Most people have never heard of Austrian economics. That's hardly surprising. Even though thousands of practitioners call themselves "economists" and the newspapers use the word every day, this important subject is not nearly as widely understood as it ought to be.

The first thing everyone needs to understand about economics is that values are subjective. In the world of human activity, there are no such things as objective values. Each individual has his own tastes and preferences. In the final analysis, these subjective individual ideas determine what course of action each person selects for himself.

The classical economists -- Adam Smith, David Ricardo, Jean-Baptiste Say, and John Stuart Mill -- never succeeded in explaining how prices are formed in the marketplace. They labored under a delusion: that the value of the things we buy and sell is objectively determined, or that it is somehow intrinsic in the things themselves. Anyone can see that this is clearly wrong. Values do not exist outside ourselves. The value which you or I attach to something is a purely mental construct. It exists only within our minds.

An economist in Vienna, named Carl Menger, was the first person to enunciate this important principle clearly. The year was 1871. He wrote about this idea, and a number of similar ideas, in a book entitled Grundsätze der Volkswirtschaftslehre (Foundations of Economics). The school of economic thought that has been founded upon Carl Menger's insight is known as Austrian Economics. Today it is studied all around the world.

In my opinion, Ludwig von Mises (1881 - 1973) is the greatest Austrian economist who has ever lived. He wrote a number of interesting books. His masterpiece, entitled Human Action, was first published in 1949. The Ludwig von Mises Institute has kindly put this book on the internet -- you can read it online.