New Thinking in Political Economy series
9/4/03 1:13 PM Page 1 Introduction THE AUSTRIAN ECONOMISTS AND NEOCLASSICAL ECONOMICS The chapters in this volume attempt to explain some of the theories and apply some of the policy implications of the Austrian School of Economics. The Austrian School had its beginnings with the publication of Carl Menger’s Grundsätze der Volkswirtschaftslehre in 1871. He is best known for having formulated a version of the theory of marginal utility, along with the two other founders of the marginalist approach, William Stanley Jevons and Leon Walras. Jevons and Walras structured their variations on the marginalist theme in the garb of mathematical notation, with an emphasis on the conditions and requirements for the existence of equilibrium states. Menger, on the other hand, presented the theory in a framework that gave greater emphasis to the roles of uncertainty, imperfect knowledge, and causal and time processes of economizing and production. He was also more interested in explaining the logic behind the process of price formation, rather than the particulars of a specific equilibrium end-state of affairs in the changing conditions of the market. And, in addition, he emphasized an aspect of the social process that neither of his two marginalist co-founders gave any serious attention to: the evolution and formation of spontaneous social institutions. Menger’s mode of exposition lead Frank H. Knight to comment in 1931 that, ‘In fact, the entire theory is much more convincing in the loose, common-sense formulation of Menger than it is in the more refined mathematical version...