In Brief:
Steve H. Hanke’s free-market economics can be read as an institutional and monetary “rules-first” liberalism, whereby markets coordinate well when property, contracts, and competition are protected, but the coordination role of prices depends on a credible monetary standard so that contracts and balance sheets remain stable over time (Hanke & Sekerke 2025).
His intellectual lineage combines classical liberal political economy (of private property and limited government) with a “money matters” revival associated with Milton Friedman and other monetarists, alongside a selective affinity for Austrian themes - especially F. A. Hayek - while maintaining a preference for practical policy design over purely theoretical debate (Hanke & Sekerke 2025; List, Schuler & Hofmann 2025).
Where Hanke’s framework resembles ordoliberalism and modern institutional economics, the connection is largely structural rather than explicit. His emphasis on rule-bound monetary reform and competition-preserving legal frameworks bears resemblance to ordoliberal “competitive order” arguments, and resembles institutionalist language about “rules of the game” (Hanke & Sekerke 2025).
Hanke’s Free Market Economics Tradition
Hanke’s own description of Austrian economics places it inside a broader classical-liberal family. He characterizes Austrian economics as fitting “into the classical liberal tradition,” emphasizing private property and laissez-faire, and he notes that he often returns to Hayek for reading. Classical liberalism, in turn, is commonly defined as a doctrine built on protecting individual liberty while limiting government power, paired historically with laissez-faire and confidence in the price mechanism as the conductor of production and distribution (List, Schuler & Hofmann 2025).
Hanke’s moral foundations in classical liberalism are reinforced by the canonical political-economy schema associated with Adam Smith and The Wealth of Nations, whereby decentralized exchange and competition transmit information through prices and discipline producers through consumer choice. Hanke also positions his “classical liberal approach” alongside John Stuart Mill as a model of how economics used to be done, which was less adjunct to the work of policymakers (List, Schuler & Hofmann 2025).
Within the scope of classical liberalism, Hanke’s doctrine lies squarely within the monetarist tradition. The framework he lays out in his 2025 manifesto Making Money Work, written with Matt Sekerke, explicitly names Friedman alongside Karl Brunner and Allan Meltzer as emblematic “last great proponents” of the idea that money matters in macroeconomics. Monetarism, as a school, embraces the quantity theory of money and treats the money supply as central to understanding economic growth and inflation. Hanke sees Milton Friedman not only as a pioneer in this school to which he belongs, but as a personal mentor (Hanke & Sekerke 2025).
Hanke’s thought also shares family resemblance with ordoliberalism’s insistence that the state’s core economic role is to secure a rule-bound competitive order, using law and institutions to prevent monopoly power and preserve the functioning of the competitive market, as opposed to creating micromanage outcomes. Hanke names Walter Eucken as one example of an influence on his interpretation of capital theory (List, Schuler & Hofmann 2025).
Core Concepts Hanke Adopts or Adapts
A central conceptual idea in Hanke’s framework from Making Money Work is to treat the performance of the free-market as inseparable from how the monetary system is designed. In Making Money Work, Hanke depicts markets as “institution-dependent systems,” in which “free” means rules that stabilize the unit of account and enforce claims tightly enough that decentralized decisions can coordinate through prices. This emphasis is consistent with standard monetary theory that highlights the unit of account as a foundational money function because it simplifies price comparisons and monetary exchange (Hanke & Sekerke 2025).
Hanke’s “unit-of-account priority” is fundamental to his understanding of the free market. Rather than treating money as a neutral medium that simply enables trade, he emphasises that the unit of account must be credible before prices can reliably signal scarcity, opportunity, and profit-and-loss feedback to firms involved. This belief is spawned from F. A. Hayek’s argument that the price system transmits dispersed knowledge and allows coordination without centralized command, though Hanke’s interpretation tends towards institutional preconditions for that coordinative role (stable measuring units, enforceable obligations, and so on) (Hanke & Sekerke 2025).
From these mechanics follows a distinctive stance on neutrality and monetary transmission. The book’s structure places emphasis on “Money Is Not Neutral in the Economic Process” as a core theme, and interprets neutrality as a policy objective rather than a default assumption because new purchasing power enters the economy through particular channels and balance sheets. In general terms, this is a rejection of strong neutrality assumptions that treat money as affecting only nominal variables (at least outside the long run) (Hanke & Sekerke 2025).
In his oral autobiography, he contrasts the Austrian school’s theoretical appeal with what he sees as insufficient practical orientation, stating that he is “more interested in the practical policy analysis part of economics.” In the same interview, he describes acquiring “tacit knowledge” through observation and work from an early age, a theme attributed to Michael Polanyi in the interview’s footnoted context, and connects that learning style to his approach to teaching and doing economics (List, Schuler & Hofmann 2025).
The interview also documents specific academic influences that help explain this “applied institutionalist” posture. Hanke credits Fred Glahe, Professor of Economics at Hanke’s alma mater UC Boulder, with giving him a first real introduction to Austrian economics, and he describes auditing Kenneth Boulding’s history of economic thought course repeatedly (though Boulding, as recounted, lingered largely on Smith). He further notes formative exposure to a free-market economics summer program involving figures such as G. Warren Nutter, Leland B. Yeager, and Armen Alchian, an intellectual neighbourhood associated with price theory, institutional realism, and scepticism of discretionary policy (List, Schuler & Hofmann 2025).
The “applied” dimension is also visible in Hanke’s autobiographical account of his water-economics career, where he describes operating at the intersection of economics and engineering since graduate school, with joint appointments spanning engineering and economics at Johns Hopkins University, and advisory work with engineering firms and utilities in multiple countries. This would be work he continued in his position as senior economist on Ronald Reagan’s Council of Economic Advisers, where he was responsible for water resources and consulted on privatization, another example of his scholarship feeding directly into his philosophy of designing rules-based monetary institutions that enable the free market to operate (Hanke 2025; List, Schuler & Hofmann 2025).
References:
- List, Mitchell, Kurt Schuler, and Caleb Hofmann. 2025. An Interview with Steve H. Hanke on His Life and Work in Economics. Studies in Applied Economics No. 330. Baltimore: Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise. List-Schuler-Hofmann WP 330
- Hanke, Steve H., and Matt Sekerke. 2025. Making Money Work: How to Rewrite the Rules of Our Financial System. Hoboken, NJ: Wiley.
Related Pages
- Principles of Free Market Economics
- Privatisation and Property Rights
- Money as a Free-Market Institution
- Home: Free Market Economics — Return to the Free Market Economics overview