Austrian economics

The Austrian school is a tradition in economics that began in Vienna in the late nineteenth century with Carl Menger and was developed by Ludwig von Mises, Friedrich Hayek and, in America, Murray Rothbard. Its central ideas are that value is subjective, that economic analysis should start from purposeful human action, and that markets coordinate dispersed knowledge, themes of the knowledge problem and spontaneous order.

Austrians study how credit expansion by central banks can distort interest rates and encourage unsustainable investments, a theory of the business cycle they use to explain booms and busts, including the Great Depression and 2008. They are skeptical of mathematical modeling and emphasize entrepreneurship and the role of prices in guiding the economy. Many favor sound money, such as the gold standard.

The school has had major influence on libertarian and some conservative thought, and on figures such as Ron Paul, but it is a minority view within academic economics, where critics say it relies too little on empirical testing and that some of its predictions did not occur. Hayek's work on knowledge and the 1974 Nobel Prize recognized parts of the tradition. It stands against keynesian economics in major debates.