I said, "It's a school of economic thought based on the theory that all voluntary action is intended to increase one's satisfaction." This didn't really make sense to the person I was talking to. How do you explain what Austrian economics are to some one who is not a pro at economics?
It is essentially a heterodox school of Economics in the marginalist-subjectivist tradition, mostly based on a rationalist (i.e. axiomatic-deductive), causal-realist methodological approach, emphasizing value-freedom, methodological individualism and disequilibrium analysis, and is exemplified best in the works of Austrian economists such as Menger, Bohm-Bawerk, Mises and Hayek, as well as various others such as Robbins, Kirzner, Rothbard et al. It also shares an affiliation with economists such as Schumpeter and J. Buchanan. It has a strong focus on capital theory, knowledge and entrepreneurship. It tends to be evoked in favour of free markets, and most of its members are advocates of them.
That is more or less it, in summary form. As friendly advice, when trying to explain it to people with little to no philosophical grounding, avoid discussions of methodology. They will lead nowhere until the individual has a comprehension of the concepts involved.
Inquisitor:It is essentially a heterodox school of Economics in the marginalist-subjectivist tradition, mostly based on a rationalist (i.e. axiomatic-deductive), causal-realist methodological approach, emphasizing value-freedom, methodological individualism and disequilibrium analysis, and is exemplified best in the works of Austrian economists such as Menger, Bohm-Bawerk, Mises and Hayek, as well as various others such as Robbins, Kirzner, Rothbard et al. It also shares an affiliation with economists such as Schumpeter and J. Buchanan. It has a strong focus on capital theory, knowledge and entrepreneurship. It tends to be evoked in favour of free markets, and most of its members are advocates of them.That is more or less it, in summary form. As friendly advice, when trying to explain it to people with little to no philosophical grounding, avoid discussions of methodology. They will lead nowhere until the individual has a comprehension of the concepts involved.
I'd agree mostly with this except I'd take the Wiserarians out of the Austrian camp and put them into the affliated camp. They deviate too far from the rationalist, causal realist approach to be considered, true Mengerian, Austrians. This means that Hayek and possibly Kirzner remain outside the Austrian camp
The atoms tell the atoms so, for I never was or will but atoms forevermore be.
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Physiocrat
Do their actual economics really differ all that much from those of other Austrians though? Especially Kirzner's, I'd be extremely reluctant to exclude him from the Austrian camp. I think confusion on methodology is insufficient to render one non-Austrian. Reisman is arguably an Austrian, even though his economics are largely a fusion of classical and Austrian economics. Perhaps on such a ground Hayek could also be seen as an Austrian, although not a full-blooded one?
I agree with Inquisitor. I just don't see how Hayek and Kirzner fail to qualify as members of the Austrian School. I suppose there can be "sub-groups" within the Austrian tent, but they are Austrians nonetheless.
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
Classical Liberalism is generally identified with laissez-faire thinkers during the nineteenth-century and before, I believe. Writers such as Locke, Cantillon, Turgot, Say, Bastiat, Molinari, and Spencer belong in this group. More recently, however, some have defined themselves as classical liberals (Milton Friedman, William Hutt). The term seems to cover a very wide area.
For a more official description, I submit to you Percy Greaves' definition of Classical (traditional) Liberalism:
Liberal. (1) Used by Mises "in the sense attached to it everywhere in the nineteenth century and still today in the countries of continental Europe. This usage is imperative because there is simply no other term available to signify the great political and intellectual movement that substituted free enterprise and the market economy for the precapitalistic methods of production; constitutional representative government for the absolutism of kings or oligarchies; and freedom of all individuals for slavery, serfdom, and other forms of bondage." (HA. v). NOTE: In the Third Edition of Human Action the last "for" appeared in error as "from."
(2) "In the [early nineteenth century] constitutional conflict in Spain in which champions of parliamentary government were fighting against the absolutist aspirations of the Bourbon Ferdinand VII, the supporters of a constitutional regime were called Liberals and those of the King Serviles. Very soon the name 'Liberalism' was adopted all over Europe." (UF. 92)
Mises considers true liberalism to be the practical philosophy of scientific praxeology (q.v.) and economics (q.v.). See especially FC., which appeared originally (1927) as Liberalismus (Liberalism). The English-Language Edition carries the subtitle, "An Exposition of the Ideas of Classical Liberalism." Its appendix discusses the term "Liberalism" and the "Literature of Liberalism."
The source can be found here: http://www.mises.org/easier/L.asp#17
Inquisitor:Do their actual economics really differ all that much from those of other Austrians though? Especially Kirzner's, I'd be extremely reluctant to exclude him from the Austrian camp. I think confusion on methodology is insufficient to render one non-Austrian. Reisman is arguably an Austrian, even though his economics are largely a fusion of classical and Austrian economics. Perhaps on such a ground Hayek could also be seen as an Austrian, although not a full-blooded one?
Leaving Kirzner aside. Hayek to my understanding (though I have read little of his actual work) attempted to explain everything in terms of subjective value which lead to his rejection of Mises' calculation argument since it rested on prices rather than value. In doing so he followed Wieser rather than Bohm-Bawerk. Further his non-systematic style is contrary to the rationalist roots of Austrian economics; in doing so brought in much consequentialism. Further Hayek's move towards positivism later in life certainly shift him outside the Mengerian tradition. For an interesteing essay read Mises and Hayek Dehomogenised by Salerno.
http://www.mises.org/journals/rae/pdf/RAE6_2_5.pdf
On Reisman, I haven't read much either, he seems to be within the rationalist mode and so would consider him more Austrian than Hayek.
wgeary:I was recently discussing my reasons for opposing the minimum wage with someone not very well educated in economics (so naturally they were pro-minimum wage). I mentioned the school of Austrian Economic thought, and they asked what is that? I said, "It's a school of economic thought based on the theory that all voluntary action is intended to increase one's satisfaction." This didn't really make sense to the person I was talking to. How do you explain what Austrian economics are to some one who is not a pro at economics?
