The Austrian School

What Is The Austrian School?

The Austrian School is a tradition of economics that takes its name from Vienna, where Carl Menger published his Principles of Economics in 1871. Menger was one of the pioneers of the marginal revolution, arguing that value is subjective and set at the margin by the usefulness of the last unit consumed. Later Austrians, most famously Friedrich Hayek, stressed how market prices coordinate the dispersed knowledge of countless individuals and warned against the conceit that planners can design an economy. Hayek's The Road to Serfdom (1944) argued that centralized economic planning tends to erode political freedom, and he wrote that the curious task of economics is to show men how little they really know about what they imagine they can design.

Why It Matters

The Austrian School matters as a persistent counterweight to the idea that governments can manage economies from the center. Its emphasis on prices as carriers of information and on the limits of planning influenced twentieth-century debates over socialism and market reform. Hayek shared the 1974 economics prize with Gunnar Myrdal, a Swedish economist whose politics were sharply opposed to his own, a pairing that captured how contested these questions were. Austrian arguments about the knowledge problem and about the unintended consequences of intervention continue to inform free-market and classical-liberal thought, and the school's subjective, marginalist theory of value became part of mainstream microeconomics.