Two perspectives of time in economics: the neoclassical school (Newtonian) versus the Austrian school (Bergsonian)

Abstract

This paper has two objectives. Firstly, it compares the concept of time in two economic paradigms, the neoclassical and the Austrian school. Secondly, this paper traces the development of the concept of subjective time in the Austrian School of Economics from Carl Menger to the contemporary Austrian economists. The neoclassical school uses a Newtonian time concept in which time is homogeneous, mathematically discontinuous and causal inertia, while most Austrian economists adopt Henri Bergson’s concept of time, where time is subjective and continuous, meaning that events are linked with each other. This implies that an individual’s decision will affect on the future, an effect which is unpredictable. Illustrations on the usefulness of the subjective time in understanding human action and economic phenomena are given. This paper concludes that it is more fruitful to use Bergsonian time than Newtonian time in economic research.