Austrian Economics

The birth of Austrian Economics has been attributed to the 1871 publication of Principles of Economics by German economist, Carl Menger. During the early 1900's, Austrian thought began to take form and gain widespread popularity due in large part to the works by Ludwig von Mises and Fredrich August von Hayek, both of whom emphasized the impossibility of socialism. Though Austrian Economics faded into the background during the 1950's and 1960's, it made quite a comeback from the 1980's to the present. The fact that Hayek won the Nobel Prize in Economics in 1974 and the fact that he could write to the laypeople in such a swaying fashion is arguably the reason for this revival. According to Deborah L. Walker in Fortune, the following are the three major cornerstones of Austrian economics:

• "Methodological individualism: Austrian economists believe that one can never know if humans have maximized benefits or minimized costs. Austrian economists emphasize instead the process by which market participant gain information and form their expectations in order to lead them to their own idea of a best solution....Austrian economists do not use mathematics in their analyses or theories because they do not think mathematics can capture the complex reality of human action."
  
• "Methodological subjectivism: Individual's values, plans, expectations, and understanding of reality are subjective."
  
• "Processes versus end states: An individual's action takes place through time...the movement to equilibrium is a process of learning and of changing expectations, which will change the equilibrium itself. To the Austrian economist, efficiency is defined within the process of acting, not as a given or known end state of affairs...The Austrian economist never speaks of efficiency outside of the individual.