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Lesson 1: Introduction to Austrian Economics

June 5, 2021

1.1 Origins and Development of Austrian Economics

1.1.1 Early Roots: The origins of Austrian Economics trace back to the late 19th century, with Carl Menger emerging as a key figure. Students will explore the intellectual roots that influenced Menger and set the stage for the development of Austrian Economics.

1.1.2 The Marginal Revolution: Dive into the Marginal Revolution, a pivotal moment in economic thought spearheaded by Carl Menger, where economists shifted their focus from the intrinsic value of goods to the subjective value as perceived by individuals. Discuss the revolutionary nature of this shift and its implications for economic theory.

1.1.3 Founding Figures: Introduce students to the prominent figures who played pivotal roles in shaping Austrian Economics, particularly Ludwig von Mises and Friedrich Hayek. Examine their contributions and how they built upon the foundation laid by Menger.

1.2 Key Principles of Austrian Economics

1.2.1 Methodological Individualism: Explore the principle of methodological individualism, which posits that economic phenomena can be best understood by analyzing the actions and decisions of individuals. Discuss how this approach differs from more collective or systemic viewpoints.

1.2.2 Subjective Value: Delve into the concept of subjective value, emphasizing that value is inherently subjective and varies among individuals. Illustrate this principle through practical examples to help students grasp its significance in Austrian economic thinking.

1.2.3 Market Process: Discuss the Austrian perspective on the market process, emphasizing spontaneous order and the decentralized coordination of individuals’ plans. Explore how markets, through voluntary exchanges, lead to social order without central planning.

1.3 Critique of Mainstream Economics

1.3.1 Austrian vs. Neoclassical Economics: Compare and contrast Austrian Economics with neoclassical economics, highlighting differences in methodology, assumptions, and conclusions. Emphasize the unique contributions of Austrian Economics to economic thought.

1.3.2 Government Intervention: Examine the Austrian critique of government intervention in the economy. Discuss how Austrian economists argue that state interventions can lead to unintended consequences and distortions in market processes.

1.3.3 Praxeology: Introduce praxeology as the distinctive methodology of Austrian Economics, emphasizing the role of deductive reasoning in economic analysis. Explore how praxeology sets Austrian Economics apart from empirically driven approaches. Activities

  • Readings: Assign key texts from Carl Menger, Ludwig von Mises, or Friedrich Hayek to provide students with firsthand exposure to foundational Austrian ideas.
  • Discussion Forum: Encourage students to engage in a forum discussing the implications of methodological individualism in economic analysis.
  • Case Study: Analyze a historical case study to illustrate how the Austrian perspective could offer unique insights compared to mainstream economic theories.