Part of a series on Libertarianism Agorism Anarcho-capitalism Autarchism Geolibertarianism Green libertarianism Left-libertarianism Libertarian feminism Minarchism Neolibertarianism Paleolibertarianism Progressive libertarianism Right-libertarianism Austrian School Chicago School Classical liberalism Individualist anarchism Civil liberties Economic freedom Free markets Free trade Humanism Laissez-faire Liberty Individualism Non-aggression Private property Self-ownership Tax cuts Economic views History Movement Parties Theories of law Views of rights Criticism of libertarianism Libertarian Republican Libertarian Democrat The Austrian School, also known as the "Vienna School" or the "Psychological School", is a heterodox school of economic thought that advocates adherence to strict methodological individualism. As a result Austrians hold that the only valid economic theory is logically derived from basic principles of human action. Alongside the formal approach to theory, often called praxeology, the school has traditionally advocated an interpretive approach to history. The praxeological method allows for the discovery of economic laws valid for all human action, while the interpretive approach addresses specific historical events.
This Aristotelian/rationalist approach differs both from the currently dominant Platonic/positivist approach of contemporary neo-classical economics and the once dominant historical approach of the German historical school and the American institutionalists. Regardless, Austrian economics has made significant contributions to modern mainstream neo-classical economics. because of its emphasis on the creative phase (i.e. the time element) of economic productivity and its questioning of the basis of the behavioral theory underlying neoclassical economics.
Because many of the policy recommendations of Austrian theorists call for small government, strict protection of private property, and support for individualism in general, they are often cited by conservatives, laissez-faire liberal, libertarian, and Objectivist groups for support, although Austrian School economists, like Ludwig von Mises, insist that praxeology must be value-free. They do not answer the question "should this policy be implemented?", but rather "if this policy is implemented, will it have the effects you intend?".

History
Austrian economists reject statistical methods and artificially constructed experiments as tools applicable to economics, saying that while it is appropriate in the natural sciences where factors can be isolated in laboratory conditions, acting human beings are too complex for this treatment. Instead one should isolate the logical processes of human action - a discipline named "praxeology" by Alfred Espinas..
This focus on opportunity cost alone means that their interpretation of the time value of a good has a strict relationship: since goods will be as restricted by scarcity at a later point in time as they are now, the strict relationship between investment and time must also hold. A factory making goods next year is worth as much less as the goods it is making next year are worth. This means that the business cycle is driven by miscoordination between sectors of the same economy, caused by money not carrying incentive information correct about present choices, rather than within a single economy where money causes people to make bad decisions about how to spend their time.

Analytical framework
Some contributions of Austrian economists:

A theory of distribution in which factor prices result from the imputation of prices of consumer goods to goods of "higher order", that is goods used in the production of consumer goods (goods of the first order).
An emphasis on the forward-looking nature of choice, seeing time as the root of uncertainty within economics (see also time preference).
A fundamental rejection of mathematical methods in economics seeing the function of economics as investigating the essences rather than the specific quantities of economic phenomena. This was seen as an evolutionary, or "genetic-causal", approach against the stresses of equilibrium and perfect competition found in mainstream Neoclassical economics (see also praxeology).
Eugen von Böhm-Bawerk's critique of Marx centered around the untenability of the labor theory of value in the light of the transformation problem. There was also the connected argument that capitalists do not exploit workers; they accommodate workers by providing them with income well in advance of the revenue from the output they helped to produce.
Eugen von Böhm-Bawerk's capital theory, which equates capital intensity with the degree of roundaboutness of production processes.
Eugen von Böhm-Bawerk's demonstration that the law of marginal utility, as formulated by Menger necessarily implies the classical law of costs and hence the vast majority of the conclusions of the British classical economists. This discovery was later fully developed and its implications traced by a student of von Mises, George Reisman, in his book, Capitalism.
An emphasis on opportunity cost and reservation demand in defining value, and a refusal to consider supply as an otherwise independent cause of value. (The British economist Philip Wicksteed adopted this perspective.)
The Mises-Hayek business cycle theory, which explains depression as a reaction to an intertemporal production structure fostered by monetary policy setting interest rates inconsistent with individual time preferences.
Hayek's concept of intertemporal equilibrium. (John Hicks took over this theory in his discussion of temporary equilibrium in Value and Capital, a book very influential on the development of neoclassical economics after World War II.)
Mises and Hayek's view of prices as permitting agents to make use of dispersed tacit knowledge.
The time preference theory of interest, which explains interest rates through intertemporal choice - the different time preferences of the borrower or lender - rather than as a price paid for a factor of production.
Stressing uncertainty in the making of economic decisions, rather than relying on "Homo economicus" or the rational man who was fully informed of all circumstances impinging on his decisions. The fact that perfect knowledge never exists, means that all economic activity implies risk.
Seeing the entrepreneurs' role as collecting and evaluating information and acting on risks.
The economic calculation debate between Austrian and Marxist economists, with the Austrians claiming that Marxism is flawed because prices could not be set to recognize opportunity costs of factors of production, and so socialism could not make rational decisions. Contributions
One criticism of the Austrian school is its rejection of the scientific method and empirical testing in favor of supposedly self-evident axioms and logical reasoning.

Economists affiliated with the Austrian School

Richard Cantillon
Frédéric Bastiat (precursor)
Henry Hazlitt (introduced the Austrian School to the USA)
School of Salamanca (Renaissance precursors)
Étienne Bonnot de Condillac
Louis Say
Jean-Baptiste Say
Léon Walras
Jules Dupuit
Lionel Robbins
Wilhelm Röpke
Joseph Schumpeter
A.R.J. Turgot
Knut Wicksell Other related economists

Bryan Caplan
David D. Friedman
Tyler Cowen Seminal works