Human Needs, the Market and the Crisis – Some Thoughts from an ‘Austrian’ Perspective

The paper discusses parallels between the Austrian School of Economics’ teachings and the current crisis and argues for decision makers to take economic theory into consideration. Menger, putting the human being and his desires at the center of economic theory, advocates an allocation allowing utility for a maximum of individuals, excluding extra profits for only a few, thus a ‘perfect’ market. Hayek says markets will function if prices – important signals to the agents – are formed without interference. Tempering (money injection, deficit spending, fiscal expansion, interest rates lowering) distorts their informative nature, lead into malinvestment and depression. Schumpeter predicts the downfall of capitalism because the chances for extra profits through innovations create imitators until the system collapses. An “economical†, votes maximizing, behavior of politicians adds to that. And he warns of some of the very policies being applied in today’s crisis.