One of the most interesting elements of the Republic of Austria is Austrian economics. Find out about this revolutionary school of economics that is a product of the great minds of Austria.
The Austrian economics known as the Austrian School or the psychological School is one of the strangest elements of the country. Basically it is an unorthodox school of economics that is strikingly different to the widely established science of economics in the world. Rather than adhering to the accepted principles this school adheres to strict methodological individualism. Their view point stands out as a slap on the face of modern economics as they believe the only valid economic theory should be derived from the principles of human action.
The school has its own way of interpreting history as they take on an interpretive approach to the study of history. The Austrian economics school has a highly creative phase which is one of the reasons it has managed to be influential despite the controversies that have been hurled against it. Another interesting element is the fact that it questions the basis of the behavioral theory that underlies neoclassical economics.
The theory that sets Austrian economics apart
Joseph Salerno is a recognized Austrian economist who clearly stated that the Austrian Business Cycle theory is the thing that sets Austrian economics apart from neoclassical economics. This theory has all the distinctive Austrian traits as part of its structure such as the theory of heterogeneous capital, the passage of time, the structure of productions, sequential analysis of monetary interventionism etc. Their main turf however is the interpretation of the American Great depression which is something not easily swallowed by the neoclassical economists.
The solutions put forward by both the schools are poles apart. This is the reason why there is so much cross criticism between the two. There are however certain common platforms between the two well known schools of economics such as the protection of private property. Both these schools tend to support individualism on a general level as well. Furthermore we find that conservatives, libertarian and objectivist groups often cite them for support.
The fundamental distinction comes to light in the form of political recommendations that each school makes. The Austrian theorists are known to have a leaning towards anarcho-capitalist solutions. This aspect of their methodology makes them part ways with traditional neoclassical economics of the Chicago school which is known to have a minarchism approach.
Criticism
The lack of scientific precision is the area that is targeted by the critics of Austrian economics. Austrian economics uses verbal logic rather than mathematical form to formulate its theories. To the mainstream economics such an approach lacks precision which makes it unfitting to explain and predict the real world events. This is the reason why Austrian economics doesn’t get much publication. This is all due to the rejection of scientific methodology and empirical testing in the social sciences. Rather they favor the use of self evident axioms and logical reasoning. Although Austrian economics does offer an interesting and unorthodox look in to the world of economics it has failed to gain credibility because it fails to yield testable predictions.
