The original Mont Pelerin Society meeting in 1947 featured Ludwig von Mises, whose warnings about the dangers of socialism and totalitarianism had gone unheeded. In the wreckage of World War II, the truth of his message should have been obvious. It wasn't.
Mainstream economists often base their analysis upon assumptions that do not square with reality. Austrian economics, on the other hand, is built upon realistic assumptions and the acknowledgement that good economics must reflect human action.
Employing the labor theory of value, Marx claimed that entrepreneurial profits arise from exploitation of workers. In reality, entrepreneurs earn profits when they correctly gauge markets. Exploitation has nothing to do with it.
Central to the paradigm of Austrian Economics is the action axiom. People act, and they act purposefully. That knowledge alone permits us to construct an entire set of theories that explains economic life.
Critics of Austrian economics often claim that real economic events are too complex to be dealt with via free markets. However, because Austrian economics is based upon understanding human action, it better explains why economic intervention routinely fails.
One of the important points made by Carl Menger in his 1871 Principles is that people ordinally rank their preferences, valuing some things more than others. While this seems to be a common-sense principle, it actually has important implications for economic theory.
When people speak of “old school economics,” they generally mean the application of economic thinking that involves what we might call “common sense.” That would include permitting a price system to work, protecting private property, and so on. But there is more.
There are numerous critics of the Austrian School of economics, but when their disparagements are closely examined, the so-called experts themselves are wrong. Austrians can do a better job of setting the record straight.
As we wade through the intricacies of modern society, it becomes all the more imperative to go back to the works of Ludwig von Mises.
Critics of Austrian economics often claim that real economic events are too complex to be dealt with via free markets. However, because Austrian economics is based upon understanding human action, it better explains why economic intervention routinely fails.
