Chicago Vs Austrian Economics: Key Differences Explained

The Chicago School and Austrian School are two distinct schools of economic thought. Despite sharing similarities as offshoots of marginalism and neoclassical economics, they differ in several key ways. This article will explore these differences, including their contrasting approaches to methodology, mathematical and statistical analysis, and public policy.

Mathematical and statistical analysis: Chicago School embraces it, Austrian School rejects it

The Chicago School and Austrian School are both offshoots of marginalism and neoclassical economics, but they differ in their approach to economic science.

The Chicago School embraces mathematical and statistical analysis, and strongly emphasises it. The Austrian School, on the other hand, rejects this approach. This is because the Austrian School is opposed to mathematical modelling and modern macro, which makes it a heterodox school. The Chicago School, while having a fringe taste, is still considered mainstream.

The fundamental difference between the two schools is methodology: inductive vs. deductive. The Chicago School, under Frank Knight, eschewed empiricism and quantitative methodology. Instead, Knight adopted a range of theories from the Austrians, Marshellians and Marxists. When Friedman, Stigler, and Co. came along, they used positivism to prove that goods were best produced under some form of "laissez faire" capitalism.

The two schools also differ in their approach to banking issues and public policy. The Chicago School will devise every model possible to prove how, where, and when intervention should happen in the economy.

Methodology: Chicago School is inductive, Austrian School is deductive

The Chicago School and Austrian School are both offshoots of marginalism and neoclassical economics, but they differ in their approach to economic science. The fundamental difference between the two schools is their methodology: the Chicago School is inductive, while the Austrian School is deductive.

The Chicago School embraces and strongly emphasises mathematical and statistical analysis, which is rejected by the Austrian School. The Chicago School uses positivism to prove that goods are best produced under some form of "laissez-faire" capitalism, which is not truly laissez-faire. The Austrian School, on the other hand, is a heterodox school because of its opposition to mathematical modelling and rejection of modern macro.

The Chicago School is more mainstream than the Austrian School, which has a fringe taste. However, both schools agree on many policy issues, such as their support for free markets and opposition to big-government Keynesians.

The Chicago School and Austrian School also differ in their views on banking issues and public policy. The Chicago School will devise various models to determine how, where, and when intervention should occur in the economy.

Banking issues: the two schools have radically different views

The Chicago School and Austrian School have radically different views on banking issues. The Chicago School embraces and strongly emphasises mathematical and statistical analysis, while the Austrian School rejects this approach. The Chicago School uses positivism to prove that goods are best produced under some form of "laissez-faire" capitalism, which is not truly laissez-faire. The Austrian School, on the other hand, is heterodox because of its opposition to mathematical modelling and rejection of modern macro.

The fundamental difference between the two schools is their methodology: inductive versus deductive. The Chicago School is more likely to devise models to prove when, where, and how intervention should happen in the economy. The Austrian School, meanwhile, is often accused of being a religion serving to justify libertarian policy conclusions. However, both schools are offshoots of marginalism and neoclassical economics, and they agree on many policy issues.

Public policy: the two schools have radically different views

The Chicago School and the Austrian School have radically different views on public policy. The Chicago School uses mathematical and statistical analysis to devise models that prove how, where and when intervention should happen in the economy. The Austrian School, on the other hand, rejects mathematical modelling and statistical analysis. Instead, it uses deductive methodology.

Both schools are offshoots of marginalism and neoclassical economics, and they agree on many policy issues. However, their approaches to economic science can be quite different. The Chicago School is considered more mainstream than the Austrian School, which is seen as a heterodox school.

Mainstream: Chicago School is mainstream, Austrian School is heterodox

The Chicago School and Austrian School are both offshoots of marginalism and neoclassical economics, but they differ in several key ways. The Chicago School is considered mainstream, while the Austrian School is heterodox. This is largely due to the Austrian School's rejection of mathematical and statistical analysis, which is embraced and strongly emphasised by the Chicago School. The Austrian School is also opposed to modern macro and mathematical modelling.

The fundamental difference between the two schools is their methodology, with the Chicago School favouring inductive reasoning and the Austrian School deductive reasoning. The Chicago School is known for devising models to prove how, where, and when intervention should happen in the economy, while the Austrian School rejects this approach.

Despite these differences, the two schools agree on many policy issues, particularly their support for free-market capitalism and opposition to big-government Keynesians. However, their approaches to economic science can be quite different. For example, the Chicago School is associated with positivism and "laissez-faire" capitalism, while the Austrian School is often seen as a religion serving to justify libertarian policy conclusions.

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