The question was how to explain the nature of Austrian Economics to someone who knows very little about economics. If a novice reads any of the replies, he/she would still not know. I am sure wgeary did not go back to his friend with any of the replies that followed.
As my philosophy professor used to say: If you cannot explain it in plain English, you do not understand. While the responses were clearly from knowledgeable people, it did not answer the question usefully. So can this be a challange - a definition of Austrian economics for the novice? And how does it differ from other branches/ views of economics?
...in a common man's (or woman's) language.
CarlvH: wgeary:I was recently discussing my reasons for opposing the minimum wage with someone not very well educated in economics (so naturally they were pro-minimum wage). I mentioned the school of Austrian Economic thought, and they asked what is that? I said, "It's a school of economic thought based on the theory that all voluntary action is intended to increase one's satisfaction." This didn't really make sense to the person I was talking to. How do you explain what Austrian economics are to some one who is not a pro at economics? The question was how to explain the nature of Austrian Economics to someone who knows very little about economics. If a novice reads any of the replies, he/she would still not know. I am sure wgeary did not go back to his friend with any of the replies that followed. As my philosophy professor used to say: If you cannot explain it in plain English, you do not understand. While the responses were clearly from knowledgeable people, it did not answer the question usefully. So can this be a challange - a definition of Austrian economics for the novice? And how does it differ from other branches/ views of economics? ...in a common man's (or woman's) language.
OK then. Austrian economics focuses on the individuals use of scarce means to satisfy his own ends. The end is given and can be anything the individual wishes it to be. Add the fact that working is hard work and you can deduce the laws of economics from these foundations. These laws are realistic and are causal in nature: if A then B. The mainstream, neo-classical position, essentially attempt to model individual behaviour using unrealistic abstraction, such as perfect knowledge, to then predict future behaviour. Rather then attempting to find causal laws they find correlations and use these in policy. ie the phillips curve- high inflation is associated with low unemployment and vice versa. The main difference is though that Austrianism is based in the real world, with realistic assumptions, from which economics can be deduced whereas neo-classicism revolovs around unrealistic assumptions to model behaviiour and consequently does lots of number crunching.
Thanks Physiocrat!
The neo-classical position seems clearer form this explanation than the Austrian position. Maybe we can do something with
The end is given and can be anything the individual wishes it to be. Add the fact that working is hard work and you can deduce the laws of economics from these foundations.
CarlvH:Thanks Physiocrat! The neo-classical position seems clearer form this explanation than the Austrian position. Maybe we can do something with The end is given and can be anything the individual wishes it to be. Add the fact that working is hard work and you can deduce the laws of economics from these foundations.
The end is that which the individual believes will increase his welfare most and is hence subjective in nature. Add the realistic assumption that labouring is hard work, if you could you would rather not work, then you can deduce the laws of economics.
How's that?
Austrian Economics is an approach to economics which does not assume away real people.
How's that for simplicity?
Yes, that is a true and simple statement, but how useful is it to explain Austrian economics to someone that does not know.
I'll take a shot at it: the Austrian School attempts to study human action in the face of scarcity. Rather than relying on abstract models and mathematics (even though it is not outright hostile to either; some Austrians do see a place for mathematics), it is based on realistic assumptions and logical analysis from what flows therefrom. Rather than treating human action in a deterministic form, it realizes it is inherently end-oriented (teleological) and purposive, and thus is difficult to predict; furthermore, it is adaptive. Its analysis leads it to conclude that governments at best can intervene as little as possible, at most should have no role whatsoever in the economy (provided one's goal is prosperity), and that the economy is best at adjusting itself to changing conditions, via the price mechanism.
I think the definitions have been given are quite good.
Although, you can watch this video. It's an interview with Kirzner, who explains the differences between the mainstream (from the classical definition of economics by Lionel Robbins) and Mises' views. During the interview (not in the video) he also explains the main tenets of Austrian economics. Quite interesting.
http://www.youtube.com/watch?v=hjctX7hmYLY
By the way, is there ANY Austrian economist who is NOT an advocate of free markets? I don't think so, but who knows....
It's not as though Kirzner and Hayek were even entirely outside of the rational causal analysis approach either. They merely associated themselves with the general equilibrium branch of Walresian economics as well; something I do by the same token.Though I generally do understand and use a general equilibrium approach in certain areas as well, I still consider myself a full fledged Austrian.
The Origins of Capitalism
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martinf:I think the definitions have been given are quite good. Although, you can watch this video. It's an interview with Kirzner, who explains the differences between the mainstream (from the classical definition of economics by Lionel Robbins) and Mises' views. During the interview (not in the video) he also explains the main tenets of Austrian economics. Quite interesting. http://www.youtube.com/watch?v=hjctX7hmYLY By the way, is there ANY Austrian economist who is NOT an advocate of free markets? I don't think so, but who knows....
JAlanKatz:Austrian Economics is an approach to economics which does not assume away real people. How's that for simplicity?
whilst i think the other posts are accurate, jalankatz gets my vote. concise, but not at the price of dumbing down. i can't tell you how often i see the term "economic rationalist" used as an insult. the implication is something robotic, cold and sub-human. this definition is the perfect foil.
i quite like this comparison by gary north (pages 2 and 3) give a clear summary of the different approaches of the keynesians, monetarists and austrians.
That's how Kirzner defines the Austrian School: