The archive.

Technical sophistication can narrow an economist’s understanding as well as sharpen it. In this review of Joseph Schumpeter’s posthumous History of Economic Analysis, later collected as “Schumpeter on the History of Economics,” Hayek asks what historical scholarship contributes to professional judgment. He admires Schumpeter’s command of original sources and willingness to unsettle familiar rankings, giving neglected thinkers their due while questioning the standing of canonical figures. Yet admiration does not erase disagreement: Hayek distinguishes Marx’s historical influence from his analytical achievement and objects to Schumpeter’s contemptuous treatment of nineteenth-century liberalism. This brief review offers a revealing encounter between two economists’ judgments—and a concrete account of why knowing older arguments matters when applying modern technical knowledge.

Bread and wine, bread and butter, coffee and milk: for Mahr these are never interchangeable along a smooth curve but combine in one determinate best proportion, which income and prices may put out of reach. On that observation rests his assault, first advanced in 1954, on the indifference-curve analysis then spreading from Anglo-American economics through Pareto and Hicks. Taking up Hans Mayer's objections—the fictive 'experiment,' infinite divisibility, unlimited substitutability—he denies that a field of equally valued bundles exists at all, and replaces indifference curves with curves of preferred combinations shifting with income and saturation. Extending the argument to the marginal-utility level, he separates broad need-classes from particular goods and locates the one clear margin in the marginal utility of money rather than in any equalization across commodities.

In Wahrheit gibt es regelmäßig nur ein optimales Kombinationsverhältnis zweier Konsumgüter.

English translation: “In truth, there is regularly only one optimal combination ratio of two consumer goods.”

High wages and competitive exports pose the explanatory puzzle of William Emmanuel Rappard’s 1954 article: what enables American workers to produce so much? Productivity names the result, he argues, without explaining it. His answer connects mass production to workers’ purchasing power and industrial research to the pressure of rivalry. Yet the large firms that finance laboratories also constrain competition—a difficulty he confronts through Galbraith’s account of oligopoly and countervailing power. Written for a congress of French-speaking economists, the article offers a European assessment of American economic performance without equating abundance with cultural superiority. Its distinctive interest lies in this double tension: competition may foster prosperity without resembling textbook markets, and greater material output need not make a civilization more desirable.

A functioning market, this revised Cologne lecture insists, demands not an absent state but a deliberately maintained legal framework — general, predictable rules applied equally to all, sharply distinguished from the discretionary administrative commands that corrode economic coordination. Speaking into the German debate over the soziale Marktwirtschaft and alongside Walter Eucken's ordoliberalism, Hayek presses the case in strict rule-of-law terms and dismantles the textbook ideal of 'perfect competition,' which mistakes an imagined final state for the discovery process by which markets actually work. He defends even the distressed, overinvested industry's right to fail against demands for cartels and protection, holding that competition's painful verdicts perform an accounting no administrative body can replace. The decisive task, he concludes, is educating opinion to accept competition consistently rather than licensing exceptions whenever it turns temporarily harmful.

Was wir wollen, ist nicht universelle Konkurrenz, sondern universelle Möglichkeit der Konkurrenz.

English translation: “What we want is not universal competition, but the universal possibility of competition.”

Between 1933 and 1953, economics was reshaped by three visible debates—Keynesian macroeconomics, the theories of imperfect and monopolistic competition, and the new welfare economics of Hicks and Kaldor—but the deeper story, Lachmann contends, is the slow displacement of static equilibrium by problems of time, knowledge, and expectation. Welfare economics he dismisses as ingenious yet politically remote; Keynesian theory as coherent but valid only for extreme situations of depression or wartime inflation, where factors can be treated as homogeneous. Chamberlin, Robinson, and Harrod exposed the unreality of perfect competition yet still classified market forms statically. The constructive alternative is Swedish Process Analysis, which distinguishes the coherence of a single plan from the compatibility of all plans, together with a redefinition of competition not as a market form but as the process by which knowledge spreads and one form turns into another.

In reality, as every newspaper reader knows, politicians pursue power, not welfare.

Strip a system of its outer layers and something eventually gives way, not gradually but all at once. Morgenstern's essay builds a vocabulary for that threshold, introducing compressibility, the selective reduction of an economy or organization that preserves its defining function, against the kernel, the minimal core below which the thing ceases to be what it was. He resists the picture of total connectedness implied by input-output schemes read as if every cell were indispensable, since such a system would collapse at the first loss. Real economies, armies, and bureaucracies instead shed activities, reorganize, and substitute; war, scarcity, and damage reveal cores that abundance ordinarily hides. Part II turns to economic constants, denying that economics has physics-like constants while insisting on firmer physiological and technological bounds, from caloric minimums to reproduction times, beneath the shifting surface of prices.

