Austrian Economics and Value Judgements : A Critical Comparison with Neoclassical Economics
Review of Political economy, vol.17, n°1, 2005
Sandy Palermo et Giulio Palermo
The article points out the limits of Austrian economics in so far as the passage from positive to normative economics is concerned. We propose a comparison with neoclassical economics and discuss the different theoretical solutions adopted by these two schools of thought in their legitimization of the normative discourse. The bridge from positive to normative economics is analyzed as resting upon two interdependent pillars, one of a technical nature, the other of an ethical one. In the case of neoclassical theory, these two pillars are, respectively, the “Pareto principle” and the so-called “minimal benevolence principle”. In the case of Austrian economics, they are the “coordination principle” and the set of “quasi-universal” value judgements. A first problem for Austrian economics is that the coordination principle turns out to be incompatible with process analysis, the latter being a central theoretical tenet of the Austrian school. A second problem, which overwhelms both the schools of thought, has to do with distribution. Our thesis is that whereas the neoclassical solution of the distributive problem is formally consistent (although deeply unrealistic), the Austrian solution is theoretically untenable and based on strong, although implicit, value judgements.