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The Austrian School of Economics is a heterodox school of economic thought that advocates strict adherence to methodological individualism – the concept that social phenomena are primarily caused by the motivations and actions of individuals. It originated in 1871 in Vienna with the work of Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, and others. While it is becoming more popular worldwide, it is not widely taught in graduate schools, and those wishing to study it may need to seek out sympathetic faculty members or free-market-oriented institutions. Some universities with a significant Austrian presence include George Mason University, New York University, Auburn University, and the University of Liechtenstein.
| Characteristics | Values |
|---|---|
| Schools that teach Austrian Economics | George Mason University, New York University, Grove City College, Loyola University New Orleans, Monmouth College, Auburn University, University of Missouri, San Jose State University, University of Chicago, North Central College, Clemson University, University of Connecticut, Florida State University, University of Georgia, University of Mississippi, North Carolina State University, Winston-Salem State University, University of Oklahoma, University of Rochester, Washington University, St. Louis, University of Canterbury, King Juan Carlos University, Universidad Francisco Marroquín, and many others |
| Austrian School of Economics | A heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result primarily from the motivations and actions of individuals along with their self-interest |
| Austrian School Theorists | Economic theory should be exclusively derived from basic principles of human action |
| Origin | Vienna, 1871 |
| Founders | Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, and others |
| Current Economists | Peter Boettke, Roger Garrison, Steven Horwitz, Peter Leeson, George Reisman, Walter Block, Hans-Hermann Hoppe, Jesús Huerta de Soto, Robert P. Murphy |
What You'll Learn
Austrian Economics vs. Keynesian Economics
Austrian economics and Keynesian economics are two opposing schools of thought that are still thriving today. Austrian economics, originating in the Austrian Empire in the mid-1800s, espouses the belief in free markets and minimal government intervention. On the other hand, Keynesian economics, named after economist John Maynard Keynes, advocates for government intervention to manage demand and maximise economic growth and employment.
Austrian Economics
Austrian economics, with roots in the mid-19th century Austrian Empire, centres around the idea that free markets are the most efficient means of allocating resources. Proponents of Austrian economics, such as Carl Menger, Ludwig von Mises, and Friedrich Hayek, argue that the market will self-regulate and reach equilibrium if left largely untouched by government influence. They emphasise the importance of backing currency with gold or other precious metals to prevent inflation, which they view as detrimental to economic growth. Austrian economists generally rely more on logic and critical thinking than complex statistical models and believe that maintaining free markets and a stable money supply are crucial for social progress and civil liberty.
Keynesian Economics
Keynesian economics, introduced by John Maynard Keynes in his 1936 book "The General Theory of Employment, Interest and Money," takes a different approach. Keynes challenged the notion that free markets automatically maximise employment and argued that government intervention is necessary to stimulate the economy and maintain stability. According to Keynesian economics, periods of inadequate demand can lead to prolonged high unemployment, and it is the government's role to step in with policies to modify monetary policy. Keynesian economists generally prioritise maximising employment over minimising inflation and support the use of fiat currency, which can be adjusted by central banks to influence the money supply.
Key Differences
The fundamental difference between Austrian and Keynesian economics lies in their views on government intervention. Austrian economists favour minimal government involvement, believing that the market will naturally balance itself out over time. In contrast, Keynesian economists see government intervention as essential to correcting market inefficiencies and mitigating recessions. Additionally, they differ in their perspectives on inflation, with Austrian economists viewing it as harmful to economic growth, while Keynesian economists believe a low, steady inflation rate encourages investment and stimulates economic growth.
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Austrian Economics in Academia
Austrian economics is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result primarily from the motivations and actions of individuals along with their self-interest. Austrian-school theorists hold that economic theory should be exclusively derived from basic principles of human action. The Austrian School of Economics represents a heterodox methodological approach to economics that significantly differs from the orthodox teachings of mainstream economics. The approach is multidisciplinary, comprising not only economists but also historians, sociologists, jurists, and philosophers who aim to explain social phenomena stemming from human action.
The Austrian School's main tools are methodological individualism and apriorism. Methodological individualism is a systematic approach that focuses on the individual as the fundamental unit of study in economics and how individual goals and actions transcend the personal sphere and influence society. It differs from collectivism, which focuses on the collective as the primary subject of study, relegating the individual to a mere part of the whole. Apriorism holds that the most basic human knowledge is innate, based on certain logical structures embedded in the mind that enable valid reasoning without the need for empirical data.
The Austrian School of Economics is becoming more and more popular worldwide, with a growing number of students, educators, entrepreneurs, philosophers, sociologists, historians, and even politicians playing a fundamental role in spreading the ideas of sound, praxeological economics in society. There are several universities with a significant Austrian presence, including George Mason University, New York University, Grove City College, Loyola University New Orleans, Monmouth College, and Auburn University in the United States; King Juan Carlos University in Spain; and Universidad Francisco Marroquín in Guatemala. Additionally, Austrian economic ideas are promoted by privately funded organizations such as the Mises Institute and the Cato Institute.
