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Keynesian Economics vs. Austrian School

1Historygenius
Posts: 1,639
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3/31/2012 1:22:54 PM
Posted: 4 years ago
While why did an earlier topic on it I decided this maybe a more debatable post to the forum.

Keynesian Economics

Founder: John Maynard Keynes (1883-1946)

Keynes argued that the solution to the Great Depression was to stimulate the economy ("inducement to invest") through some combination of two approaches: a reduction in interest rates and government investment in infrastructure. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment. A central conclusion of Keynesian economics is that, in some situations, no strong automatic mechanism moves output and employment towards full employment levels. This conclusion conflicts with economic approaches that assume a strong general tendency towards equilibrium. In the 'neoclassical synthesis', which combines Keynesian macro concepts with a micro foundation, the conditions of general equilibrium allow for price adjustment to eventually achieve this goal. More broadly, Keynes saw his theory as a general theory, in which utilization of resources could be high or low, whereas previous economics focused on the particular case of full utilization.

Austrian School

Founder: Eugen Böhm von Bawerk (1851-1914)

Whereas mainstream economists generally use economic models and statistical methods to model economic behavior, Austrians argue that they are a flawed, unreliable, and insufficient means of analyzing economic behavior and evaluating economic theories. Instead, they advocate deriving economic theory logically from basic principles of human action, a study called praxeology. Additionally, whereas experimental research and natural experiments are often used in mainstream economics, Austrians generally hold that testability in economics and precise mathematical modeling of an economic market are virtually impossible. They argue that modeling a market relies on human actors who cannot be placed in a lab setting without altering their would-be actions. Supporters of using models of market behavior to analyze and test economic theory argue that economists have developed numerous experiments that elicit useful information about individual preferences. Austrian contributions to mainstream economic thought include involvement in the development of marginalism and the subjective theory of value on which it is based, as well as contributions to the economic calculation debate. From the middle of the 20th century onwards, the Austrian school has been considered outside the mainstream of economic thought. Its reputation rose in the mid-1970s, after Austrian economist Friedrich Hayek shared the 1974 Nobel Prize in Economics. According to Austrian School economist Peter J. Boettke, the position of the Austrian School within the economics profession has changed several times from mainstream to heterodox.

So which economic theory do you like better?

Also I made a poll: http://poll.pollcode.com...
"The chief business of the American people is business." - Calvin Coolidge

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Reasoning
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3/31/2012 5:13:23 PM
Posted: 4 years ago
These are far from the only two options. Also, Menger is usually credited as he founder of the Austrian school, not Bohm-Bawerk. In fact, if we credit Bohm-Bawerk than Wieser, probably the most influential Austrian on mainstream economics, would not be considered an Austrian at all!
"What we really ought to ask the liberal, before we even begin addressing his agenda, is this: In what kind of society would he be a conservative?" - Joseph Sobran
16kadams
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3/31/2012 5:19:20 PM
Posted: 4 years ago
lol I voted in the poll, saw the results, and laughed.
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"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross
16kadams
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3/31/2012 5:21:03 PM
Posted: 4 years ago
austrian had 3 founders:

arl Menger (1840–1921), Friedrich von Wieser (1851–1926), and Eugen von Böhm-Bawerk (1851–1914)
http://www.thefreemanonline.org...
https://www.youtube.com...
https://rekonomics.wordpress.com...
"A trend is a trend, but the question is, will it bend? Will it alter its course through some unforeseen force and come to a premature end?" -- Alec Cairncross