Murray N. Rothbard, Austrian Economics: Tensions and New Directions (1994)

Murray N. Rothbard’s journal book review assesses the 1992 collection edited by Bruce Caldwell and Stephan Boehm through a dispute over what counts as contemporary Austrian economics. His central objection is that the volume’s selection of contributors and subjects marginalizes the Misesian tradition while presenting the Hayek–Kirzner approach as representative of the school. The review moves from criticism of the collection’s coverage to methodological distinctions, then develops substantive arguments about entrepreneurship, uncertainty, equilibrium, and historical interpretation. Its significance lies in this combination: Rothbard evaluates the book by advancing his own account of the divisions within Austrian economics.

The opening establishes the problem of representation:

As Lawrence H. White points out in his perceptive, if necessarily brief, afterword to the book, of the eighteen papers and comments assessing contemporary Austrian economics, only two (White and Israel M. Kirzner) are by Austrians.

For Rothbard, this imbalance matters because the contributors largely overlook the school’s substantive research. He names monetary and banking theory, business cycles, capital and interest, competition, public finance, government intervention, socialism, law, and economic history among the neglected fields. His example is Alan Hamlin’s attempt to construct an Austrian welfare economics without acknowledging existing contributions. The charge is therefore more specific than exclusion of insiders: the collection’s organization, he argues, leaves readers unable to recognize an already developed research programme.

The resulting emphasis on methodology compounds this defect. Rothbard acknowledges its importance and the distinctiveness of Austrian methodological contributions, but insists that methodological reflection should illuminate economic analysis rather than displace it. Even on its chosen terrain, the volume misrepresents the school’s internal structure:

There are three distinctive and often clashing paradigms within modern Austrian economics: Misesian praxeology; the Hayek-Kirzner emphasis on the market as transmission of knowledge and coordination of plans—rather than the Misesian emphasis on continuing coordination of prices; and the ultra-subjectivism of Lachmann, which amounts to a virtual abandonment of economic theory.

This classification supplies the review’s conceptual framework. Rothbard distinguishes price coordination from knowledge transmission and plan coordination, while treating Lachmann’s subjectivism as a threat to economic theory itself. These are explicitly evaluative distinctions, not a neutral inventory. He objects especially to the editors’ conscious exclusion of praxeology despite its prominence in The Review of Austrian Economics. The small proportion of American contributors provides a possible explanation, since he identifies the United States after World War II as the principal location of the Misesian approach.

The review’s constructive centre is its discussion of Martin Ricketts’s paper and Kirzner’s reply on entrepreneurship. Rothbard reads Kirzner’s recent work as a partial movement away from entrepreneurship defined by alertness and toward the Misesian entrepreneur as capitalist, resource-owner, forecaster, and bearer of uninsurable risks:

It should by now be clear that alertness is merely one quality within the context of the bearing of uncertainty: the entrepreneur must of course be "alert" to a risk-taking opportunity.

Alertness, in this account, cannot independently explain the entrepreneurial function. Rothbard’s decisive objection is that Kirzner’s entrepreneur can earn profits through superior perception but cannot suffer losses beyond the opportunity loss of overlooking a gain. This asymmetry detaches entrepreneurial discovery from the commitment of resources under uncertainty. Rothbard credits Kirzner with partial correction while maintaining that genuine exposure to loss remains inadequately incorporated.

He then welcomes work by Kirzner and Joseph T. Salerno distinguishing Mises from Frank Knight. In Rothbard’s presentation, Knight treats uninsurable uncertainty as scientifically unpredictable and thus makes successful entrepreneurship a matter of luck. Mises instead allows unequal abilities to understand and anticipate unique historical events. Such forecasting rests on individual insight or Verstehen, rather than probability distributions:

Hence, over time, the market economy will tend to select for a body of superior entrepreneurs, of whom capitalist resource-owners are by far the most important.

Profits and losses therefore have a selective function: they reward better forecasting and penalize worse forecasting. This argument connects uncertainty-bearing to ownership and explains why Rothbard regards the capitalist entrepreneur as central rather than incidental.

The equilibrium discussion extends the same contrast. Ricketts asks how Kirznerian entrepreneurship can both equilibrate and create, when creativity appears disruptive. Rothbard argues that the difficulty arises from a Hayek–Kirzner conception of “near equilibrium.” For Mises, equilibrium is a remote goal attainable only if economic data remain frozen; creativity can therefore alter the destination toward which market processes tend without generating the alleged contradiction. Rothbard closes with Boehm’s account of interwar Austrian economics and Blaug’s criticism of its emphasis on currently fashionable questions of time and disequilibrium. Neglecting monetary, capital, and business-cycle theory, he argues, projects the volume’s present-day preferences backward. The review thus ends where it began: identifying Austrian economics chiefly with Hayek and Kirzner distorts both its contemporary range and its historical concerns.