While Austrian economics is gaining popularity, it still faces some challenges in academia. Some view it as ideological and not based on science and mathematics, which are considered essential in mainstream economics. Most universities teach institutionalized Keynesian economics, and Austrian economics is not widely represented in graduate programs. However, there are a growing number of schools that specialize in Austrian economics or have sympathetic faculty members. It is important to note that Austrian economics may require advanced mathematics to understand the professional language, and some programs may feature an unexpected amount of mathematics.
Overall, Austrian economics has a presence in academia, with a growing number of interested students and educators. While it may not be as widely taught as other economic schools of thought, it is gaining traction and has a dedicated following.
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The Austrian School's Approach
The Austrian School of Economics is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result primarily from the motivations and actions of individuals along with their self-interest. Austrian-school theorists hold that economic theory should be exclusively derived from basic principles of human action.
Methodological individualism is a systematic approach that focuses on the individual as the fundamental unit of study in economics and how individual goals and actions transcend the personal sphere and influence society. It differs from collectivism, which focuses on the collective as the primary subject of study, relegating the individual to a mere part of the whole. Methodological individualism does not deny the aggregate impact of groups on individuals but argues that social groups, or the collective, are ultimately composed of individuals with their own goals and objectives, whose convergence fosters the formation of such groups. In other words, collective groups are ultimately several acting individuals.
Apriorism holds that the most basic human knowledge is innate, based on certain logical structures embedded in the mind that enable valid reasoning without the need for empirical data. Thus, this knowledge is valid and certain in all contexts. A prominent example is that of human action, which cannot be denied without human action and other consequent economic laws.
The Austrian School originated in 1871 in Vienna with the work of Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, and others. It was methodologically opposed to the Historical School, in a dispute known as the "methodology quarrel." The Austrian School owes its name to members of the German Historical School of Economics, who argued against the Austrians during the late 19th-century "methodology struggle," in which the Austrians defended the role of theory in economics as distinct from the study or compilation of historical circumstances.
The Austrian School's focus on methodological individualism also sets it apart from other schools of economic thought, which have typically focused on aggregate variables, equilibrium analysis, and societal groups rather than individuals.
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Austrian Economics and Mathematics
Austrian economics is often criticised for its lack of mathematical modelling, with some critics deeming it unscientific. However, Austrian economics is not opposed to mathematics per se, but rather its use in economics. Austrian economists argue that mathematics is not an appropriate tool to describe human action, which is central to economic analysis.
Austrian economics is a very different approach to the subject, and it is not a matter of ideology. It is a method to study the economy. The Austrian School of Economics is becoming more and more popular worldwide, and there are several universities that offer courses in this field.
Some critics argue that Austrian economics fails the "market test" because it does not incorporate multivariable calculus and other mathematical tools in its economic analysis. They claim that since mainstream economics uses mathematics, it has passed the "market test" and is therefore the correct tool. This has led to top economic journals resembling collections of applied mathematics rather than economics.
However, Austrian economists argue that mathematics is inappropriate for describing human behaviour. They believe that utility or consumer satisfaction cannot be measured in cardinal terms. While one can say they like chocolate more than vanilla, they cannot put that preference in cardinal numbers without committing fraud.
Austrian economics emphasises the importance of observing individual choices to understand their preferences. They argue that macroeconomic models must be consistent with microeconomic principles and explainable in terms of human decisions.
While Austrian economics may not use formal mathematical modelling, it does draw heavily upon logical inferences and deductive reasoning in its economic analysis.
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Austrian Economics and Libertarianism
Austrian economics is a school of economic thought that has gained popularity worldwide. It is distinct from Keynesian economics, which is taught in most universities. Austrian economics is based on the principles of economists such as Adam Smith and Ludwig von Mises, while Keynesian economics is associated with John Maynard Keynes and other interventionists.
Austrian economics is often associated with libertarianism, and some libertarian thinkers such as Murray Rothbard, Friedrich Hayek, and Henry Hazlitt are proponents of Austrian economics. However, it is important to note that not all libertarians support Austrian economics, and some critics argue that Austrian economics is used to justify libertarian ideology.
There are several educational institutions that offer programs in Austrian economics, including New York University, George Mason University, and Auburn University. These programs provide students with the opportunity to specialize in Austrian economics and explore its applications in various fields.
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Frequently asked questions
Austrian Economics is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result primarily from the motivations and actions of individuals along with their self-interest. Austrian-school theorists hold that economic theory should be exclusively derived from basic principles of human action.
Some graduate schools that teach Austrian Economics include George Mason University, New York University, Auburn University, and Grove City College.
Notable universities outside the United States that teach Austrian Economics include King Juan Carlos University in Spain, Universidad Francisco Marroquín in Guatemala, University of Canterbury in New Zealand, and University of Liechtenstein.
Austrian Economics has been criticised for its rejection of model building, mathematical, and statistical methods in economics. It has also been criticised for its libertarian political theory, which some believe clashes with the economic theory.
