Dynamics of the Mixed Economy: Toward a Theory of Interventionism.

• Author: Holcombe, Randall G.

By Sanford Ikeda London: Routledge, 1997. Pp. xiv, 296. $90.00 cloth.

The Austrian school of economics, once barely visible at the fringe of academia, has been growing in strength in recent decades, and Sanford Ikeda's book is a good example of the scholarship coming from members of this school. The book fills an important gap in the school's work, because Austrian economists have written extensively on the operation of a pure market economy and on the problems of a centrally planned economy, but they have written relatively little about the operation of the far more common mixed economy Ikeda uses the insights of Austrian economics, blended with ideas from other schools of thought, to develop his theory of the mixed economy. He explains why government involvement in the economy tends to grow over time, how government intervention misallocates resources, and why people put up with and even encourage government growth even though it makes them worse off.

The modern Austrian school owes its existence to Ludwig von Mises (1881-1973), who began his career in Vienna and eventually migrated to New York, where a small group of his students spread the word and sparked an Austrian resurgence. As a result, the "Austrian" school now exists mostly in the United States, and Ikeda is a participant in its resurgence. He presents an extensive review of the literature on which he builds, describing the ideas of others and categorizing them according to schools of thought. For example, he distinguishes between Chicago public choice and Virginia public choice and explains why some ideas are more "Austrian" than others. This preoccupation with methodological issues and schools of thought tends to be a characteristic of writers in the Austrian school, but Ikeda's literature review serves the book well by laying a foundation and framing his work within the larger context of the work he builds on. After developing his foundation, he proceeds to build the superstructure, Ins theory of the mixed economy

A major theme in Austrian economics pertains to how markets use knowledge more effectively than government, and Ikeda builds on this idea to explain how the mixed economy allocates resources. In a mixed economy, government decision makers can use information generated by markets, but as government grows relative to the market sector, market prices contain less information to guide resource allocation, rendering the economic system less efficient. Thus, smaller...