The "Austrian School":
Economics According to Mountain Folks
The term "Austrian School" or - less frequently, as it could be confused with the school of classic composition with the same name - "Vienna School" refers to a school of thinking in economics that was crucially influenced by Austrians. It was first used by German economists to underline how "provincial" the thoughts and ideas of the Austrian School were.
The teachings of the school deal with the significance of spread information and with individuals and their actions within a system - on contrast to most economic traditions, however, the Austrian School rejects empirical methods as well as mathematical models. The roots of the Austrian School go back to the second half of the 19th century.
In 1871 - the year of a serious economic crisis in Austria - Carl Menger published a book on principles of economics. He is considered the intellectual father of the Austrian School, as it later developed. Another shaping figure is Eugen von Böhm-Bawerk, who extensively worked on Marxism. The Austrian School radically rejected public involvement in economic affairs, and thus, opposed socialism. In a book published as early as in 1884 ("Kapital und Kapitalzins"), Böhm-Bawerk took those principles apart that underlie Marxism.
Liberalism Made in Austria
Some 30 years later, a second generation of the Austrian School became active. One of the most distinguished representatives was Ludwig von Mises, who finally claimed to hold the key to proof fundamental conceptual errors in socialism in his book "Die Gemeinwirtschaft" (1922). Mostly due to the work of von Mises and his contemporaries, the Austrian School is now seen as a liberal tradition. Like many other Austrian economists, von Mises was of Jewish descent (although a converted Catholic) and left Austria in the late 1930ies.
The Nazis are responsible for the "Austrian School" suddenly becoming a school of exile Austrians, living mostly in England and the US. This "expulsion" appears to be echoed by Austria′s economic policies, as the liberal views of the Austrian School were extinguished in this country more extremely than in most other non-communist countries: Austria turned into one of the most socialised nations in the World in the decades that followed WWII.
Two important contemporaries and successors of von Mises were Murray Rothbard and Friedrich von Hayek. Hayek, who worked at the London School of Economics, was a fierce opponent of John Maynard Keynes and his policies of centralised, public influence. Following an all-time-high in public involvement in economic matters in the 1960ies and 1970ies, the neo-liberalism that followed favoured the views of the Austrian School.
On the theoretic level, the school′s critique of economic models was supported by game theory and chaos theory. This caused a bit of a Renaissance of the Austrian School since the 1980ies.
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