“AUSTRIAN ECONOMICS”

disrupt this highly complex market process and invariably produce perverse . but in the minds of the individuals who value them. In the short term this may mean a 'considerable role for regulation'..INTRODUCTION      Austrian economists regard utilities as exceptional cases where regulation may be justified.. competitive and unregulated industry'. The economic decisions from which all economic phenomena derive are inherently personal and unpredictable. Value does not exist in things. and policy mistakes such as inflation.turn as much as possible of that industry into a private. The long term aim for a public utility should be to '. Government intervention.

In the human sciences. The study of the market order is fundamentally about exchange behaviour and the institutions within which exchanges take place. with his purposes and plans. The “facts” of the social sciences are what people believe and think: Unlike the physical sciences. collective entities do not choose. the “facts” of the world are what .Science of the economics    Only individuals choose: Man. Only individuals make choices. the human sciences begin with the purposes and plans of individuals. is the beginning of all economic analysis.

never taken.Utility and costs are subjective: The focus on alternatives in choices leads to one of the defining concepts of the economic way of thinking: opportunity costs.  Private property in the means of production is a necessary condition for rational economic calculation.  The price system economizes on the information that people need to process in making their decisions. one weighs the expected benefits of an activity against the expected benefits of alternative activities.  . Since the forgone action is. when one decides.

the entrepreneur has a huge role as the agent of change who prods and pulls markets in new directions.  Social institutions often are the result of human action.  The capital structure consists of heterogeneous goods that have multi-specific uses that must be aligned. but not of human design.  .The competitive market is a process of entrepreneurial discovery: Since competition is an activity.  Money is non-neutral.

◦ the origin of social institutions as the unintended consequences of human action. ◦ the salience of dynamic competition and entrepreneurial innovation in the marketplace. ◦ the subjective theory of value. ◦ recognition of the time factor in social and economic processes. and .RESEARCH METHODOLOGY  The leading features of the Austrian tradition include ◦ methodological individualism.

that is.The most distinctive feature and the one that has created the most problems for them in gaining acceptance in the mainstream of modern economics is the concept of praxeology.  .  Praxeology rests on the fundamental axiom that individual human beings act. on the primordial fact that individuals engage in conscious action towards chosen goals.

 They also insist that Austrians are too quick to blame government intervention for every failing.  Most criticism focuses round the deductive method of Mises.  . and that free markets produce monopolies and other problems. which mainstream economists regard as unscientific. which are after all only abstractions.  Critics also argue that Austrians caricature their models.CRITICISMS Some critics argue that the Austrians’ strict individualist method is too narrow. and that social patterns can be used to explain and predict human groups.

Critics argue that praxeology rejects the scientific method and the use of empirical data.  Supporters argue that empirical data in and of itself cannot explain anything.  . which in turn implies that empirical data cannot falsify a theory.

the advantages of markets outweigh their disadvantages. but that explanations based on broad cultural. we will end up with equally unreal conclusions.  Better to show that. economic. coercion and government.  . or historic trends do help our understanding.CONCLUSION Austrians accept that all human action is ultimately down to individuals.  To Austrians like Hayek. it seems pointless to reject any method other than deduction and any deviation from a purely conceptual ideal. and that if we start from the idea of action that is untainted by theft. fraud.  Many Austrians also believe that the deductive method needs to be checked against the hard evidence of real life. despite all their inevitable taints.

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