The present collection is a paperback reprint of the 2005 hardback edition published in the well-regarded Routledge “Studies in the History of Economics” series. Having read the 2005 edition, this reviewer approached the volume wondering whether this collection of contributions, taken as a whole, deserved to have been reprinted. There are sixteen chapters written by a cosmopolitan group of historians of economic thought. The chapters are divided into six parts: “The Meeting of Austrian and Swedish Economics,” “The Stockholm School,” “Money and the Business Cycle,” “Capital Theory,” “Expectations and Money,” and “Methodology.” As with all such edited collections of essays from a range of authors, the topic treatments and depth are uneven, though one might reasonably expect that the various chapters would have some direct or indirect relevance to the main theme advertised in the title: the “evolution of market process.” Unfortunately, this is not the case.

In the absence of a general introduction that draws together the main themes—there is a “Preface” offering a bare two paragraphs as an “overview of the book”—it is left to the two opening chapters to provide the focal point for the whole collection. Axel Leijonhufvud leads with a rich, provocative, scene-setting essay on the “metamorphoses of neoclassical economics,” and he explains how Swedish and Austrian economists played different roles in this transformation of neoclassicism in the early and mid-twentieth century. It is well known that several key ideas in the first generation of Austrian economics were absorbed into mainstream neoclassical economics before the 1940s. In particular (thanks to Robbins), the Austrian approach to the logic of choice was later formalized and axiomatized in mid-twentieth-century neoclassicism, and any semblance of ‘process’ was expunged. The Swedes contributed their “sequence analysis” and their studies of market clearing disequilibrium in the 1920s and 1930s, but these ideas had little influence on the way neoclassicism developed (p. 13). Both ideas were essentially ‘process’ oriented. Like the Austrians, they turned away from determinate equilibrium economics, and their work, in the process sense, “lost international influence” and identity (p. 14). The same could not be said for Heckscher–Ohlin trade theory, which was congenial to developments in conventional neoclassical economics. Moreover, Swedish economics (especially Lundberg’s work) came to be associated with a strand of Keynesianism (see Lars Magnusson’s chapter, pp. 60–62), and the market clearing disequilibrium idea is also evidenced much later in Leijonhufvud’s own work on Keynesian economics. Leijonhufvud leaves us with some tantalizing prospects for further research, including the idea that while Böhm-Bawerk’s production theory and theory of capital was, for a long time afterwards, quite influential, it embodied increasing returns to scale—something that we know could not ultimately be absorbed into neoclassical, inter-temporal, general equilibrium economics (pp. 16–17).

The point of Peter Boettke’s and Chris Coyne’s chapter on Swedish and Austrian economics approaches to market process theory is to argue that both groups have made “distinct contributions” that “established market process theory as a distinct and robust explanation of economic activity” (p. 20). Unlike Leijonhufvud, Boettke and Coyne are rightly not bothered by the ebbs and flows of lost international influence and identity—it is the content and durability of ideas that matter even if they have, from time to time, been cast onto the scrap heap by mainstream practitioners. Here, the work of second-generation Austrians comes to the fore. Without necessarily acknowledging Swedish economics, Mises, Hayek, and Mayer adopted a Swedish-like “step-by-step” analysis that “emphasizes changing parameters of the dynamic economy over time and the subsequent impact on the movement of the economy toward equilibrium.” By contrast, static general equilibrium approaches “frame economic analysis in terms of a state of general long-run equilibrium” (p. 21). Lachmann, Kirzner, and Rothbard carried the step-by-step analysis to the later half of the century, and Boettke himself has now made further important contributions along these lines in modern economics. There has been an Austrian resurgence, but Swedish economics per se has now lost its distinctiveness. Of the sixteen chapters in this book, only two—Boettke’s and Coyne’s and, to a lesser extent, Leijonhufvud’s—squarely confront the question as to why market process analysis should matter at all.

The chapter on the self-perceptions of Swedish economists in public policy and in public policy discussion is interesting history of thought (Carlson and Jonung, ch. 3); those Swedish economists seemed to have made little use of a theory of market process in public debates (though the chapter does not tell us that explicitly—the reader has to read between the lines). Lars Magnusson’s chapter on Myrdal’s place in the Stockholm School and several others in this book confirm the null hypothesis: that Cassel, Heckscher, and Ohlin could hardly be said to have offered anything like a ‘market process’ analysis. Wicksell had indeed started with a form of process analysis in his monetary economics, but others in the school did not follow his lead automatically. Myrdal, Lindahl, and Lundberg retained different styles of process analysis and variously emphasized the ex ante, ex post distinction in their treatment of expectations, and Myrdal formulated and applied the concept of “cumulative causation” (reminiscent of Wicksell’s original idea of cumulative process) to development problems later in the twentieth century.

The formation of expectations, especially investment expectations, would seem to be critically important to a process analysis of business cycles. Lachmann, to some extent influenced by Hayek, had made this a core element of his work on the subject in the 1940s and 1950s. But the Swedes lost their way on this particular dimension of process analysis from that time. In the 1930s, there were some interesting links between what the Swedes were doing and the work of Hayek on the theory of money, banking, and monetary policy (see the important chapter by Hans-Michael Trautwein on this subject, pp. 94–113).

