Austrian School of Economics

  

Definition

Forerunner of unrestrained free market (libertarian) economics, its central concept is that the coordination of human effort can be achieved only through the combined decisions and judgments of individuals and cannot be forced by an external agency such as a government. It emphasizes complete freedom of association and sovereignty of individual property rights. Its other main tenets include (1) abolishment of central banks and return to the gold standard, (2) elimination of bank deposit insurance schemes so that bank failures punish bad investments, (3) institution of an information system that make real-time prices data available to everyone, (4) abandonment of mathematical models as too rigid and limited to be of any use. Most of its recommendations are fiercely opposed by the mainstream (both capitalist and socialist) economists who call it 'anarchist economics,' and barely acknowledge its existence. This body of thought was founded in 1871 in Vienna by Carl Menger (1840-1921) who developed marginal utility theory of value and carried on by Friedrich von Wiesner (1851-1926) who developed the concept of opportunity cost. It was further elaborated by Eugen von Böhm-Bawerk (1851-1914) who developed a capital and interest rate theory, Ludwig Edler von Mises (1881-1973) who developed a business cycle theory, and the 1974 Nobel laureate in economics, Friedrich August von Hayek (1899-1992) who unified the works of his predecessors.

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