21/12/2025
Modern Economics Had a Fatal Flaw.
For a long time, mainstream economics treated the economy like a machine. Pull this lever, push that button, adjust interest rates here, and boom: everything works perfectly.
But economies aren't machines. They're made of millions of people making billions of decisions every single day. You can't predict human action with mathematical precision.
The Austrian School understood this from day one. It Started in Vienna in 1871.
Carl Menger published Principles of Economics and offered a fundamentally different approach. While other economists focused on labor theories, Menger asked a deceptively simple question: Why do people value things?
His answer: Because individuals make subjective choices based on their own needs and desires. Not because of some objective measure inherent in the object itself. Value is subjective.
This single insight laid the foundation of the Austrian School and started a revolution in economics.
Menger Solved the Diamond-Water Paradox.
For centuries, economists couldn't explain why diamonds cost more than water when water is essential for life. Menger's answer was simple and devastating: marginal utility.
The first glass of water when you're dying of thirst? Priceless. The hundredth glass? Worthless. Value isn't objective; it depends entirely on context and individual circumstances.
This wasn't just theory. It explained how real people make real economic decisions every single day.
Then Böhm-Bawerk Explained Why Interest Exists.
Eugen von Böhm-Bawerk took Menger's insights further. In 1884, he explained why lenders charge interest and why it's not exploitation. It's time preference.
People value goods available now more than identical goods available later. A dollar today is worth more than a dollar next year because you can use it immediately.
This means interest rates aren't arbitrary numbers set by governments. They reflect real human preferences about present versus future consumption. Mess with them artificially, and you distort the entire economy.
Mises Proved Central Planning Can't Work.
In 1920, Ludwig von Mises wrote an essay that should have ended socialism forever. He proved central planning was mathematically impossible.
Without prices generated by free markets, governments have no way to calculate what to produce, how much to produce, or how to allocate resources efficiently. They're flying blind.
Soviet economists spent decades trying to refute him. They never could. Instead, the USSR collapsed in 1991, exactly as Mises predicted it would.
Hayek Explained Why Booms Always Become Busts.
Friedrich Hayek won the Nobel Prize in 1974 for explaining something central bankers still refuse to accept: when governments artificially lower interest rates, they create unsustainable booms that must crash.
Low rates send false signals to entrepreneurs. Businesses invest in projects that look profitable but aren't sustainable. The boom feels real. Until reality hits.
Hayek described this process in the 1930s. Keynesian economists ignored him. Then 2008 happened. Then 2020. The pattern keeps repeating.
Every Crisis Proves the Austrians Right.
The Great Depression? Mises warned of an inevitable crash in the late 1920s when everyone else celebrated the Roaring Twenties boom. The 2008 financial crisis? Austrians predicted it by watching housing bubbles and loose credit. The inflation surge after 2020? Austrians warned that printing trillions would destroy purchasing power.
Meanwhile, mainstream economists keep getting blindsided. Why? Because they trust mathematical models more than they understand human behavior. Austrian economics isn't popular in universities because it threatens the people who benefit from government intervention.
This Isn't Just Academic Theory.
When governments ignore Austrian insights, real people suffer. Savings get destroyed by inflation. Careers get disrupted by artificial boom-bust cycles. Entire generations inherit economies crippled by central planning fantasies.
The Austrian School doesn't just explain what went wrong. It explains why it will keep going wrong until we stop treating economies like machines we can control.
You can't centrally plan millions of individual human decisions. Every attempt ends the same way.
The Austrian School gave us the tools to see through institutional lies about how economies really work. The question is whether we'll use them.