Michel Bellet and Abdallah Zouache write an ambitious and largely successful chapter on the links between Hayek, Lundberg, and Keynes on capital and the business cycle. It is not often that the theory of capital is discussed in connection with Keynes—the Austrian and Swedish economists were far more accomplished in this field and it would not be too wide of the mark to say that Keynes was an also-ran as far as capital theory and the cycle is concerned. Keynes offered a monetary theory of production and a theory of investment and investment expectations; it is not clear to this reviewer that he articulated a full-blown theory of real capital. Lundberg attempted to synthesize Hayek’s and Keynes’s theories of capital and the cycle; on fundamentals, he becomes a disciple of Keynes because he rejected Hayek’s point that the cycle is another species of the general inter-temporal coordination problem first theorized in capital theory proper and then generalized to the economy as a whole.

The international monetary dimension of Swedish and Austrian economics has been neglected. So, it is refreshing to read a chapter on what Wicksell and Hayek would have said about the later twentieth-century problem of international monetary policy coordination (Torre and Tossi, ch. 8, pp. 135–150). The authors miss a key point: Hayek did not only advocate competing private monies, though this was his first best option; the Hayekian second best, for credible international money, was a regime of freely competing, transnational fiat currencies in a world of free capital flows and flexible exchange rates (Endres Reference Endres2009).

Part IV on the subject of capital theory begins with a chapter formalizing “Austrian production processes,” but “the’’ Austrian production process here turns out to be a Böhm-Bawerkian construction (p. 156). In different ways, Wicksell, Hayek, and others made use of, and extended, this particular Austrian approach (Jenn-Treyer, ch. 10). However, the genuine Austrian market process approach to production, with doctrinal roots in Menger, rather than Böhm-Bawerk, is resurrected by Lachmann in 1956. The superb chapter entitled “To What Extent is the Austrian Theory of Capital Austrian?” (Gloria-Palermo and Palermo) goes only some way toward making this point, though it repeats the well-worn, mistaken line that Lachmann’s capital theory was somehow based on “nihilist’’ foundations (p. 209). More recent research has corrected this misconception (Endres and Harper Reference Endres and Harper2011). In any case, remaining faithful to the title of this volume, as far as evolution of the market process as a form of analysis was concerned, it is defensible to conclude that the Böhm-Bawerkian theory of production was an unfortunate mutation.

The last two chapters deserving praise, and not only because they are consistent with the book’s theme, are Carlo Zappia’s discussion on the disequilibrium dynamics in the work of Hayek and Lindahl (ch. 12) and Michel Bellet and Jacques Durieu’s comparison of the treatment of expectations in Lundberg and Lachmann (ch. 13). Both chapters are models of careful research in comparative intellectual history. It came as no surprise to this reviewer that, in fact, Hayek’s theory of expectations and their revision made a lot more ground than Lindahl’s. What was surprising was that Hayek’s conceptualization of competition as a dynamic process of “relations among individuals,” and not as a matter of the “attributes of individuals’’ (p. 225), could be linked to his other notions of personal knowledge that cannot be articulated, learning in the process of plan revision and complete changes in market participants’ “ways of thinking” about economic activities. During the period from the mid-1930s until the 1950s, Lachmann and Lundberg were preoccupied with expectations—their formation and revision—and both economists were especially keen to address how expectations mattered at the macroeconomic level. Accordingly, a comparison of their work on this subject is welcome and certainly relevant to market process analysis. Lachmann is criticized for not describing business “decision making” and its underlying features (p. 245), but this seems a harsh judgment if one considers his later work in the field of interpretive action, in which a clear and distinct theory of entrepreneurial behavior and decision making is provided. The roots of this theory may be found in his work on expectations in the 1940s (Endres and Harper Reference Endres2013). That “Lundberg and Lachmann did not succeed in providing a tractable way to explain the formation, revision and co-ordination of expectations” (p. 245) may well be correct, but one wonders if any economist has achieved such a counsel of perfection up to the present day. Moreover, tractability may not be the only criterion for good and realistic social science.

Returning to my opening question: was this book worth reprinting? After all, in the seven years that have elapsed since the first printing, research has moved forward in many of the topic areas covered by the authors of various chapters. Rather invidiously citing my own work above, I offered three examples: the Hayekian view of international monetary and financial processes; the intellectual history of Austrian capital theory; and the Lachmannian approach to decision-making behavior and expectations. On these topics, as we should expect in respect of other subjects covered in this book, more recent research has brought new evidence to bear on the evolution of market process theory. Furthermore, some five chapters in this book, while being accomplished histories of thought, are not relevant to the question of market process analysis; for example: “Hayek with Descartes and Durkheim: Reason and the Individual” (ch. 16), and “Wicksell on Technical Change, Real Wages and Employment” (ch. 5). It may have been more appropriate to make the main title of the book “Austrian and Swedish economics,” since the “evolution of the market process” is somewhat misleading. Altogether, my judgment is that, on academic grounds, the book as a whole did not justify printing again, though ostensibly it made sense on commercial grounds.