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Circular Flow, Austrian Price Theory, and Social Appraisement

  • The Quarterly Journal of Austrian Economics

Tags PricesValue and Exchange

 

Volume 8, No. 4 (Winter 2005)

 

The circular-flow approach is decidedly Neoclassical, and suffers from many problems which traditional Austrians would notice. The circular-flow diagram’s greatest problem is, in fact, its circularity. While real-world economic analysis has a beginning, an ending, and ever-changing processes, the circular-flow diagram has no beginning or ending. It is drawn as though entire macroeconomies sprang into existence from whole cloth. While the circular flow appears to be dynamic, it allows no room for change on any  margin: consumer preference, production technique, or availability of factors of production.

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Cite This Article

Simpson, Barry Dean and Scott A. Kjar. "Circular Flow, Austrian Price Theory, and Social Appraisement." The Quarterly Journal of Austrian Economics 8, No. 4 (Winter 2005): 3–13.