Austrian and Neoclassical Economics : Any Gains From Trade ?

A ustrian economics has been important to the development of modern economics, but its role in current practice is much diminished. The neoclassical approach dominates today’s thinking. Many Austrians bemoan this state of affairs; most neoclassical economists just ignore it. But Austrian and neoclassical economics aren’t mutually exclusive. Each represents a distinctive point of view, although with little meaningful intellectual exchange between them these days. This is unfortunate. Many different concepts are associated with both Austrian and neoclassical economics. To concentrate on where the most exchange of ideas might occur, I am concerned about those aspects of Austrian economics primarily dealing with the process of competition, and that portion of neoclassical economics primarily dealing with the determination of economic equilibrium. This, in a nutshell, is the main intellectual difference between them. Some consequences of this difference are discussed in what follows. I hope to show that mutually advantageous gains from trade exist. Austrian economics offers a valuable perspective of the economy as an evolutionary process, akin to biological evolution, with entrepreneurial activities representing the main instruments of change. It is primarily a macroeconomic theory of the economy as a whole, with keen insights on the nature of decentralization and the process of competition that deserve more attention. Neoclassical economics offers a microeconomic theory of economic behavior that is especially useful for analyzing specific economic problems and for orienting analysis around more sharply described empirical phenomena and data.