[This paper was originally written for ECON 3469 - History of Economic Thought, and is my most challenging thesis yet. As with anything in HET, this is conjectural.]
Alfred Marshall, an Austrian Sympathizer in the Cambridge Court?
By Ryan Safner
I. INTRODUCTION
Alfred Marshall, the great founder of neoclassical economics, shared more in common with the Austrian School than is traditionally considered. Austrian economists tend to resent Alfred Marshall as the theorist who subsumed their subjectivist theories into an objective and static model of equilibrium analysis. However, they fail to recognize the connection between Marshall and elements of the Austrian methodological tradition. To be sure, Marshall is clearly no Austrian, but many of his comments on the form and scope of economics mark him as a potential fellow-traveler. The broad range of economic action described by Marshall, and his insistence on practical applications to the real world unites him with Austrian theorists. His descriptive emphasis on the biological-evolutionary nature of the market over physical-static modeling suggests of Austrian methodology. His deep comprehension and subsequent temperance towards mathematical economics also provides hints of Austrianism. Most mainstream economists believe that Marshall had historically captured all the Austrians’ relevant contributions into his work, thus rendering the successive generations of Austrians as unnecessary anachronisms. Such followers, however, fail to appreciate the distinction that Marshall may have seen, between his dynamic economics and the successive body of economics attributed “Marshallian.”
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[This paper was originally written for ECON 3499 - Independent Study in Austrian Economics]
Two Theories of the Entrepreneur in Austrian Economics
The role of the entrepreneur is one of the most pivotal elements in the economic theories of the Austrian School. The entrepreneurial nature of the market cited by Austrians is alone sufficient to distinguish their theories from orthodox economics. Instead of a set of static equilibrium models with pristine assumptions, the Austrians elucidate an emergent market revolving around the dynamic actions of entrepreneurs in an uncertain environment, a perpetual state of disequilibrium. Professors Joseph Schumpeter and Israel Kirzner, two of the most prominent entrepreneurial theorists, both agree on the fundamental role of the entrepreneur in the market process, and that economics ought to focus on disequilibrium. However, they interpret the function and purpose of the entrepreneur in two starkly contrasting ways. Schumpeter argued that it is a small cluster of entrepreneur-innovators that cause disequilibrium in the market with revolutionary new inventions, and that this unstable process will ultimately morph capitalism out of existence. Kirzner both incorporates the entrepreneurial nature of the market to a broader range of human action, and takes an optimistic approach, arguing that the entrepreneur instead alleviates disequilibrium and brings the market closer to equilibrium and economic harmony.
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Understanding Economics Series
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Common sense economic lessons for the interested layman. How a free market economy works, from an Austrian School perspective.
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Lesson One: The Basics of Human Action
Starting from the very beginning, founding economic theory on absolutely true axioms and deriving universal economic law from them. Major principles: Human Action, Means & Ends, Goods, Production, Time, Scarcity, Choice, Cost, The Margin
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