Three Trends in Austrian Economics

There are at least three distinct, but overlapping, research programmes (to use Lakatos’ term) in Austrian economics, at least according to Rothbard. Each of these styles of thought can rightfully claim to be based on Mengerian insight.

There is the Mises-Rothbard strand, which emphasizes rationality, equilibrium as a mental construct, and theorizing based on axioms and logical deduction. This comes directly from Menger’s search for “exact laws” of economics and human action.

A more prominent mode of thought, at least among the mainstream, is the Hayek-Kirzner paradigm. Although this group can easily be split up further, it generally emphasizes spontaneous order, discovery procedures, and entrepreneurship. This can be derived from Menger’s discussion of organic and pragmatic orders and organizations. The classic example of an organic order is the means of exchange, which spontaneously arose to fulfill the need created by the problem of finding a “double coincidence of wants”. This draws on Menger’s role as one of the founders of subjectivism and claims to complete the subjectivist revolution.

Another, more controversial, research programme is the Lachmann-Shackle school of radical subjectivism. This method of analysis focuses on expectations, sociology, and disequilibriating elements in the economic process. It shares some elements with the Post-Keynesians, although these ideas are taken in drastically different directions. This draws on Menger’s role as one of the founders of subjectivism and claims to complete the subjectivist revolution.