Jesús Huerta de Soto
Professor of Political Economy
King Juan Carlos University of Madrid, Spain
“What distinguishes the Austrian School and will lend it immortal fame is precisely the fact that it created a theory of economic action and not of economic equilibrium or non-action.”
Ludwig von Mises
Notes and Recollections, Libertarian Press, 1978, p. 36
(Points of comparison)
Austrian paradigm / Neoclassical paradigm
Theory of action (Austrians) versus theory of decision (neoclassicals)
Subjectivism (Austrians) versus objectivism (neoclassicals)
Entrepreneur (Austrians) versus homo oeconomicus (neoclassicals)
Entrepreneurial error (Austrian) versus ex post rationalization of all past decisions (neoclassical)
Subjective information (Austrians) versus objective information (neoclassicals)
Entrepreneurial coordination (Austrian) versus general and/or partial equilibrium (neoclassical)
Subjective costs (Austrians) versus objective costs (neoclassicals)
Verbal formalism (Austrians) versus mathematical formalism (neoclassicals)
Relation with the empirical world: the different meaning of “prediction”
First round: Carl Menger versus the German Historical School (27)
Second round: Böhm-Bawerk versus John Bates Clark (and also versus Marshall and Marx)
Third Round: Mises, Hayek and Mayer versus Socialism, Keynes and the Neoclassicals
Fourth round: Neo-Austrians versus the mainstream and methodological nihilisms
Austrian School / Neoclassical School (Monetarists and Keynesians)
The Austrians should not criticize the neoclassicals for using simplified assumptions which held to understand reality.
The Austrians fail when formalizing their theoretical propositions
The Austrians carry out very little empirical work.
The Austrians renounce prediction in the economic field.
The Austrians do not have empirical criteria to validate their theories.
The accusation of dogmatism.
“No part of this work may be reprinted or reproduced or utilized in any form
or by any electronic, mechanical, or other means, now known or hereafter
invented, including photocopying and recording, or in any information
storage or retrieval system, without citing the name of the author and the
source from which it has been taken.”
* I thank Leland Yeager, Israel M. Kirzner and two anonymous referees for their kind remarks on this paper. A previous version of its content was presented at the Mont Pèlerin Society General Meeting held in Vienna, September 1996.