Austrian School

AustrianSchool

Advocateabstractdeductionmethod

TheAustrianSchoolopposestheGermanhistoricalschool’smethodofdenyingabstractdeductionandthewrongattitudeofdenyingtheoreticaleconomicsandgenerallaws.ItalsoopposesthetheoryofvalueanddistributionoftheBritishclassicalschoolanditsvulgarfollowers,especiallyRicardo'stheoryoflaborvalue.Itbelievesthatsocietyisacollectionofindividuals,andindividualeconomicactivitiesaretheepitomeofthenationaleconomy.Deductionandreasoningofpersonaleconomicactivitiesaresufficienttoexplaintheintricateandcomplexrealeconomicphenomena.

Introduction

AbstractRestoration

TheAustrianschoolabstractlyrestoresthe"economicman"inthesocialrealityrelationshipasanisolatedindividualwhopursuesthesatisfactionofconsumerdesire;Theresearchobjectofpoliticaleconomyhaschangedfromtherelationshipofproductionbetweenpeopletotherelationshipbetweenpeopleandthings,studyingconsumers'subjectiveevaluationofconsumergoods,andturningpoliticaleconomyintosubjectivepersonalconsumptionpsychology.

Theoreticalcore

ThetheoreticalcoreoftheAustrianschoolisthesubjectivetheoryofvalue,thatis,themarginalutilitytheoryofvalue.Differentfromthe"utilityvaluetheory"ofSayandothers,themarginalutilityvaluetheorybelievesthatinadditiontoeffectiveuse,athingmustbe"scarce",thatis,itsquantityislimited.Asaresult,itsgainsandlossesbecomeanindispensableconditionfortheowner'shappinessorpain.

Example

Forexample,aglassofwaterdoesnotmattertothepersonatthewellwhenitispoured.Atthistime,theglassofwaterisonlyusefulandnotvaluable;Inotherwords,thelastglassofwaterleftinthekettle,withit,islikegettingasweetspringjade,withoutit,thepainofthirstisinsurmountable,sothisglassofwaterhasvalue.TheAustrianschoolrecognizesthatthisissubjectivevalue,andbelievesthatvalueineconomicsshouldonlyrefertothissubjectivevalue,andmarketpricesarenothingmorethantheformationofvaluationbasedonthissubjectivevalue.

TheAustrianschoolhasdifferentdistributiontheories.Mengerbelievesthattheincomeoflabor,capital,andlandaretherewardsfortheirrespectiveutility;WieserregardsthemascomplementingthevalueoftheloanThevalue"attribution"ofthevariouscomponentsintheelement;BöhmBawerkexplaineditbythe"jetlagtheory"thatthemarginalutilityvaluationofcurrentgoodsishigherthanthatoffuturegoods.ThemarginalutilitytheoryofvalueandthetheoryofdistributionoftheAustrianschoolarediametricallyopposedtoMarx'stheoryoflaborvalueandsurplusvalue.Itsmainargumentsare:valueissubjective,anditistheimportanceofthingstosatisfypeople'sdesires;thecauseofvalueisutilityplusscarcity;themagnitudeofvaluedependsonlyonthemagnitudeofmarginalutility,andhasnothingtodowithsociallynecessarylabor;Producedinthefieldofconsumption,itisnotthemeansofproductionthattransfersitsvaluetoitsproducts,onthecontrary,thevalueoftheproductgivesvaluetothemeansofproduction;theincomeofcapitalandland,eitherprovidesutilityrewards,orisgeneratedfromcurrentgoodsandthefutureThedifferentvaluationofgoodshasnothingtodowiththeexploitationoflabor.Inshort,theAustrianschoolcompletelyobliteratedthedecisiveroleoflaborinvaluecreation.

