POLS FINAL EXAM - Austrian School Approach: Austrian...

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Austrian School Approach: Austrian Economics based on the assumption that the actions of social groupings and individual humans follow natural laws much in the same way as other aspects of nature. It has been the aim of Austrian economics to produce theories to explain these actions; although the claim that this should involve different tools than used in hard science. Followers of this theory of economics are strong advocates for complete freedom in the marketplace; they believe that industry should be allowed to make voluntary contracts but they should not be coerced into anything. .An important interest, for those involved with the Austrian School, are those forces which cause a recession. The actions of central banks have come under a lot of criticism because it is claimed that their manipulation of interest rates are often the cause of the downturn. It is this that is seen as causing a huge increase in credit growth which eventually leads to a credit burst which affects the whole economy. This is another area where the Austrian economists believe that government intervention causes things in the economy to worsen. The Austrian school believes that the entrepreneurial spirit and the right to own property are vital for the success of any economy. Their ideas find a lot of support around the world and are quite similar to the theories of the Chicago School. The Austrians don’t believe that economies can be simplified into mathematical models because they feel that a different set of tools is needed when dealing with this area of life. Instead of using the methods of the hard sciences the approach is instead focused on deduction. These economists believe in the existence of axioms from which further deductions can be made about human economic behavior. The fact that they don’t use mathematical models is often viewed as being a negative and means that their ideas lack any real scientific rigor. This criticism is compounded by the fact that many critics claim that their arguments or often overstated or even based on faulty understandings about the other economic theories that they criticize. They also fail to take into account the many examples of how government intervention has helped in the market place. Institutional approach: The institutional approach draws no distinction between jurisprudential, legislative, bureaucratic, or regulatory treatments. All are seen as particular parts or manifestations of the interrelation of government and the economy, or of legal and economic processes. Underlying the major thrust of the institutional approach to law and economics are two complementary modes of analysis. Instead of concentrating on a unidirectional sequence in which the law or legal structure governs behavior or conduct in the mixed market economy which in turn drives economic performance, for institutional law and economics the emphasis is on the interpenetration and interrelations between government and the economy, so that law or legal structure and behavior or conduct in the
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This note was uploaded on 08/22/2011 for the course ECON 3170 taught by Professor Oaisd during the Spring '11 term at Utah State University.

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POLS FINAL EXAM - Austrian School Approach: Austrian...

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