Contributions of the Austrian School of Thought Essay

Contributions of the Austrian School of Thought - Essay Example The historical school suggested that economic science cannot generate universal principles so scientific research should study historical examination in detail. Principles of Economics reiterated the universal laws’ view of political economy using marginal analysis. Roscher’s students gave Menger and his followers the title of Austrian School for being faculty members at the University of Vienna. There have been no leading figures in economists from any Austrian university in the Austrian school of economics since the 1930s. Between 1930s and 1940s, scholars associated with the Austrian school were located at different universities in Britain and the US. Many ideas of the mid-twentieth-century Austrian economists originate in the classical economists’ ideas or ideas of economists from the early-twentieth-century. The present Austrian school economists are influenced by modern economists. There is no substantive meaning of the label â€Å"Austrian†, though a unique Austrian school of economics does exist in the economic profession. This article discusses the major propositions of economics believed by the Austrians. According to the first proposition, only individuals select which implies that man starts all economic analysis with plan and purpose. Choices are made by individuals rather than by collective entities. The second proposition suggests that the market order study is basically about exchange behavior and organizations undergoing exchange. The science exploring market order is categorized under catallactics. Catallactics discusses emerging exchange relationships in the market, bargaining in the process of exchange, and the institutions that participate in exchange. The third proposition states that the social sciences’ facts are what individuals think about and also believe. Being humans, we can understand other humans’ purposes and plans. Human action sciences vary from natural sciences. Human sciences are ruin ed with them being forced into natural sciences’ philosophical mold. The fourth proposition considers costs and utility to be subjective because the human mind filters all economic phenomena. One has to choose among the various available paths while deciding the courses of action. Focus on choice alternatives leads to opportunity costs. Any action’s cost is the value of the most valuable alternative left out while that action is selected. The fifth proposition states that economization of the price system is based on the information needed by individuals to process in decision making. Price summarizes exchange terms on the market. Market prices quickly change with the change of underlying conditions thus causing people to quickly adjust. According to the sixth proposition, private property is a compulsory condition in the means of production that is needed for rational calculation of economics. Private ownership offers strong incentives for scarce resources’ eff icient allocation. Economic planners cannot correctly calculate the alternative use of production means if money prices do not reflect the means of production’s relative scarcities. The seventh proposition considers the competitive market to be an entrepreneurial discovery process as competition is thought by many economists to be a state of affairs. The entrepreneur plays the role of change agent that pulls and prods markets in different directions since competition is an activity. Market economy and