Afterthe1930s,someAustrianeconomistsrepresentedbyMisesandHayekinheritedthetraditionaltheoriesoftheAustrianschoolandmadesomesupplements.TheyopposeMarxismandKeynesianismthatadvocatesstateregulationoftheeconomy.Theydotheirbesttopromoteliberalism,worshipthespontaneousmarketforcesandslanderthesocialistplannedeconomy.UsuallycalledtheNewAustrianSchool,alsoknownastheViennaSchool.ThemainrepresentativesareMises,Hayek,Meyer,Strieger,Haberler,Morgansteinandsoon.ThemainrepresentativeofthisschoolisanAustrianeconomist.TheactivitycenterwasoriginallylocatedattheUniversityofVienna,hencethename.

TheNewAustrianSchoolinheritsthetraditionsoftheOldAustrianSchoolandiscommittedtothestudyofeconomicbehavior,capitaltheory,businesscycletheory,monetarytheoryandotherissues.Themainpointsofviewincludethefollowingaspects.

Mainpoints

BehavioralTheory

TheNewAustrianSchoolbelievesthatclassicalvaluetheoriesaretoonarrowbecausetheyonlypayattentiontotheanalysisofprofit.Therefore,itisadvocatedtotransformthetheorybasedonthelabortheoryofvalueintothebehavioralchoicetheory,andturneconomicsintoabehavioralscience.Theneconomicsmuststudytheeconomicbehaviorofeconomicpartiesthemselves.Itsstatementsandpropositionsareindeductiveformanddonotdependonpracticalandhistoricaltheories.Intheeconomicbehaviorofeconomicparties,thecountermeasuresaregeneralbehaviors.Thewinnersgetprofitswhilethelosersaretrappedinpoverty.Thebenefitsthatonepersongainsinthegameareequaltothelossesofothers.Thistheoryishelpfultoexplainthebehaviorofoligopolists.

UtilityTheory

Undertheguidanceofbehavioraltheory,theNewAustrianSchooltriedtorepairthecardinalutilitytheoryoftheAustrianSchool.Acknowledgethatutilitycannotbemeasured,andthenusethebehaviorofeconomicagentstoexplainutility.Theybelievethatthepurposeoftheeconomicparty’sbehavioristoobtainthegreatestsatisfaction,andtherealizationofitspurposeiscarriedoutthroughexchange.Exchangeistoexchangeamoredissatisfiedstateforamoresatisfyingstate.Inordertoobtaintheformer,thelattermustbeabandoned.Iftheresultoftheexchangeisthattheformerisgreaterthanthelatter,thentheeconomicpartieswillbenefitfromtheexchange.Whentheeconomicagentstopsthisexchange,theutilitysatisfactionoftheeconomicagentreachestheoptimum.

MonetaryEconomicCycleTheory

TheNewAustrianSchoolbelievesthattheeconomiccycleiscausedbymonetaryfactors.Inacurrencyeconomy,becausethebankingsystemcancreateitsownmeansofcirculation,itmaycausecurrencycontractionandinflation.Inaddition,intheproductionsector,thecapitalizedproductionmethodisauniversalform,thatis,mostoftheoriginalmeansofproduction(laborandland)arenotusedtodirectlyproduceconsumergoods,buttoproducefutureconsumergoods.Thepurposeofadoptingthisproductionmethodistoobtainmoreconsumergoodswiththesameamountoforiginalproductionmaterials.Ifthetotaldemandformeansofproductionincurrencyincreasesrelativetothetotaldemandforconsumergoods,atransitionfromalesscapitalizedproductionmethodtoamorecapitalizedproductionmethodwilloccur;iftheformerdecreasesrelativetothelatter,Therewillbeatransitiontoalesscapitalizedproductionmethod.Inthecurrencyeconomy,therelativetotaldemandforthemeansofproductionandconsumergoodsexpressedincurrencychangesfromtimetotimeduetotheinfluenceofcreditexpansionandcontraction,whichwillleadtoimbalancesintheeconomicsystemandevencauseeconomiccrises.

Itcanbeseenthatthecauseoftheeconomiccrisisliesintheexpansionandcontractionofcurrencies.Accordingly,theNeo-AustrianSchoolmaintainsthatmaintainingcurrencyneutralitymeansthatcurrencydoesnotaffecttheformationofpricesandthedegreeofcapitalization.