A system will be said to be totally connected if the destruction of any of its parts destroys the whole system, i. e., deprives it of all of its functions.

A passenger car may be expendable—or indispensable if workers need it to reach essential industries. Such distinctions drive Oskar Morgenstern’s 1954 RAND research report: how much can an economy or organization shed before it ceases to perform its basic functions? His concept of a “kernel” challenges the assumption that essential components can be identified once and for all. What must survive depends on technological arrangements, available substitutes, and how long reduced operations must last. Morgenstern distinguishes selective compression from indiscriminate contraction, showing why cuts in one activity can create new burdens elsewhere, such as increased repair needs. The report offers a tentative vocabulary, rather than a finished predictive theory, for examining the boundary between manageable loss and organizational collapse.

A definition of "essential" services implies a technology.

Can a theory built around market adjustment still explain trade when governments plan, wages resist falling, and firms exercise monopoly power? In this 1954 paper, Gottfried Haberler answers Jacob Viner’s doubts by separating classical trade theory from the free-trade policies often associated with it. A government may obstruct adjustment without rendering the theory that explains the obstruction irrelevant. Haberler shows why exchange-rate depreciation can fail when compensating policies cancel its effects, and why departures from competition do not automatically justify protection. His qualified defense of free trade rests on comparing workable markets with actual administrative capacities, not ideal planning. Readers can discover how an analytical framework can accommodate exceptions without becoming either an unconditional policy rule or an excuse for intervention.

It is essential, however, that we distinguish between classical trade theory on the one hand and the free trade conclusions derived from the theory on the other hand.

Could the papacy secure its independence without recovering its lost territories? Friedrich Engel-Janosi examines this question through Benedict XV’s early efforts toward accommodation with Italy, drawing principally on Austrian diplomatic records. Those reports reveal a revealing tension: Austria-Hungary professed support for papal independence yet feared that reconciliation would strengthen Italy and diminish Vienna’s influence. Italy’s entry into the First World War made the problem urgent by restricting the Holy See’s diplomatic relations. Engel-Janosi distinguishes reported papal intentions from confirmed negotiations, tracing possibilities rather than an agreed settlement. His article shows how sovereignty, territorial possession, and international guarantees could become separate questions—and how a Catholic power’s strategic interests could conflict with the freedom it claimed to defend.

Rappard, a Geneva economist who had taught at Harvard, set out to explain a fact many Europeans preferred to explain away: that the United States enjoyed a material abundance no rival approached, and had done so well before two world wars widened the gap. Offered here in the 1955 English translation of his 1954 French study, and prefaced by Henry Hazlitt, the argument marshals figures on national income, population, and production before turning to observers from Adam Smith and Tocqueville to Mill. The wealth, he concludes, springs less from virgin soil than from labor and its productivity—driven by mass production, the marriage of laboratory and workshop, a sheer passion for output, and above all the spirit of competition that European cartels had smothered. Economic superiority, he cautions, implies no superiority of soul.

The United States are today by far the richest nation in the world because they produce by far the most wealth.

Observed prices and quantities do not, by themselves, distinguish demand from supply. This problem gives concrete force to Gerhard Tintner’s account of what mathematics can—and cannot—do for economic knowledge. His 1954 article connects economic modelling with the collection of data and the estimation of relationships, insisting that useful numerical results depend on assumptions that statistical technique cannot supply. Examples from butter demand, investment and industrial production show how models acquire practical meaning, while unidentified equations and short, dependent time series expose the limits of inference. Tintner’s selective methodological pluralism also leaves room for criticism: he questions decision theory where numerical losses cannot be justified. Readers can discover why choosing a mathematical method is inseparable from deciding what an economic model claims and what its evidence can establish.

When does a research technique become an obstacle to understanding? In this joint review of books by John Madge, Arnold M. Rose, and Hans L. Zetterberg, Fritz Machlup challenges the elevation of observation, interviews, and experiments above the problems they are meant to illuminate. He faults Madge for subordinating theory to empirical research, while finding in Rose and Zetterberg alternatives that join logical deduction to empirical testing. Writing as an economist engaging sociological method, Machlup distinguishes pluralism about methods from relativism about truth. The review offers a compact way to examine why accumulated findings need explanatory connections—and why a measurement procedure must answer to the hypothesis being tested, rather than define in advance what science may ask.