AUSTRIAN SCHOOL VS.
NEOCLASSICAL SCHOOL
A summary of the essential points of comparison between two paradigms.
Adapted from The Austrian School: Market Order And Entrepreneurial Creativity
Points of Comparison
Concept of economics
(essential principle)
Methodological outlook
Protagonist of social processes
Possibility that actors may
err a priori, and nature of
entrepreneurial profit
Concept of information
Reference point
Concept of competition
Concept of cost
Formalism
Relationship with the
empirical world
Possibilities of specific
prediction
Person responsible for making
predictions
Current state of the paradigm
Amount of "human capital"
invested
Type of "human capital"
invested
Most recent contributions
Relative position of different
authors
by Jesus Huerta De Soto.
Austrian Paradigm Neoclassical Paradigm
A theory of human action, A theory of maximization
understood as a dynamic subject to restrictions (narrow
process (praxeology) concept of "rationality")
Stereotype of methodological
Subjectivism
individualism (objectivist)
Creative entrepreneur Homo economicus
Regrettable errors are
Actors may conceivably
not regarded as such,
commit pure entrepreneurial
since all past decisions
errors that they could have
are rationalized in terms
avoided had they shown
of costs and benefits;
greater entrepreneurial
entrepreneurial profits are
alertness to identify profit
viewed as rent on a factor of
opportunities
production
Complete, objective, and
Knowledge and information
constant information (in
are subjective and dispersed
certain or probabilistic
and they change constantly
terms) on ends and means
(entrepreneurial creativity);
is assumed; practical
a radical distinction is drawn
(entrepreneurship)
between scientific knowledge
knowledge is not
(objective) and practical
distinguished from scientific
knowledge (subjective)
knowledge
General process which tends
towards coordination; no Model of equilibrium (general
distinction is made between or partial); separation
micro and macroeconomics: between micro and
each economic problem is macroeconomics
studied in relation to others
Process of entrepreneurial State or model of "perfect
rivalry competition"
Subjective (depends on
Objective and constant (such
entrepreneurial alertness and
that a third party can know
the resulting discovery of new,
and measure it)
alternative ends)
Verbal (abstract and formal) Mathematical formalism
logic which introduces (symbolic language typical of
subjective time and human the analysis of atemporal and
creativity constant phenomena)
Aprioristic-deductive reasoning:
radical separation and
Empirical validation of
simultaneous coordination
hypotheses (at least
between theory (science) and
rhetorically)
history (art); history cannot
validate theories
Impossible, since future events
depend on entrepreneurial
knowledge which has not
yet been created; only Prediction is an objective
qualitative, theoretical which is deliberately pursued
pattern predictions about the
discoordinating consequences
of interventionism are possible
The economic analyst (social
The entrepreneur
engineer)
Remarkable resurgence over
the last 25 years (particularly
State of crisis and rapid
following the crisis of
change
Keynesianism and the collapse
of real socialism)
The majority, though there
A minority, though it is
are signs of dispersal and
increasing
disintegration
Specialists in economic
Multidisciplinary theorists intervention (piecemeal
and philosophers, radical social engineering); an
libertarians extremely variable degree of
commitment to freedom
- Critical analysis of
institutional coercion - Public choice theory
(socialism and - Economic analysis of the
interventionism) family
- Theory of free banking and - Economic analysis of law
economic cycles - New classical
- Evolutionary theory of macroeconomics
(juridical, moral) institutions - Economics of information
- Critical analysis of "social - New Keynesians
justice"
Coase, Friedman, Becker,
Rothbard, Mises, Hayek, Kirzner
Samuelson, Stiglitz
Hunter Hastings
hunterhastings.com mises.org