Austrian Economic School
The Austrian Economic School is a school of economic thought founded in the late 19th century by Carl Menger and today associated with the theories of Friedrich von Hayek and Ludwig von Mises. The school of thought is known for its emphasis on methodological individualism and subjective value and for its opposition to state monopoly in currency and central planning. These ideas were first put forward in the 1870s and were later developed by Mengers students, notably Eugen von Böhm-Bawerk and Friedrich Hayek, culminating in Misess Human Action which provided a synthesis of much of the Austrian literature up to that point.
The Austrian School believes that prices determine relative values of goods and services, and that entrepreneurial efforts are the main drivers of economic growth. It is skeptical of government intervention in the economy, believing that government’s ability to influence economic outcomes is limited and can often have undesirable unintended consequences. Austrian economists therefore advocate a free market economy, in which governments should have a minimum role.
The Austrian School does not have a unified set of specific beliefs, but certain ideas are shared by the majority of the school’s authors. These include an emphasis on individual choice, the belief that economics is an inexact science, and an understanding of economics as a process rather than as a series of fixed laws.
The Austrian Schools approach to economics can be characterized by its methodological individualism, which seeks to explain economic phenomena by studying the decisions of individuals, rather than aggregating them.
The Austrian Schools understanding of the nature of money and its importance to the economy has been influential in the development of modern monetary theory, focusing on the role of money as a store of value and the critical role it plays in maintaining economic stability. Austrian views on money developed in opposition to the quantity theory of money promoted by the neoclassical school of economics and the widespread practice of central banks manipulating the money supply to achieve economic objectives.
The Austrian School also believes in the notion of spontaneous order, the idea that complex systems can arise from the interactions of individuals in a decentralized and largely unregulated fashion. This is an important part of the Austrians reluctance to engage in centralized economic planning, believing that the marketplace will find more efficient ways of allocating goods and services than governments can.
One of the most influential ideas of the Austrian School is its emphasis on the subjective nature of economic decisions, which led to its advocacy of marginalism and the notion of consumer sovereignty. Marginalism seeks to explain the behavior of individuals by focusing on the role of small, incremental changes in prices and other economic variables in influencing individual choices. Austrian economists believe that individuals are the best judge of what they should buy or not buy and that governments should only intervene in the economy to enforce contracts and protect property rights.
The Austrian School of Economics today is closely associated with the libertarian movement in the economic sphere. Many libertarians consider the Austrian tradition of economic thought to be a valid alternative to mainstream economics, providing a theoretical basis for free market economics and limited government. Today, the Austrian Schools ideas are still studied and discussed by academics, scholars, and economists, with many believing that modern economics still has much to learn from the Austrian School.
