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General analysis of the new Austrian school

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Matyas A.

Kozgazdasagi Szemle (Economic Review)

2004

vol. 51

issue 10

936-947

The study sets out to give a clear, comprehensible, systematic account of the teachings of the founders of the new Austrian school: Mises, Hayek, and its present leading figure, Kirzner. The new Austrian economists do not follow their Neoclassical peers in focusing on equilibrium price. Their concern is with the market processes maintained endogenously and kept in ceaseless motion by resourceful, innovative, creative entrepreneurs. The conditions for their activity are not prior conditions; the entrepreneurs themselves strive to acquire the knowledge required for their economic decisions, through trial and error. They exploit price differences caused by imperfection in the discernment of agents on local markets, shape consumer preferences, and introduce new production techniques. Entrepreneurs are pushed into ceaseless innovation to gain advantage in their competitive battles. New knowledge displayed by resourceful entrepreneurs then spreads slowly through the operation of the price mechanism, obliging market agents to make ceaseless adjustments and keeping the market in continual motion. The study compares Neoclassical and New Austrian teachings, identifying the new ideas and the shortcomings in the latter: market order and regularities can be explored only on the level of current knowledge, not in the economy in ceaseless motion.

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1 Kozgazdasagi Szemle (Economic Review)

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1 Matyas A.

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General analysis of the new Austrian school