Is There a Specific Austrian Demand Theory?

Austrian economics is sometimes considered as an alternative to the mainstream. Regardless whether this holds true in other areas, the present paper argues that it is not the case as far as the demand theory is concerned. I attempt to show that the Austrian version of the theory is in fact equivalent with the neoclassical (in its ‘revealed preference’ incarnation). In particular, it is shown that the law of marginal utility, which is considered to be the key element of the Austrian approach, is irrelevant for deriving individual demand; the crucial assumption of both, the Austrian and the neoclassical theory is that of an existence of preference ordering. The paper proceeds as follows: in part I the meaning of the law of marginal utility is discussed; part II criticizes Rothbard’s derivation of demand from the law of marginal utility; an example is given that demand can be increasing without violating the law. Part III compares the Austrian and the neoclassical approach; part IV is conclusion.