Written by John Lounsbury
Econintersect: The Austrian school of thought is closely related to the Neoclassical mainstream–in that it shares its utilitarian theory of value, accepts basic supply and demand analysis, and sees capitalism as generally tending towards equilibrium. But it is also highly critical of the mainstream for the absurd assumptions about individual knowledge that it is willing to make to preserve its equilibrium-oriented mathematical approach.
The Austrian School of economics sees capitalism’s strengths as how it encourages innovation, which is an equilibrium-disturbing process, and regards money as being both integral to capitalism and the primary source of economic cycles. In the previous lecture we discussed how neoclassical economists try to view economic processes as occuring in stages of equilibrium. Austrian economists take the diametrically opposed view of the economy; The economy progresses through various stages of disequilibrium and that leads to economic cycles.
Lectures in the Series
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