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Until recently the Austrian School of Economics was a topic studied almost solely by historians of economic thought interested in the development of marginal utility theory in the late nineteenth century. Not only has the life span of the school been longer than those few decades, however, but marginalism as such has never been its real focus. Today the tradition of Austrian economics, never completely dormant, is enjoying a resurgence. Austrian economists are engaged in theoretical and applied research on a wide array of topics. What unifies this school of thought—what might be called its theme—is the methodological outlook of its members: subjectivism. The subjective approach to economic phenomena builds economic analysis upon the insight that every individual chooses and acts purposively, i.e. in pursuit of his purposes and in accordance with his perception of his options for achieving them. This approach has been the hallmark of the Austrian School from its inception in the 1870s to the present day, though different members have defended their method in different ways. As a contemporary Austrian economist has put it, "The significance of the Austrian school in the history of ideas perhaps finds its most pregnant expression in the statement that here man as an actor stands at the center of economic events."1
The consistent attention to the subjectivist outlook and its implications distinguished the early Austrians from the Jevonian and Walrasian schools, who, of course, were also marginalist in their value theories. Erich Streissler remarks that "the Austrians always stressed, and stressed rightly, I think, that they were the school of subjective value, a school apart."2 But subjectivism has meant much more than subjective value theory for the Austrians, and especially so for the most recent Austrians. It has marked their approach to every economic question. Subjectivism has been, in short, the distinctive Method of the Austrian School economists. If the Austrians continue to stand apart from mainstream neoclassical economics, the reason lies in their methodological orientation and the implications this has for their theoretical and applied work.
In tracing the development of Austrian economics, we shall concentrate on six authors who have been most notable for their use and defense of the subjectivist approach, and on the themes running through their theoretical and methodological writings. These six are: Carl Menger, the founder of the school; Friedrich von Wieser and Eugen von Böhm-Bawerk, who developed and publicized Menger's ideas along somewhat separate lines; Ludwig von Mises, a student of Wieser and Böhm-Bawerk who made pathbreaking contributions to both theory and methodology; Friedrich A. Hayek, a student of Wieser and Mises whose well-known theoretical and interdisciplinary studies have earned him the Nobel Prize in economics; and Ludwig Lachmann, who studied with Hayek in the 1930s and has pursued subjectivist themes in the decades since. There have been many lesser-known authors in the Austrian tradition, and well known economists partially influenced by the Austrians,3 but these six may be considered the school's most important past and senior contributors. We shall conclude by noting the contributions of several economists who are actively elaborating and advancing the Austrian viewpoint today, particularly two students of Mises, Israel M. Kirzner and Murray N. Rothbard.
- 1. Ludwig M. Lachmann, "The Significance of the Austrian School of Economics in the History of Ideas," in Capital, Expectations, and the Market Process, ed. by Walter E. Grinder (Kansas City: Sheed, Andrews and McMeel, 1977), p. 51.
- 2. Erich Streissler, "To What Extent Was the Austrian School Marginalist?," History of Political Economy 4 (Fall 1972): 427. See also William Jaffe, "Menger, Jevons, and Walras De-homogenized," Economic Inquiry 14 (Dec. 1976): 511-524.
- 3. Examples of the former: Emil Sax, Robert Zuckerkandl, Eugen Phillipovitch von Phillipsberg, Hans Mayer, Paul N. Rosenstein-Rodan, Emil Kauder, and Richard Strigl, to name just a few. Examples of the latter: Joseph A. Schumpeter, Fritz Machlup, Gottfried Haberler, Oskar Morgenstern, Lionel Robbins, G.L.S. Shackle, and John Hicks. See The International Encyclopedia of the Social Sciences, 1968 ed., s.v. "Economic Thought: The Austrian School," by Friedrich A. Hayek.