In recent months, there has been an explosion of interest in the Austrian School of Economics, a free market school of thought. This is due to a variety of factors, from the rising popularity of Ron Paul and Peter Schiff on YouTube to the mounting opposition toward President Barack Obama’s interventionist economic policies. Most of the recent attention has been directed at the school’s practical policy conclusions, such as its call to abolish the central bank and to avoid bailouts. These policies set Austrian economics apart from most other schools. But what is important is not the Austrian policy conclusions themselves, but rather the undeniable truths underpinning such policies.

Austrian economics describes fundamental laws of nature that can’t be violated. Obama is not only wasting money, but his current economic policies are using our arms to overcome gravity. If you disagree with Austrian economics, you must attack the axioms on which it’s built. If you attack the policy prescriptions, then you are wasting your time because the policy prescriptions are correct, given the axioms.

Whenever someone picks up an Austrian book and begins reading, it’s much different then most other books on economics. For one thing, there are very few mathematical equations or graphs. Austrian economics textbooks also proceed logically, with each new chapter either building from the previous ones, or from additional axioms, which are introduced and justified. For example, a common presentation is to use Robinson Crusoe on a desert island, so that you can analyze human beings and nature, and add in more elements later such as Friday (to analyze exchanges).

Austrian economics uses praxeology,the science of human action. This is a deductive system used to reach economic truths. A deductive system will state an axiom or axioms, and logic is used to reach economic or mathematical law. This is the only possible place where Austrian economics can be attacked. Axioms are themselves unproved or unstated and, as such, are susceptible to scrutiny. The fundamental axiom of praxeology is that human beings have free will and are conscious actors. From this and other axioms (such as preferring goods sooner rather than later), all economic law and policy prescriptions are derived.

The most common knock on Austrian economics theory is that it is not “scientific” enough. Mainstream economics uses a method called logical positivism to derive economic law, copying physics as if to gain prestige. The scientific method is applied, a regularly occurring event is observed, facts are recorded and a hypothesis is postulated. Then, the hypothesis is retested until a suitable explanation for the cause is found.

But economics can’t start there. In the first place, the fundamental cause of economic interactions is already known — namely that human beings are conscious actors. Unlike particles in physics, which have no intention or consciousness, human beings have free will. We have and make choices, and this determines our economic interactions with one another. Human actions can never be compartmentalized into quantitative laws, and thus our actions cannot be predicted.

Attempting to use math to determine laws is also flawed. Mathematical relationships are functional, meaning that X is a function of Y and Y is also a function of X. With economics, there is only one direction, namely that the subjective demand impresses itself on the economic system. The value of a product is subjective (think of love, which cannot be measured) and provided by the human. Since the object is not conscious, it cannot value us back, and therefore no reciprocal functions can capture this relationship.

Another significant problem is that, unlike in the field of physics, controlled experiments are impossible in economics. With a physics experiment, all variables are held constant except for one. The independent variable is changed and the results are measured to determine laws. With economics, no such experiments are possible. There are multitudes of constantly changing variables for any series of economic events, much less the near infinite number of interactions which take place every day for every choice of everyone on Earth. Buying gum today is different than buying gum tomorrow, even if I shop in the same store, buy the same gum and talk to the same clerk. I have different information and different goals for the particular moment. If they were held constant, much like modern microeconomics treats them, life would be a miserable existence, where you would repeat the same tasks everyday without being able to “accomplish” any long term goal.

Economics is a science that is qualitative, not quantitative. The current perplexity that some feel when taking economics courses here occurs because this point is never acknowledged. So the next time you hear someone predict that doing policy A will result in reward B for people C, know that this is nonsense, because humans do not – and are not predetermined to – act in a certain way.

And this axiom proves Austrian economic policies correct.

Vincent Patsy can be reached at

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