Austrian economics at the cutting edge

Austrian economists today have a valuable opportunity to rejoin the mainstream of the economics profession. As Colander, Holt, and Rosser have argued, neoclassical orthodoxy is no long mainstream. What I call the “heterodox mainstream” is an emerging new orthodoxy. The five leading characteristics of the emerging new orthodoxy are bounded rationality, rule following, institutions, cognition, and evolution. When listed in this order, they suggest the acronym BRICE. The Austrian school is also an example of BRICE economics. The shared themes of BRICE economics create an opportunity for intellectual exchange between Austrians and other elements of the heterodox mainstream. Although Austrians should engage the heterodox mainstream energetically, they should also defend the essential elements of an early version of neoclassical economics, elements at risk of becoming half-forgotten themes of an earlier era. These elements are supply and demand, marginalist logic, opportunity-cost reasoning, and the elementary theory of markets. JEL Codes A14, B50, B53 This text is an edited version of a talk given in Washington, D.C. on 19 November 2005 at the SDAE annual dinner. I thank persons present at that time for a helpful discussion. I also thank William Butos, Roger Garrison, Steven Horwitz, and Peter Lewin for useful comments on an earlier draft.