LiberalEconomicPolicy

TheNewAustrianSchoolstrivestomaintainthetraditionallaissez-faireeconomicpolicyandopposesKeynesianstateintervention.Thisschoolbelievesthatthecurrentcoexistenceofunemploymentandinflationiscausedbystateintervention.Accordingtothemonetaryeconomiccycletheory,theuseofmonetarypolicybythestatetoregulatetheeconomywillleadtoaneconomiccycle.Atthesametime,duetotheexistenceofthegovernment'scurrencymonopolypower,theconditionsforthefreeactivitiesoftheprivatesectorarerestricted,whichhinderstheeffectiveoperationofthemarketmechanismandpreventsmarketsignalsfrombeingtransmittedtoconsumers,resultinginunemployment.Sinceinflationandunemploymentaretheresultsofthegovernment'scontrolofcurrencyissuancepowertointerveneintheeconomy,thewaytocurestagflationistoabandonthecountry'scurrencyissuancepowerandrestorethefreebankingsystem.

OpposeSocialism

TheNewAustrianSchooldeniesthepossibilityofsocialismtorealizetherationalallocationofresources,andbelievesthattheplannedeconomyistheenslavementofhumannature.Intheirview,reasonableresourceallocationmustbebasedonreasonableeconomicbehavior,andreasonableeconomicbehaviorisbasedonreasonablepricesandcostcalculations.However,undersocialistconditions,thefactorsofproductionarecontrolledbythestate,andthereisnofactormarketandnoprice.Withoutapricemechanism,itisimpossibletoachieveareasonableallocationofresources.Inaddition,becausesocialistenterpriseshavenoprofitmotiveandonlybureaucraticcontrol,theresultmustbeawasteofresources.Therefore,socialismwasabandonedbyarationaleconomicsystem.

ThetheoriesandpoliciesoftheNewAustrianSchoolareextremeintheneoliberalcamp.

Themainbranchoftheschoolofmarginalutilityofthebourgeoisie.Producedinthe1880s,itisnamedafteritsmainrepresentativesMenger,WieselandBombawerkareallAustrians.Theyalladoptpsychoanalyticmethodstoestablishtheirowntheoreticalsystem,sotheyarealsocalled"psychologyschool".Inthesecondhalfofthe19thcentury,theGerman-Austrianeconomydevelopedrapidly.Inordertoadapttothedevelopmentofthecapitalisteconomy,theAustrianSchoolusedsubjectiveidealismtoattributehumansocialandeconomiclifetothesatisfactionofdesires,andregardedtheentiresocietyasamechanicalsynthesisofindividualactivities.Menger,thefounderofthisschool,proposedthateconomicsshouldstudytheconditionsforhumanbeingstocarryoutpre-financingactivitiestosatisfytheirdesires,andspecialattentionshouldbepaidtothestudyofthecausalrelationshipofeconomicphenomenaof"productsandtheirproductionfactors"."Heevaluatedthevaluesubjectivelyfromtheintensityofpeople'sdesiretosatisfythedesireofwealth,andputforwardthe"desiresatisfactiondiminishingrate."Followinghim,Wieselproposedtheterm"marginalutility."Emphasizingthenatureandscaleofwealthvalueissubjective.Opposingtheviewthatthelaborconsumedinproductiondeterminesthevalueofcommodities.ThenBom-Bawerkproposedthe"timedifferenceinteresttheory",whichattributedthevariousexploitationincomesofcapitalistsocietytopeople'ssubjectiveevaluationoftheutilityofgoodsattwodifferenttimes,nowandinthefuture.Thedifferencebetween"marginalutility","timedifferenceinterest",and"psychoanalysis"promotedbytheAustrianschoolwasacceptedbyvariousschoolsofbourgeoiseconomicsandbecameanimportantpartofcontemporarybourgeoiseconomics.1930softhiscenturyAustrianeconomistsrepresentedbyMisesandHayekinheritedthetraditionaltheoriesoftheAustrianschool.Theyopposedstateinterventionintheeconomy,advocatedliberalism,andattackedthesocialistplannedeconomy.TheyareusuallycalledtheNewAustrianschool.