how little they really know
about what they imagine they can design.
F.A. Hayek, The Fatal Conceit, 1988
The Austrian School of economics, for many years considered "fringe," or heterodox, has nonetheless proven startlingly prescient, as the quotes from two famous Austrians in the photograph above illustrates. Now, in the midst of the Great Recession, some attention is being paid once again to the school of economic thought that led Mises and Hayek to express their contrarian positions before the 1929 stock market crash.
The Austrian School of Economics
Briefly stated, the Austrian School argues that economics is a social science, rather than a physical one, that human behavior in the aggregate is so complex as to make economic modeling all but impossible, and that the proper approach to understanding economics is through the deductive discovery of fundamental laws of human action rather than through analysis of historical data.
Mainstream economists operate primarily from the latter, inductive, form of reasoning, while the Austrian School is built on a foundation of deductive reasoning from first principles, also known as axioms.