Austrian Economics
Founded by Carl Menger in 1871. Emphasizes subjective value, spontaneous order, entrepreneurship, and skepticism of central planning and state intervention.
Sub-topics
Founder of the Austrian School. Principles of Economics (1871) introduced subjective value theory and methodological individualism, launching the marginalist revolution alongside Jevons and Walras.
Human Action (1949) built economics from praxeology — the logic of purposeful human action. His socialist calculation argument (1920) predicted the failure of centrally planned economies.
Nobel laureate (1974). The Road to Serfdom (1944) warned against central planning. Argued that prices are an information system and that knowledge is dispersed, never centralizable.
Value is not intrinsic to goods but exists in the mind of the valuer. A glass of water in the desert is worth more than a diamond on a full stomach. Menger's answer to the classical paradox of value.
Mises and Hayek argued that artificially low interest rates from central banks cause malinvestment booms that inevitably bust. The 2008 housing bubble fits the pattern remarkably well.
Order emerges from individual actions without central design — markets, language, law, and social norms are all examples. Hayek's deepest insight: the best institutions are not planned.
Mises's methodology: economics is deduced from the axiom that humans act purposefully. No empirical testing needed — economic laws are a priori truths, like logic or mathematics.
Israel Kirzner extended Austrian economics to show that entrepreneurs drive markets toward equilibrium by discovering and exploiting previously unnoticed profit opportunities.