Portal:Business and economics/Selected article/May 2007
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The Austrian School, also known as “the Vienna School” and as “the Psychological School”, is a school of economic thought that advocates adherence to strict methodological individualism. As a result Austrians hold that the only valid economic theory is logically derived from basic principles of human action. Alongside the formal approach to theory, often called praxeology, the school has traditionally advocated an interpretive approach to history. The praxeological method allows for the discovery of economic laws valid for all human action, while the interpretive approach addresses specific historical events.
This Aristotelian/rationalist approach differs both from the currently dominant Platonic/positivist approach of contemporary neo-classical economics and the once dominant historical approach of the German historical school and the American institutionalists. While the praxeological method differs from the current method advocated by the majority of contemporary economists, the Austrian method is essentially identical with the traditional approach to economics used by the British classical economists, the early continental economists, and the Late Scholastics. The Austrian methodology is, therefore, a continuation of a long line of economic thought stretching from the 15th century to the modern era and including such major economists as Richard Cantillon, David Hume, A.R.J. Turgot, Adam Smith, Jean-Baptiste Say, David Ricardo, Nassau Senior, John Elliott Cairnes, and Claude Frédéric Bastiat.
The most famous Austrian adherents are Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, Ludwig von Mises, Friedrich Hayek, Joseph Schumpeter, Gottfried von Haberler, Murray Rothbard, Israel Kirzner, George Reisman, Henry Hazlitt, and Hans-Hermann Hoppe. While often controversial, and standing to some extent outside of the mainstream of neoclassical theory — as well as being staunchly opposed to much of Keynes' theory and its results — the Austrian School has been widely influential because of its emphasis on the creative phase (i.e. the time element) of economic productivity and its questioning of the basis of the behavioral theory underlying neoclassical economics.
Because many of the policy recommendations of Austrian theorists call for small government, strict protection of private property, and support for individualism in general, they are often cited by laissez-faire liberal, libertarian, and Objectivist groups for support, although Austrian School economists, like Ludwig von Mises, insist that praxeology must be value-free. They do not answer the question "should this policy be implemented?", but rather "if this policy is implemented, will it have the effects you intend?".
