Did you ever wondered why all the the free market fundies like to quote guys whose last name begins with Von? Von Hayek, Von Mises and so on?

The reason for this goes back to the period just after the First World War. The Austro Hungarian Empire the last remnant of the Holy Roman Empire was defeated and dismembered. All around it various peasant states were forming, ruled by its former serfs. To the east its former enemy, Russia, was rising as a socialist nation. All around it industrial Europe was challenging the tried and true ways or the past. People made things rather than live off the serfs.

Wonks Anonymous can only imagine how disorienting this was for the all those guys named Von. Some, like Baron Von Trapp, sought consolation in music, others turned to economic theory. Their theory betrays their origins. Von Mises derives his pricing examples from rural livestock markets.

The Austrian theory of interest is based on the decision of a landholder to sell the timber on the woodlot today or to wait for another year. No new ideas are needed here. Labor and capital are not combined to produce new goods. There are not even any peasants to exploit. Owners delay gratification and are rewarded by nature with more consumption later.

And, it turns out, the real cause of economic chaos is not workers or socialists. For the fall of economic man we need to go further back. It was those evil Florentines of the Renaissance who cursed man with fractional reserve banking. They pulled the economy away from sound money, based on gold and silver. This led to the cycles of boom and bust, credit expansion and contraction. These tempted the poor by offering them riches and freedoms beyond their station and then withdrawing the offer.

To return to the vanished paradise all we need to do, according to Stephan Grossman, writing in Economix is:

Trash the Fed. Abolish legal tender. Free the financial industry. Trade with gold, silver and redeemable notes.

Naturally we would have to pay a price. Credit would not be so easy to come by and, most likely, the sort of highly developed economy that we are used to would gradually contract. If a succession of recessions were allowed to take their natural course we might well find ourselves back in the comfortable world of the medieval economy. Here we would all practice ennobling pursuits like hawking, hunting, pillage and dirt farming.

The Austrian nobility were not satisfied to ruin their own country in the years before the First World War so they gave the world a gift that keeps on giving, Austrian Economics.