82. An Austrian Economist by Accident

82

FERNANDO ZANELLA

AN AUSTRIAN ECONOMIST BY ACCIDENT

I WAS BORN IN VOLTA REDONDA, State of Rio de Janeiro, where my father worked as an engineer for one of the most famous Brazilian state companies, i.e., Companhia Siderúrgica Nacional (CSN). CSN was founded in 1941 as the first steel producer in Brazil. The U.S. funded it after the then Brazilian president, the dictator Vargas, threatened to join the axis powers instead of allowing American military bases in Brazil. CSN was, and still is, considered a watershed in the Brazilian industrialization process, an industrialization with central command. Government, in the words of Vargas, had the duty of organizing the “market anarchy.” My father died when I was three years old and my family moved to Porto Alegre.

I always had a passion for economics; I am not sure why. I used to buy books about economics even before going to the university. When I was thirteen years old I used to do my mother’s income taxes, my first concrete experience with the “mafia’s” work. Brazil was not yet a democratic country in 1982, the year that I entered a public university to study economics. After years of hampered economy, Brazil had a widespread system of inefficient state-owned companies, all kinds of regulations, and uncontrolled debts at all levels of government. CSN was finally privatized in 1993. Its net income jumped from US$ 22 million to US$ 154 million in 1994.

My undergraduate studies were pretty much focused on Keynes, Marx, and neoclassical economics. It was then fashionable to study Marx. During my studies, Brazil went through an external debt repudiation, several price controls, and a relentless inflation process. Everything was quite amazing for an economics student. However, I could not make much sense from what I learned in the academy besides ending up deeply disappointed with the Marxist rhetoric and the Keynesian models (and their variants).

I pursued a master’s degree in economics. After the first year, and the traditional micro, macro, math, and econometrics classes I was again a little disappointed. I was mastering how to deal with math models and textbooks tricks without creating connections with the outside world, actually, the real world. Then I came across, by accident, books on Austrian economics.

Walking through the university library I saw a shelf with books which were being given away, for free. I was struck by two new books, recently translated to Portuguese, on that shelf. They were Unemployment and Monetary Policy by F.A. Hayek and The Essential von Mises by Murray Rothbard. I asked the librarian why they were giving away those books. She told me that they needed more space on the shelves and those books were duplicates and no one, ever, took them out to. My first surprise was that Hayek was a Nobel Prize winner in economics whom I had never heard of before. Those two books were just fascinating. For the first time, economics made sense to me. The theoretical approach was coherent, solid, and quite applied to the Brazilian reality. Later, I met the head of the graduate program and asked if he knew about Hayek and Austrian economics. He said that he did not know much but he believed that Hayek was “a kind of monetarist.” I talked with another professor, a neoclassical economist who held a Ph.D. from Vanderbilt. He said that he did not know about Austrian economics, but actually had brought from the U.S. a book that he never read and he believed would be of interest to me. He lent me The Foundations of Modern Austrian Economics, edited by Edwin Dolan which consists, mainly, of articles by Kirzner, Lachmann, and Rothbard. After that I read The Capitalist Alternative by Alexander Shand and all the Austrian books available in Portuguese. They were Human Action and Liberalism by Ludwig von Mises, Competition and Entrepreneurship by Israel Kirzner, Denationalization of Money by Hayek, and Economics in One Lesson by Henry Hazlitt. Economics was no longer a disappointing science. Actually, it was now fascinating. Perhaps it was even more than that. I was searching and reading Austrian books in an almost frenetic way. Austrian economics became the subject of my master’s thesis.

In 1991, I spent a few months in Buenos Aires studying Austrian economics at ESEADE, a graduate school. ESEADE has the best Austrian program in South America. There I had access to a wide range of Austrian books and others in classical economics, political science, methodology, law, and history with several outstanding professors. There I met the best Austrian economist in Latin America and one of the best professors I ever had, Juan Cachanosky, who got his Ph.D. under Hans Sennholz. There I also was introduced to public choice and neoinstitutional economics.

Back in Porto Alegre, I had the opportunity of attending seminars and exchanging ideas with Israel Kirzner, Hans-Hermann Hoppe, and Walter Block. It was time to pursue a Ph.D. I was accepted at both Auburn University and George Mason University. Several factors made me choose Auburn. One of them was the proximity of the Mises Institute. The most important, perhaps, was a nice exchange of emails with Professor Robert Ekelund about my research proposal, to investigate how Brazil fell behind the U.S. in terms of economic performance. Ekelund was my adviser and his teaching made an extraordinary contribution to my economic way of thinking.

Curiously, during my first two years in Auburn I never visited the Mises Institute. I had decided to focus on my formal studies. By the middle of the program I was taking an excellent externalities class. Andy Barnett, my professor, realized that I knew about Austrian economics. He encouraged me be in touch with the Mises Institute. I started to attend some seminars and soon got a scholarship from the Institute. It was very helpful at that moment because my studies were funded in reals—the Brazilian currency—and Brazil had 50 percent currency devaluation. There again I came in contact with Rothbard’s ideas, which I had put aside for several years. I read Man, Economy, and State. If I had to choose one of his books I would pick Power and Market as the most striking.

I am teaching at one of the biggest private universities in Brazil. My university, as are all others, supposed to follow Education Ministry guidelines. That narrows a little what is possible to teach and what to research. For instance, by the end of the economics course, all students must go through a national system of evaluation. The national exam is basically mainstream economics. The economics department got an A in this exam. Despite that, recently I was elected, by direct vote of students, as the best professor of the department. I cannot deny that the clear way of thinking of Austrian economics explains a good deal of this recognition. It seems that the students realize the advantages and the pleasure of studying the real world with coherent deductions instead of fooling around with math models. It is something that the status quo of the academic profession seems to have lost. I cannot stop thinking what I would be doing today if I were not at the right place and at the right time to see, accidentally, those free Austrian books.

Fernando Zanella is economics professor at Vale do Rio dos Sinos University (UNISINOS), Brazil, and editor of Perspectiva Econômica.