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From the
Introduction (pp. 1-2)
This excerpt is taken from George Reisman, Capitalism: A Treatise
on Economics. Ottawa, Illinois: Jameson Books, 1996. Copyright © 1996 by George
Reisman. All rights reserved. May not be reproduced in any form without written permission
of the author. The following limited exception is granted: Namely, provided they are
reproduced in full and include this copyright notice and are made for noncommercial
use, i.e., for use other than for sale, including use as part of any publication that is
sold, copies of this excerpt may be downloaded into personal computers and distributed
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internet is permitted provided the copy of the excerpt is accompanied by the following
link to the Jefferson School's home page (which may, and hopefully will, be displayed
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of Philosophy, Economics, and Psychology.
The subject of this book is the principles of economics. Its theme is that the
application of these principles to the service of human life and well-being requires the
existence of a capitalist society.
The purpose of this introduction is to enable the reader to classify the present book
in relation to the wider body of procapitalist economic thought and of economic thought as
such.
Procapitalist Economic Thought, Past and Present
Procapitalist economic thought and economic thought as such are essentially synonymous.
The substance of both is to be found in the same two main sources, namely, the writings of
the British (and French) classical economists and the Austrian neoclassical economists.
All other schools of economic thought are essentially either just prescientific gropings
or nothing more than misguided criticisms of the positive truths established by the
classical and Austrian schools.
Among the classical economists are, above all, Adam Smith (172390), David Ricardo
(17721823), James Mill (17731836), and John Stuart Mill (180673), and the Frenchmen
Jean-Baptiste Say (17671832) and Frederic Bastiat (180150). The nineteenth-century
Englishmen Nassau W. Senior (17901864), John R. McCulloch (17891864), and John Cairnes
(182475) also deserve mention as important members of this group. Important close allies
of the classical school are the Manchester school, led by Richard Cobden (180465) and
John Bright (181189), who were the parliamentary leaders of the British free-trade
movement in the mid-nineteenth century, and the currency school, which included the
English economists Lord Overstone (17961883) and Robert Torrens (17801864), and the
American monetary theorists William Gouge (17961863) and Charles Holt Carroll
(17991890). The classical school incorporated important economic truths previously
identified by Richard Cantillon (16801734), David Hume (171176), and, above all, the
French Physiocrats. The Physiocrats flourished around the middle of the eighteenth
century. The leading members of the school are François Quesnay (16941774), Pierre Du
Pont de Nemours (17391817), Robert Jacques Turgot (172781), and Mercier de la Rivière
(172093). The great merit of the Physiocrats was to have identified the existence of
natural economic laws (physiocracy means the rule of nature) and, on the basis of
their understanding of those laws, to have reached the conclusion that the government
should follow a policy of laissez faire, a term which they originated.1
The most important members of the Austrian school are Carl Menger (18401921), Eugen
von Böhm-Bawerk (18511914), and Ludwig von Mises (18811973). Other important members
are Friedrich von Wieser (18511926); F. A. Hayek (18991992), who was the most
prominent of von Mises's students and who won the Nobel prize for economics in 1974; Henry
Hazlitt (18941993); Murray Rothbard (192695), who was one of von Mises's later
students; and, among the later students of von Mises who are still alive, Hans Sennholz
and Israel Kirzner.2
Closely allied with the Austrian school on many points are the major neoclassical
English economists William Stanley Jevons (183582) and Philip Wicksteed (18601927),
the major Swedish economist Knut Wicksell (18511926), and the major
mid-nineteenth-century German economist Hermann Heinrich Gossen (181058), who had
anticipated some of its leading doctrines in a book published in 1854. Other major
economists who are more or less significantly allied with the Austrian school are the
Americans John Bates Clark (18471938), Frank Fetter (18631949), Irving Fisher
(18671947), and Frank Knight (18851972), who were prominent earlier in this century.
The contemporary Chicago school, led by Milton Friedman, and its offshoot the Public
Choice school, headed by James Buchanan, also fall into the category of allies of the
Austrian school. (Friedman won the Nobel prize in economics in 1976; Buchanan, in 1986.)
Other, less well-known but important contemporary or recent economists who are more or
less significantly allied with the Austrian school and sympathetic to capitalism are Armen
Alchian, William Allen, Dominick Armentano, Paul Heyne, Wayne Leeman, John. S. McGee, Mark
Skousen, Thomas Sowell, Walter Williams, Leland Yeager, and the late W. H. Hutt
(18991988) and Ludwig Lachmann (19061990). And there are many more, both here in the
United States and abroad. Both the Austrian school and its allies have been heavily
influenced in turn by the writings of the classical economists.
It should not be surprising that such a large number of those who are recognized as
important economists are, at the same time, leading advocates of capitalism. To the extent
that an economist really understands the principles governing economic life, and desires
that human beings live and prosper, he can hardly fail to be an advocate of capitalism.
The classical and Austrian schools have had important allies in the field of
philosophy. Ayn Rand (190582), in particular, must be cited as providing a philosophical
foundation for the case for capitalism, and as being responsible probably more than anyone
else for the current spread of procapitalist ideas. The great English philosopher John
Locke, who was a leading intellectual influence on the Founding Fathers of the United
States, also deserves an especially prominent mention. And the English philosophers Jeremy
Bentham and Herbert Spencer must be cited as well.
The classical and the Austrian schools and their allies have developed virtually all of
the great positive truths of economic science. Their ideas, especially those of von Mises,
Ricardo, Smith, and Böhm-Bawerk--in that order--together with important elements of the
philosophy of Ayn Rand--are the intellectual foundation and inspiration of this book,
which seeks to carry the work of these extraordinary individuals a step further by
integrating leading elements of it into a logically consistent whole and by
incorporating the present author's own contributions. . . .
Notes
1. For an excellent account of the doctrines of the Physiocrats, see Adam Smith, The
Wealth of Nations (London, 1776), bk. 4, chap. 9; reprint of Cannan ed. (Chicago:
University of Chicago Press, 2 vols. in 1, 1976), 2:182209. From now on, specific page
references to the University of Chicago Press reprint will be supplied in brackets.
2. The present author was also one of the later students of von Mises. However, because
of the profound influence of the classical economists on my thinking, it would be more
appropriate to describe my views as "Austro-classical" rather than as
"Austrian."
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