Basic Ideas
Criticism of other Schools of Economics
- The Austrian School does not agree with most other schools of thought, especially the Keynesian and Chicago Schools
- Disagree with applying physics, math, and natural sciences to economics
- Disapprove of socialism because the government should not be in charge of economics, it hinders creativity and entrepreneurship
it's an Austrian Shepherd!
More Ideas...
- Believes that recessions are a natural part of the economy
- Thinks that economic cycles are caused by the fractional-reserve banking system and central banks (which they think should be replaced)
- Also think there should be a 100% reserve requirement so that there is not artificial money expansion
Basic Principle
- Stress put on the individual rather than the market.
- People wanting the good should set the price of something not quantity.
- Views the economy as a cycle it goes through stages like most other things in nature (that's why our prezi theme is a tree).
Some Basic Ideas of the Austrian School
- Focuses on the psychology of individuals, not the behavior of collective identities
- Strongly discourages government involvement in the economy- there is no way for the government to fully understand all the factors that make up the economy
- Places emphasis on entrepreneurship and creativity
- Recognizes competition in the economy (as opposed to perfect competition)
Other Important Austrian Economists!
Founder
- taught at the university of Vienna
- Carl Menger- influenced by the School of Salamanca (1500 economic school)
- Eugen von Bohm-Bawerk- theories of interest and capital
- Ludwig von Mises- disproved socialism, theories of entrepreneurship and economic cycles
- Friedrich A. Hayek- spontaneous order of market, Nobel Prize
- He wrote Principles of Economics and Investigations into the Method of the Social Sciences
Austrian School
of Economics
Other essential info
- Similar to Classical Economics
Relations to Philip's Curve
- Sometimes called Demand Side Economics
- Widely accepted for microeconomics thoughts
- Austrian school of economics finds that in the short run the Philip's Curve is correct; however, in the short run inflation and unemployment are positively related. This is because according to Austrian thought the more money you have (or that is inflated) the more people you will be willing to hire.
- Disagrees with Keynesian Economics
Cool Predictions
- Austrian economists were able to predict the Great Depression, as a result of the excess spending caused by the establishment of the Federal Reserve and the Roaring 20's.
- Also predicted the stagflation caused
by the 1973 oil crisis.
- Understood the economic recession of 2008, an example of the Austrian theory of economic cycles
Basic Info
Fun Facts
Peel's Bank Act
What is it?
- According to Austrian Economists, responsible for all economic problems the United States faces today
- Passed on July 19th, 1844
- It required a 100% reserve requirement for banknotes, but not demand deposits, which causes artificial credit expansion and allows bubbles to form in the economy
- So, if the act had included demand deposits, there would not be economic recessions and booms today
- It was started in Austria. (still a country...)
- Idea of thought not necessarily a physical school
- Other names include the Vienna School and the psychological school
- In 2010, two British economists tried to pass a law in England to put a 100% reserve requirement on demand deposits, which would in turn put an end to the fractional-reserve banking system.
By Murphy and Suzanne