What Makes the Austrian School Different?

Walter Block explains that, what is truly unique about the Austrian School of economics its particular methodologies and its radical policy ideas.

Truths You Can’t Deny

The Austrian School is based on the insights we get from knowing that man acts purposefully. The lovely thing about this argument is you can’t deny it! To deny it would be in itself a purposeful act. Boom!

Block writes, “For Austrians, economic theory is correct if and only if it starts with correct principles, and utilizes a logical chain of reasoning. Statistics can illustrate economic axioms, but can never test them” (17). The clearest way to think about it is to understand the problem is that economists often wish they worked in a hard or empirical science. But Block likens economics more to mathematics: “No one goes out and tests the Pythagorean theorem, or measures triangles to see if they really have 180 degrees.”

Beyond the basic principle, there are many additional undeniable insights derivative of purposeful action. All voluntary trade is done for mutual benefit. We know this from the very fact they are making the trade. People act in such ways as to make their futures more desirable. Some implications are more specific: “The minimum wage causes unemployment for unskilled workers with productivity levels below that stipulated by the law” (16).

These are simple truths. The Austrian School depends on these simple truths.

Radical Policy Ideas

With regard to the private political positions of individual economists, Block gleefully catalogued the Austrians as the most “extreme advocates of economic freedom, free enterprise, property rights, etc” (18).

Just what are these radical ideas?

1) Highway and Road Privatization

Many Austrians want to privatize roads. Tens of thousands of Americans die on roads every year in a system of what Dr. Block calls “road socialism.” “Traffic congestion is to highways as long queues were to Soviet groceries,” he wrote. “At zero price, the tragedy of the commons comes into play” (18). This is not an obscure issue for Dr. Block to bring up; he has written an entire book on the topic. He argues that the profit and loss system would incentivize road managers to do a better job with traffic flow and safety.

2) Anti Trust

Most Austrians are against all anti trust legislation. Not only does Block disagree with the very idea of monopoly market failure, but there is another problem here beyond anti trust itself. Companies can be guilty of “crimes” no matter what they do. They can charge too much and be a price gouger, charge too little and be a predatory pricer, or charge just the right price and be a price fixer.

3) Market Failures

It is not failures in the market that cause poverty, say the Austrians, but rather government itself. And, furthermore, it is the government’s welfare programs that exacerbate the problem of poverty by making poor people dependent on something fickle (politicians) instead of something perhaps slightly less fickle (themselves).

4) Property Rights

Austrians emphasize the moral or ethical aspect of property rights, whereas most other free market economists emphasize the material importance of property in the creation of wealth.

Conclusion

The Austrian School is different from other schools of economic thought by emphasizing the importance on a strong theoretical framework—and not endless empirical models. In consequence, the Austrians diverge from even many free-market economists on important fundamental topics, like property rights.

 

A Comparison of Economic Correctness and Political Correctness, Humanomics, Vol 20, No 3 – 4, 2004, pp. 14 – 25

Share Button

RSS feed for comments on this post. TrackBack URI

Leave a Reply