[79/100] Austrian School of Economics: Subjective Value
The Austrian School of Economics is a significant school of thought in economics, originating in Vienna, Austria, in the late 19th century. It emphasizes the importance of individual action, subjective value, and market processes, distinguishing itself from mainstream (especially mathematical and model-driven macroeconomics).
Here are its core characteristics and representative ideas:
1. Core Views
1. Subjective Theory of Value
Value is not determined by labor or cost but by consumers' subjective evaluation of goods.
➡ This is a rebuttal to the classical "Labor Theory of Value."
2. Marginal Utility
The Austrian School was a key participant in the Marginal Revolution. The value of a good depends on the utility of the "last unit" (marginal utility), not the total quantity.
3. Methodological Individualism
Economic analysis should start from the actions and choices of "individuals," not aggregates or statistical data.
4. Spontaneous Order
Market order is not designed by governments but emerges naturally from countless individual actions, such as the price system.
5. Emphasis on Entrepreneurship
Entrepreneurs are the core force in discovering market opportunities, coordinating resources, and driving economic development.
6. Opposition to Mathematical and Theoretical Modeling
The Austrian School views economics as a social science that should not rely excessively on mathematical models but instead use logical reasoning and an understanding of human behavior to explain economic phenomena.
7. Opposition to Government Intervention
Advocates laissez-faire, arguing that government intervention distorts market price signals, leading to misallocation of resources.
II. Key Figures
1. Carl Menger
Founder, proposed the subjective theory of value and marginal utility.
2. Eugen Böhm-Bawerk
Major contributor to capital and interest theory.
3. Ludwig von Mises
Opposed socialist planned economies; famous work: Human Action.
4. F. A. Hayek
Nobel Prize winner in Economics; key ideas include:
- Price system = Information system
- Spontaneous order
- Theory of economic cycles caused by government intervention (coined with Mises as the Austrian Business Cycle Theory)
III. Austrian Business Cycle Theory (ABCT)
One of the most important theories of the Austrian School:
- When central banks artificially lower interest rates and expand credit → entrepreneurs misjudge the market → overinvestment
- Eventually, investments become unsustainable → economic recession ➡ Argues that economic cycles are primarily caused by monetary policy, not market failures.
IV. Modern Influence
The Austrian School has significantly influenced:
- Free-market ideologies (e.g., libertarianism)
- Cryptocurrencies and Bitcoin (many design principles are influenced by it)
- Critiques of government intervention and central banking
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