The **Austrian School of Economics** is a school of economic thought that emphasizes the spontaneous organizing power of the **price mechanism**, the importance of **individual choice**, and the limitations of **central planning** and **mathematical modeling** in understanding economic behavior. ### Key Principles: 1. **Methodological Individualism** Economics should focus on the actions and decisions of individuals, not aggregates or collectives. 2. **Subjective Value Theory** The value of goods and services is determined by individual preferences, not by any intrinsic quality or labor input. 3. **Marginalism** Decisions are made at the margin; people make choices based on the additional benefit or cost of consuming or producing one more unit. 4. **Time Preference and Capital Theory** Emphasizes how people value present goods more than future goods, leading to interest and capital formation. Capital structure is viewed as complex and time-sensitive. 5. **Entrepreneurship** Entrepreneurs are central to economic progress. They use knowledge and foresight to allocate resources effectively in the face of uncertainty. 6. **Critique of Central Planning and Intervention** Argues that government interference distorts price signals, misallocates resources, and leads to inefficiency or even economic crises. 7. **Business Cycle Theory** Known as the **Austrian Business Cycle Theory (ABCT)**, it claims that artificially low interest rates set by central banks lead to malinvestment and economic booms followed by inevitable busts. 8. **Praxeology** A distinctive methodological approach championed by Ludwig von Mises, praxeology is the study of human action through logical deduction rather than empirical data. --- ### Major Figures: - **Carl Menger** – Founder of the Austrian School - **Eugen Böhm-Bawerk** – Developed capital and interest theory - **Ludwig von Mises** – Advanced praxeology and critiques of socialism - **[[😊 Friedrich Hayek|😊 F. A. Hayek]]** – Nobel laureate, known for work on knowledge, prices, and spontaneous order - **Murray Rothbard** – Combined Austrian economics with libertarianism --- ### Influence: While the Austrian School is considered **heterodox** in mainstream economics, its insights are influential in areas like **libertarian political philosophy**, **free-market advocacy**, and critiques of central banking and inflation. Want to dig deeper into any of these areas?