A school of economic thought founded in 1871 with the publication of
Carl Menger's [Principles of Economics]
?. Austrian economics is currently closely associated with advocacy of unregulated capitalism and extreme laissez faire views.
Austrians view entrepreneurship as the driving force in economic development, see private property as essential to the efficient use of resources, and often think government interference in market
processes to be counterproductive. The school originated in
Vienna and owes its name to members of the [Historical School]
? of
economics who derisively called it the "Austrian School" to emphasize its departure from mainstream German thought.
Menger was closely followed by contributions from
[Eugen von Böhm-Bawerk]? and [Friedrich von Wieser]?.
Austrian economists developed a sense of themselves as a
school distinct from neoclassical economics
during the [economic calculation debate]?,
with [Ludwig von Mises]? and Friedrich von Hayek
representing the Austrian position. The school was
no longer centered in Austria after Hitler came to
power. Austrian economics was ill-thought of by most
economists after World War II. Its reputation has
lately risen with work by students of Israel Kirnzer
and Ludwig Lachmann.
Carl Menger was one of a group of economists founding
neoclassical economics in the 1870s. Neoclassical
economists reject classical cost of production
theories. Instead they explain value by subjective
preferences of individuals. Supply and demand are
explained by aggregating over the decisions of
individuals, following the precepts of methodological
individualism and marginal arguments, which compare
the costs and benefits for incremental changes.
Contemporary neo-Austrian economists claim to
adopt Economic subjectivism more consistently
than any other school of economics and reject many
neoclassical formalisms. For example, while neoclassical economics formalizes the economy as an equilibrium system, Austrian economists emphasize it's dynamic, perpetually dis-equilibriated, nature.
Some contributions of Austrian economists:
- A theory of distribution in which factor prices result from the imputation of prices of consumer goods to goods of "higher order", that is goods used in the production of consumer goods, goods used in the production of those producers goods, etc.
- An emphasis on opportunity cost, reservation demand, and a refusal to consider supply as an otherwise independent cause of value. (The British economist Philip Wicksteed adopted this perspective.)
- An emphasis on the forward-looking nature of choice.
- [Eugen von Böhm-Bawerk]?'s critique of Marx centered around the untenability of the labor theory of value in the light of the transformation problem.
- [Eugen von Böhm-Bawerk]?'s capital theory which equates capital intensity with the degree of roundaboutness of production processes and explain interest rates through intertemporal choice.
- The Mises-Hayek business cycle theory which explains depression as a reaction to an intertemporal production structure fostered by monetary policy setting interest rates inconsistent with individual time preferences.
- Hayek's concept of intertemporal equilibrium. (J. R. Hicks took over this theory in his discussion of temporary equilibrium in Value and Capital, a book very influential on the development of neoclassical economics after World War II.)
- Mises and Hayek's view of prices as permitting agents to make use of dispersed tacit knowledge.
- The [time preference theory of interest]?
Major Austrian Economists
Other related economists:
- Frederic Bastiat (precursor)
- [Henry Hazlitt]? (introduced the Austrian School to the USA)
- [Murray N. Rothbard]? (successor)
/Talk
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