This is the first essay in LibertarianChristians.com series “Essentials of Austrian Economics.” Throughout this series, we will explore important economic concepts and why they are crucial to an understanding of a free society.
Most people are unfamiliar with Austrian School of Economics and the work of Ludwig von Mises, Murray Rothbard, and Friedrich Hayek, but thanks to the efforts of Ron Paul, the Mises Institute, and many others the ideas are becoming much more well known.
Austrian economics is more than just a sub-theory within the field of economics – it is an different way of thinking about economic science altogether. Most of modern economics falls into either neoclassical or Keynesian economics, which tend to focus on mathematical modeling and statistical analysis. Austrian economics, in constrast, claims that economic activity is too complex and varied to be reasonably described through mathematical models. This is not to say that mathematics and statistics are bad altogether when doing economics, but such tools have limitations that do not permit them to access the core of economic theory.
Instead of statistics and numerical models, Austrian economics begins with basic axioms of human action, a study known as praxeology. The starting point that humans utilize means to achieve desired ends begins the elucidation of economic law. Ludwig von Mises defined human action in this way:
“Human action is purposeful behavior. Or we may say: Action is will put into operation and transformed into an agency, is aiming at ends and goals, is the ego’s meaningful response to stimuli and to the conditions of its environment, is a person’s conscious adjustment to the state of the universe that determines his life. Such paraphrases may clarify the definition given and prevent possible misinterpretations. But the definition itself is adequate and does not need complement of commentary.” [from Human Action]