A Review of the Austrian Economic Paradigm

Abstract

This review synthesizes the Austrian School’s microeconomic contributions, emphasizing its departure from neoclassical and Keynesian orthodoxy through a focus on subjective valuation, entrepreneurial discovery, price signals, capital heterogeneity, and perpetual disequilibrium. Drawing on seminal works from Menger (1871) to Lachmann (1956) and beyond, it explores how Austrian theory reframes markets as dynamic discovery processes driven by human action and dispersed knowledge, contrasting this with static equilibrium models. The paper evaluates key debates—such as Kirzner’s equilibrating versus Schumpeter’s disequilibrating entrepreneurship—and critiques mainstream reliance on centralized frameworks, highlighting Austrian insights into monetary distortions and capital misallocation. It concludes by assessing the paradigm’s relevance to contemporary economic challenges, identifying gaps, and suggesting avenues for future research.