The Austrian School puts great emphasis on individual choices and the crucial role that prices, acting as signals, have in those choices. The more prices depart from what they would be in a free market, the more concerned Austrian School economists become about economic performance.
The Austrian School believes in an absolute minimal role for government in economic affairs. In the jargon of the Economics 101, the Austrian School is laissez faire – leave it alone, with the “it” being the economy. Government ownership, regulation, rules, taxes, subsidies and other interventions are viewed as costly in their administrative excesses and their impact on economic performance, their ability to distort resource allocation and richly fertile ground for the law of unintended negative consequences.
The Austrian School has little confidence that any [mathematical] model can capture the complexities of a modern economy, given the myriad economic decisions that every agent in the economy makes every day. They have even less confidence that models can adequately accommodate risk and uncertainty. Austrian School scepticism about economic models translates into scepticism about the effectiveness of policies and forecasts that come out of the models.
The Austrian School believes big government can only become big by borrowing and then using easy monetary policy to inflate the currency, so they can pay their debts back in cheaper money. The Austrian School does not have much confidence that governments will indefinitely pay for their programs with taxes or hard currency debt.
Finally, the Austrian School is very respectful of the importance of credit to a properly functioning economy. They connect a breakdown in credit at least in part to wrong monetary policy.
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