Essays after the Collapse of Communism
New Thinking in Political Economy series
Chapter 1: Comparative Economic Systems
* Austrian economists are rather well known for their defense of capitalism and criticism of planning and intervention. Comparative economic systems – the comparative analysis of a society’s fundamental organizational principles – has emerged as a popular, and powerful, ﬁeld of study within contemporary Austrian economics. Here, many of the Austrian School’s key theoretical concepts regarding prices and knowledge, proﬁt and loss accounting, and rivalrous competition have been rigorously applied to examine the nature and logic of capitalism, socialism and interventionism. While the Austrians have developed a theory of comparative economic systems over the past several decades, only recently, since the collapse of ‘really existing socialism’ in the former Soviet Union and Eastern Europe, has their analysis – particularly of the problems of rational planning under socialism – become accepted by mainstream economists. ROOTS OF COMPARATIVE SYSTEMS ANALYSIS The ﬁeld of comparative economic systems is neither an Austrian invention, nor unique to the school. Economists of all stripes have studied the theory and practice of capitalist and socialist systems. Its roots travel back to the nineteenth century. If, as contemporary economists commonly believe, Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations oﬀers the ﬁrst attempt to study the economics of free market capitalism (which Smith dubbed the ‘system of natural liberty’), then Karl Marx arguably provides the ﬁrst major ‘comparative’ analysis: most notably, Marx’s Das Kapital (1906) established both a critical (if not hostile and damning) analysis of capitalism, and also an implicit, general vision of socialist...
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