Friday, November 27, 2009

What is Austrian Economics?

Just so I don't lose it, here is a list of "Themes" that define Austrian economics, taken from ThinkMarkets:

(1) the subjective, yet socially embedded, quality of human decision making; (2) the individual’s perception of the passage of time (‘real time’); (3) the radical uncertainty of expectations; (4) the decentralization of explicit and tacit knowledge in society; (5) the dynamic market processes generated by individual action, especially entrepreneurship; (6) the function of the price system in transmitting knowledge; (7) the supplementary role of cultural norms and other cultural products (‘institutions’) in conveying knowledge; and (8) the spontaneous – that is, not centrally directed – evolution of social institutions.

Whatever one's school of economics, it seems that if it ignores some or all of these things, it can't possibly be going a good job of capturing what's really going on. I don't know enough about Keynesianism to say categorically that it doesn't include all or even some of these things, but it's my impression that it doesn't, and certainly I haven't see any Keyensian make mention of them, and in particular that macro formula that seems to be 90% of Keynesianism that Garth and others have quoted and discussed on wc-talk which has about 5-6 aggregate-level variables.

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