Randall G. Holcombe: Advanced introduction to the Austrian school of economics

Abstract

What is Austrian Economics and how is it different from “regular” economics? This is a much more difficult question to answer than it might seem. One may be tempted to answer, “how long have you got?” and risk losing the audience immediately. One has to find the right entry point, the hook necessary to draw in the curious and lead them to an understanding that comes from the commitment to reexamine one’s presumptions concerning meaning and method. In this slim volume Randall Holcombe had risen to the challenge. If read carefully it provides a comprehensive and accurate introduction for the serious student wanting to know what Austrian Economics is all about. To be sure, it is an “advanced” introduction, meaning, it seems, that some prior knowledge of economics and some conceptual maturity is assumed. Neoclassical equilibrium economics is the standard against which Austrian market process economics is compared throughout. The goal is to achieve understanding by contrast. Whereas equilibrium economics builds models distinguished by the equilibria they embody, Austrian economics examines the real-time processes by which people’s actions are ordered in a disequilibrium world, a world in which, although people’s plans are never completely coordinated, economies function effectively to peacefully produce valuable goods and services. So, rather than beginning with a standard account of the origins and development of Austrian economics (which, in fact, is the subject of the last chapter) Holcombe jumps right into the key conceptual difference that characterizes Austrian Economics—it is disequilibrium economics. The first chapter, “the Market Process” thus uses the idea of the dynamic market process to explain fundamental Austrian ideas, namely, spontaneous order; the nature and role of time and knowledge in economic activity; equilibrium as market clearing; the role and importance of entrepreneurship; the nature of realworld competition not as a state of affairs, but, rather as a discovery process; and, Rev Austrian Econ DOI 10.1007/s11138-014-0291-7