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 (1905-82), 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.

Because the whole of this book is itself an exposition of the ideas of the classical and Austrian economists, it is not necessary (nor would it be possible) to explain at this point precisely what it is that these economists maintain, beyond a few generalities. They recognize the gains derived from the division of labor. They explain the nature, origin, and importance of money; the laws governing the determination of prices, wages, profits, and interest; and the vital role of saving and capital accumulation in raising the standard of living. They understand the benevolent nature of self-interest and the profit motive operating under economic freedom, and show how government intervention is the cause of inflation, depressions, economic stagnation, poverty, international economic conflict, and wars. In sum, they support capitalism and oppose government interference and socialism. To a great extent, the views of these authors will become clear in the pages that follow. But, because this is not a book on the history of economic thought, no systematic effort is made to explain precisely which individuals held which specific positions. The reader who is interested in acquiring that knowledge is advised to consult the bibliography, which appears at the end of this book, and to undertake the immeasurably valuable task of reading through the works listed in it.

A subject which must be dealt with here, however, is a brief account of the differences between the classical and Austrian schools. The leading difference concerns the theory of value and price. The classical economists, with exceptions, assigned an exaggerated role to cost of production as an explanation of prices, and, as a consequence, to the quantity of labor required to produce goods. They even went so far as frequently to maintain that wages are determined by "the cost of production of labor." Wages, they often held, tend to equal the price of the goods necessary to enable a worker to live and to raise replacements for himself and his wife.

Such an exaggerated role assigned to cost of production and quantity of labor made it possible later in the nineteenth century for Karl Marx to present himself as the logical heir of the classical economists, devoted merely to developing the implications of their doctrines. Marx was believed, and the consequence was that when the Austrian and other neoclassical economists appeared on the scene around 1870 and propounded the theory of marginal utility as the explanation of value and price, the doctrines of classical economics were abandoned to an extent much greater than necessary, to the great loss of later economic science.