Microeconomic Principles
In studying economic activities and concepts, there are two dominant modes of thought that come to the forefront; neoclassicism or the 'mainstream' view and Austrian economics. These two schools of thought have points of contention on many different issues and theories found in the analysis of economic events. Several literary works have been written detailing the differences between the two approaches, although they have been subject to much criticism by the Austrian school. The major distinctions outlined by many authors include: praxeology, indifference, cardinality, continuity, probability, mathematical analysis, and public goods. Praxeological analysis is the basic foundation for the entire Austrian approach to economic observation. Human action is the most important and defining concept in Austrian economics. Human beings act, and the choices they make are based on motives or 'not-yet realized' parts which explain the behavior and thoughts that they exhibit. This basic notion allows for the Austrian school to build an approach based on human action, and the means they use to get to an end. Neoclassical economics differs in the sense that they seek to explain human action in terms of value and choice with their
Indifference is a simple concept that has brought about many heated debates in economic circles. foundation firmly embedded in utility. They maintain that the market equilibrium cannot be represented by the intersection of supply and demand curves, and view equilibrium as the point to which the economy is always moving but never reaches, as motion itself will cause changes which will require the economy to head is a slightly different direction in order to reach equilibrium. The functions used to produce these supply, demand, and cost curves are calculated with differentiation, which does depend on the miniscule changes. The Austrians deny that probability can be quantified and future human actions derived from calculations. The neoclassicals advocate the use of quantifiable probability, and defend their stance by referring to games of chance. Any model that accurately represents conditions and actions is either historical in nature, or is modeling what could be, not what is or will be. The Austrian view the public goods concept as 'an entering ideological wedge for government intervention into the economy. The Austrians contend that human action is based on value judgments, which have no cardinal value and no unit of measure. ' (Hulsman, 5) The Austrian school maintains that neoclassic economics waste their time in calculating maximization and equilibrium to describe human behavior. The points brought up are highly debatable on both sides and are sure to remain that way for some time to come. The crux of the matter in terms of uncertainty and probability is dealing with the presence (or lack thereof) of class and case probability. This in turn implies that human beings cannot learn, because learning could change action under any given set of conditions, negating the theory and probability calculations. The goal of the Austrian economist is not to quantify, but to qualify what may happen in the future. The idea of public goods is also rejected by Austrian economics.
Common topics in this essay:
Buridan's Ass,
,
human action,
austrian economics,
human behavior,
austrian school,
neoclassical economists,
constant relationships,
economic events,
economic analysis,
austrian approach,
equilibrium prices,
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Acceptance Essays
