Austrian School

The Austrian School is a school of economic thought that is based on methodological individualism. It originated in late-19th and early-20th century Vienna with the work of Carl Menger, Eugen von Böhm-Bawerk, Friedrich von Wieser, and others. Current-day economists working in this tradition are located in many different countries, but their work is referred to as Austrian economics.

Quotes

• The Austrian a priori dogmatism (von Mises, especially; Hayek, to a lesser degree).
  • Kenneth Arrow, on question "In your mind, what has been the most misleading theoretical approach in economics?", in Karen Ilse Horn (ed.) Roads to Wisdom, Conversations With Ten Nobel Laureates in Economics (2009)

• There are two big reasons today's right loves the Austrians. One is that Austrian economists reject empirical analysis, and instead believe that you can reach conclusions about correct economic policies from a priori principles. It's philosophy dressed up as economics; with the Austrians, there is never any risk that real-world events will interfere with your ideology.
  The other big advantage is that the main Austrian thinkers, Friedrich Hayek and Ludwig von Mises, are dead, so they can't argue with your interpretation of their work. This is especially important with Hayek, who got sort of squishy later in life.
  • Josh Barro, "Who Needs Posner When You Have Mises and Hayek?" (2012)

• I am not suggesting that the Austrians are uninteresting; far from it. I love to read their work, and I find their views, bizarre and outlandish they seem to my ear, to be as mind-stimulating as a good fantasy novel, or an ethnographic account of the hunter-gatherer inhabitants of some tropical island. However, in no way are they scientists that deserve to be taken seriously. Of course, when there are Marxists all over the place trying to nationalize everything in sight, the Austrian philosophy might have some popular value as a counterweight. By the way, my reading of Americans who call themselves Austrians is that they are fooling themselves---they are really standard neoclassical public sector economists that have personal values favoring the entrepreneurial spirit.
  • Herbert Gintis, review of Vienna & Chicago, Friends or Foes?: A Tale of Two Schools of Free-Market Economics (2009)

• The hangover theory, then, turns out to be intellectually incoherent; nobody has managed to explain why bad investments in the past require the unemployment of good workers in the present. Yet the theory has powerful emotional appeal. Usually that appeal is strongest for conservatives, who can't stand the thought that positive action by governments (let alone—horrors!—printing money) can ever be a good idea. Some libertarians extol the Austrian theory, not because they have really thought that theory through, but because they feel the need for some prestigious alternative to the perceived statist implications of Keynesianism. And some people probably are attracted to Austrianism because they imagine that it devalues the intellectual pretensions of economics professors. But moderates and liberals are not immune to the theory's seductive charms—especially when it gives them a chance to lecture others on their failings.
  • Paul Krugman, "The Hangover Theory", Slate (Dec. 4, 1998)

• Substance aside — not that substance isn’t important — Austrian economics very much has the psychology of a cult. Its devotees believe that they have access to a truth that generations of mainstream economists have somehow failed to discern; they go wild at any suggestion that maybe they’re the ones who have an intellectual blind spot. And as with all cults, the failure of prophecy — in this case, the prophecy of soaring inflation from deficits and monetary expansion — only strengthens the determination of the faithful to uphold the faith.
  • Paul Krugman, "Fine Austrian Whines" (February 20, 2013)

• In the early 1970s, the Austrian School, then in its fourth generation, appeared to be nearing an inglorious personal and community end; after a second bout of prolonged depression (1969–1974), Hayek always carried a razor blade with which to slash his wrist (Cubitt 2006, 89). However, Mises’ death in 1973 facilitated his School’s resurrection; alive Mises had been a liability, whereas dead he could be marketed as a saint. Benjamin Rogge (1974) reported that at a Philadelphia Society meeting, David Friedman ‘first made clear to us the true fascist nature of [his father] Milton Friedman’s thinking.’ When Rothbard, Richard Ebeling, Gary North, Sudha Shenoy et al. initiated an Austrian revivalist conference in June 1974, one of the highlights was the baiting of Friedman – in person – with the accusation that his son detected ‘latent fascist tendencies’ in him (Ebeling 1974). Shenoy (2003) recalled that ‘Murray Rothbard made the whole affair fun.’ ...For a quarter of a century after World War II, the social democratic ‘middle way’ appeared to prosper. But in the 1970s, the ideological balance shifted. The regulatory wave had successfully tackled various aspects of market failure, but had actually exacerbated underlying problems when applied to the control of prices and wages. From the mid-1970s, the deregulation wave began to successfully tackle some of the welfare loses caused by regulatory capture. Schools of economics are associated with these waves: regulation with Pigouvian market failure analysis and its Keynesian macroeconomic counterpart; and deregulation with market success promotion (with Austrian, Chicago and Public Choice variants).
  • Robert Leeson, Introduction in Hayek: A Collaborative Biography, Part III, Fraud, Fascism and Free Market Religion (2015), edited by Robert Leeson

• Today there are academic dogmas as well, such as those of the cultural Left, the Austrian school of economics, and the followers of Leo Strauss. Intellectuals, moreover, often flock together; in fact very few of them are truly untamable individualists in the tradition of Socrates, Thoreau, Nietzsche, Camus, and Orwell.
  • Richard A. Posner, Public Intellectuals: A Study of Decline (2001), Chapter 1. Setting the Stage

Related topics

• Austrian business cycle theory
• Free banking