Austrian School

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The Austrian School is a heterodox school of economic thought that emphasizes the spontaneous organizing power of the price mechanism. Its name derives from the identity of its founders and early supporters, who were citizens of the old Austrian Habsburg Empire, including Carl Menger, Eugen von Böhm-Bawerk, Ludwig von Mises, and Nobel laureate Friedrich Hayek.[1] Currently, adherents of the Austrian School can come from any part of the world, but they are often referred to simply as Austrian economists and their work as Austrian economics.

The Austrian School was influential in the late 19th and early 20th century. Austrian contributions to mainstream economic thought include involvement in the development of the neoclassical theory of value and the subjective theory of value on which it is based, as well as contributions to the "economic calculation debate" which concerns the allocative properties of a centrally planned economy versus a decentralized free market economy.[2] From the middle of the 20th century onwards, it has been considered outside the mainstream,[3][4] with notable criticisms related to the School leveled by economists such as Bryan Caplan, Jeffrey Sachs, and Nobel laureates Paul Samuelson,[5] Milton Friedman,[6] and Paul Krugman.[7] Followers of the Austrian School are now most frequently associated with libertarian political perspectives that emanate from such bodies as the Ludwig von Mises Institute and George Mason University in the US.[8]

Austrian School principles advocate strict adherence to methodological individualism – analyzing human action exclusively from the perspective of an individual agent.[9] Austrian economists also argue that mathematical models and statistics are an unreliable means of analyzing and testing economic theory, and advocate deriving economic theory logically from basic principles of human action and have given this method the name, praxeology. Additionally, whereas experimental research and natural experiments are often used in mainstream economics, Austrian economists contend that testability in economics is virtually impossible since it relies on human actors who cannot be placed in a lab setting without altering their would-be actions. Mainstream economists are generally critical of methodologies used by modern Austrian economists;[10] in particular, a primary Austrian School method of deriving theories has been criticized by mainstream economists as a priori "non-empirical" analysis[5] and differing from the practices of scientific theorizing, as widely conducted in economics.[11][12][10]

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