milton Freedman and Mises went to New York and found himself in the company of even more outstanding students, the primary two being Henry Haslett and Murray Rothbard. His name lives on today in the Mises Institute which Rothbard co-founded. I have gushed over Rothbard so many times on this channel and it's always for good reason. Murray Rothbard took Mises's already phenomenal views and managed to improve on them, permanently solidifying the Austrian school into a school far beyond economics and into an entire political and philosophical view on the nature of humanity, our rights, our actions and our future. Rothbard can safely be known as Mr Libertarian for his unprecedented efforts in continuing to expand the already vast field to even greater heights. He published his own masterpiece of a treatise, Man, Economy and State in 1963, which encapsulates perfectly how Rothbard mantled and improved all of Mises' ideas and gave the world its first extensive justification and defence of anarcho-capitalism. And our final character in this star-studded line of tutelage stretching back to Menger's founding, we arrive at Rothbard's own student, Hans-Herman Hopper. The thing that Hopper is most known for is his almost extreme culturally conservative views of Libertarianism, but anyone who views him as just that is doing themselves a heinous disservice. Hopper gave the Austrian school argumentation ethics, his philosophical determination for the proof of self-ownership through private property and not only as acceptable or moral, but as an objective truth. Just as Mises made the economic calculation problem the prime weapon against the encroachment of 20th century socialism, I believe Hopper's argumentation ethics must be our prime weapon against our society's current encroachment of post-modernism. He is, after all, an Austrian economist through and through, and has continued the Misesian principles of praxeology and methodological individualism to great effect. So it's clear from this history that the Austrian school of economics is a free market capitalist one, and arguably the most free market economic school ever devised, because it takes the notion very seriously. Somebody who would describe themselves as pro-free markets would believe that government intervention in the economy such as high taxes, price controls, over-regulation and so on are detrimental to human prosperity and liberty. But have they ever considered the nature of whether or not government is fit to control and regulate money itself? Economic monetarists stemming from Milton Friedman and people like him would say that they are, and they inadvertently say that free market principles work for what people use their money on, but the principles don't work for the very money itself. This is one example of an area of free market thought that the Austrian school stands firm on where others do not. These convictions come from many places, but often it only takes a cursory glancer history to see why they view capitalism as a good force and government as a bad one. Consider this chart showing how world poverty has plummeted since the early 19th century. The 19th century is when most people believe that Western capitalism, that being in the United States and United Kingdom, had too much power, that it was making the rich richer at the expense of the poor becoming poorer, being exploited in almost slave-like conditions just so the fat cat robber barons can use the profit from their labor to go on exploiting and pillaging even more. But how can this mental image of early capitalism be true if at its supposed peak of exploitation the poverty curve was already falling dramatically? From this derogatory narrative we know that governments weren't intervening in the economy, so it obviously wasn't government regulation or welfare that was making poverty a thing of the past, was it? The narrative is self-defeating as the empirical evidence alone tells us that capitalism by its own nature makes all participants wealthier, only that some become wealthy quicker than others. But when the poorest of society were for the first time in all of history able to begin climbing out of poverty, the idea that capitalism is exploitative and unjust makes no sense at all. And then what about the 20th century? Well from the millennium up until the end of the Second World War we see a clear stagnation in the curve. Humanity's first ever global industrialized wars obviously helped hold poverty where it was, but this is also the period in the west known as the progressive era. The two people who most signify the progressive era are presidents Woodrow Wilson and Franklin Roosevelt. Aside from both of these men taking the US into the world wars they also shared similar societal visions. They looked at capitalism, this system which is the only one ever in human history that was able to make more than a dent in human poverty and did it just by letting spontaneous agreements be made between people, and they didn't like it. They believed humanity needed plans from above, society needed engineering to achieve aims of equality, never mind that all people, no matter if they were financially unequal, were becoming more prosperous with every passing year. Wilson created the Federal Reserve to give the government the ability to plan the economy's money supply and created the income tax, claiming to be helping the poor while simultaneously taking money away from them. After the American government gave itself a monopoly over the money supply, the Great Depression happened and somehow everyone was surprised. FDR came into office and brought in the new deal, and instead of asking if the depression was a government-made problem, he went out and spent like a drunk sailor on shore leave with a limitless credit card and was praised for ending the depression, despite the fact that it didn't recover until after the new deal was over and done with. To the Austrians, it is no surprise at all that the grand social engineering and planning policies of these men stalled poverty improvements. But later, after the Second World War, we have the Cold War, a period where socialism and capitalism were fighting on the world stage. Socialism was losing the fight from the very beginning, and the largest socialist countries in the world, such as the USSR and Communist China, either collapsed entirely or moved to more market-focused economies before it was too late. The second half of the 20th century saw socialism falling and capitalism becoming the norm for the entire world, and as this happens, poverty goes into a nosedive, and this is not by coincidence. There is one constant and unavoidable theme when you view this chart with the hindsight of economic history. Free market capitalism eliminates poverty, everything else either stalls or creates it. Yet there are many people who hate it, and they have many reasons why. Often the reasons they give are a direct cause of government intervention or any alternative they suggest for a particular problem has already been proven to in fact make the problem worse. This is where the Austrians introduced themselves. Throughout my series of videos, it will become clear how Austrian theories don't even stumble in the face of all anti-capitalist arguments and always have a counter-argument to come back with. Capitalism is good, and the Austrian school is the total realisation of capitalism. So I hope this introduction has served you well. If you enjoyed it, please subscribe and click the bell icon to be informed of when I upload the coming videos in this series, which I will always attempt to make approachable and easy to follow, so you have the full basic understanding of the school and can read the great treatises like man, economy and state with no trouble. Thanks again for watching and take it easy.