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Austrian thinkers see the economy not as a machine, but as a complex system.
There are many schools of thought in economics—so many, in fact, that it can get a little confusing: Keynesianism, monetarism, supply-side economics, public choice theory, the Austrian school, and others confront each other in an intellectual struggle. These debates have created a misperception of economics as a field that never reaches consensus, even though most economists agree on a great many things, such as the benefits of free trade.
One of these great schools of thought is the Austrian school, which dates back to 1871. It was founded by Carl Menger, and then developed and popularized by great economists like Ludwig von Mises and Friedrich Hayek, each the subject of a blog post similar to this one.
This school has helped advance our understanding of economics thanks to their development of several important concepts, such as the subjectivity of value and marginal analysis, which are now integrated into modern economic theory. The proponents of the Austrian school were also the first to have anticipated the inevitable failure of centralized planning in the Soviet Union.
However, the Austrian school has been quite marginalized over the past few decades, insofar as it diverges from the main or popular currents of thought in academic circles. One reason is its rejection of the mathematical models which are such a prominent part of contemporary economics. Austrian thinkers see the economy not as a machine, but as a complex system. From their perspective, the study of economics is more akin to philosophy or psychology than to physics or engineering.
Does this make the lessons of the Austrian school less relevant? Do its theories still have a place in the academic world? The example of Peter Boettke leaves little doubt that they do.
Austrian and multidisciplinary
Professor of Economics and Philosophy at the well-known George Mason University, Peter Boettke mixes Austrian economics with other schools of thought, such as public choice theory and institutional economics.
He is known as someone who loves to share his passion for economics, and he does so in a number of ways: supervising theses and dissertations, inspiring the next generation, giving lectures and interviews, and writing books. He describes his most popular book, Living Economics: Yesterday, Today and Tomorrow, as a work designed to show the beauty of economic study and to inspire those who are interested in the subject.
Boettke is also the author of some 250 studies, including a recent Research Paper he co-authored for the MEI entitled How to Foster Entrepreneurship in Canada: The Teachings of the Austrian School of Economics. At the beginning of his career, he worked extensively on the Soviet economy and its collapse. His work now covers a range of fields: political economy, methodology, past thinkers, the role of institutions in economic development, and so on. He is also actively involved with the Mercatus Center, a think tank based at George Mason where he serves as Vice President of the F.A. Hayek Study Program in Philosophy, Politics and Economics. Finally, he is the President of the Mont Pelerin Society, a prestigious international association of pro-freedom intellectuals.
Boettke works in a very special environment for an economist. Recognized as having a unique approach, the Economics Department at George Mason University has been home to two recipients of the Nobel Memorial Prize in Economics: James M. Buchanan, one of the founders of public choice theory, and Vernon L. Smith, a pioneer in experimental economics. It is therefore a place where public choice theory, experimental economics, and the Austrian tradition merge. The result is a rather particular view of the economy that is not found anywhere else. It is this way of thinking, outside of the established framework, that the department is famous for.
While central banks around the world are trying to emerge from a decade of unconventional monetary policies, it is quite possible that Austrian theories on currency and economic cycles could enjoy renewed popularity. Uncertain economic conditions raise questions, and the answers are sometimes found in the ideas of thinkers from past centuries. Those developed by Menger, Mises, and Hayek, and now carried forward by Peter Boettke and several others, will certainly demonstrate once again how relevant they are.
Jasmin Guénette is Vice President of Operations at the Montreal Economic Institute. The views reflected in this op-ed are his own.
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