The Austrian Search for Realistic Foundations

Self-designated Austrian economists have two different views of modern neoclassical economics. Some, such as F. A. Hayek, take issue with certain aspects of neoclassical economics without disputing its fundamentals. Others, most notably Ludwig von Mises and Murray Rothbard, explicitly reject the foundations of neoclassical consumer and welfare theory and construct a systematic alternative. This paper analyzes the most distinctive features of the Mises-Rothbard alternative to the neoclassical paradigm; it also considers related positions defended by Israel Kirzner. I argue that their effort to rebuild economics on nonneoclassical foundations fails and that their critique of neoclassical foundations is wrong or strongly overstated.