Austrian School

This school emphasizes the spontaneous organizing power of the price mechanism and holds that the complexity of subjective human choices makes mathematical modelling of the evolving market extremely difficult (or impossible). Its proponents tend to advocate a laissez faire approach to the economy and the enforcement of voluntary contractual agreements between economic agents, but otherwise the smallest imposition of coercive force (especially government-imposed) on commercial transactions.

History

While the Austrian School of Economics has connections as far as 15th century, it began with notable 19th century economists of Austrian origin.

Pre-Austrian Economists

With noted contributions of earlier thinkers, like Nicole Oresme, the Austrian school traces its roots to the followers of St. Thomas Aquinas, writing and teaching at the University of Salamanca in Spain.

These Late Scholastics observed the existence of economic law, inexorable forces of cause and effect that operate very much as other natural laws. Over the course of several generations, they discovered and explained the laws of supply and demand, the cause of inflation, the operation of foreign exchange rates, and the subjective nature of economic value. They were advocates of property rights and the freedom to contract and trade.

A further influence were the French Physiocrats. Influenced by the work of Richard Cantillon and others, they were probably the first to develop a general theory of economics. One of their most important figures was Anne Robert Jacques Turgot. His paper "Value and Money" spelled out the origins of money, and the nature of economic choice: that it reflects the subjective rankings of an individual's preferences. Turgot solved the famous diamond-water paradox that baffled later classical economists, articulated the law of diminishing returns, and criticized usury laws (a sticking point with the Late Scholastics). He favored a classical liberal approach to economic policy, recommending a repeal of all special privileges granted to government-connected industries.

Quote: http://mises.org/etexts/austrian.asp

The Austrian School derives its name from its predominantly Austrian founders and early supporters, including Carl Menger, Eugen von Böhm-Bawerk and Ludwig von Mises. Prominent Austrian School economists of the 20th century include Joseph Schumpeter, Henry Hazlitt, Murray Rothbard, and Nobel Laureate Friedrich Hayek. A rather prominent institution is the Ludwig von Mises Institute.

Austrian School economists advocate strict adherence to methodological individualism – analyzing human action from the perspective of individual agents. Proponents of this method, praxeology, argue that the only means of arriving at a valid economic theory is to derive it logically from basic principles of human action. Proponents of this method hold that it allows for the discovery of fundamental economic laws valid for all human action. Alongside praxeology, the school has traditionally advocated an interpretive approach to history to address specific historical events.

External links

• What is Austrian Economics? from the Mises Institute
• Wikipedia:Austrian School
• Austrian School of Economics from The Concise Encyclopedia of Economics
• The Austrian School from the History of Economic Thought page