Primer Parcial - Economía Austriaca

Allocation Paradigm

The mainstream economic approach focusing on the optimal assignment of scarce resources through mathematical optimization and static equilibrium models

Animi

A Latin term meaning spirit or internal motivation, used by Max Weber to represent the subjective intention or meaning behind individual actions, critical for interpretive understanding (Verstehen).

Apriorism

The philosophical assumption that knowledge can be acquired independently of specific experience or experiment, knowable a priori through non-inductive means.

Aristotelian Methodology (Aristotelianism)

Views science as a descriptive enterprise focusing on qualitative laws governing universal connections between essences or categories, which are knowable a priori.

Aspects of Human Action

Economic roles such as consumer, resource owner, and entrepreneur are not distinct types of people but different ways in which all individuals act purposefully.

Atomism

Carl Menger’s term for the methodology asserting that all social phenomena must be reduced to the actions of the individual, who serves as the irreducible unit of analysis.

Austrian Aristotelianism

A philosophical doctrine asserting that the world exists independently, possesses intrinsic intelligibility, and contains universal structures or essences knowable a priori.

Böhm-Bawerk, Eugen von

A key figure in the Austrian School who systematically developed the theory of capital and interest and refuted Marx’s labor theory of value.

Buchanan’s 6 Conclusions on Subjective Cost

Arguments asserting that cost is subjective, borne solely by the decision-maker, and cannot be transferred or imposed on another.

Capital (Böhm-Bawerk)

Defined as the bridge in time separating multi-period production plans from the eventual satisfaction of final consumer demand.

Capital Structure

Consists of heterogeneous goods with multispecific uses that must be aligned with complex, multi-period production plans to meet uncertain future demand.

Case Probability (Probabilidad de Caso)

A subjective probability judgment applicable to unique, non-repeatable events, relying on the actor’s knowledge and judgment rather than measurable statistical frequency.

Catallaxy (Catallactics)

The science of exchange focusing on exchange relationships, networks, and institutions of the market order, grounded in purposeful human action.

Causal-Genetic Theory of Institutions

An approach emphasizing the origin and evolution of institutions by tracing the process through which they emerge, rather than focusing solely on design or outcomes.

Class Probability (Riesgo de Clase)

A type of probability applicable when the structure of the problem is known and all possible states of the world can be enumerated, characterized by measurable frequency or statistical regularity.

Common Sense

A method, alongside the scientific method, by which humans can know the general structures of the world, according to Aristotelian realism.

Competitive Market is a Process of Entrepreneurial Discovery, The

The proposition that the market is a continuous process of adaptation driven by entrepreneurial actions that reallocate resources toward their most valued use.

Critique of Keynes (Crítica a Keynes)

Hayek’s thesis that monetary expansion and credit creation distort relative prices and lead to malallocation of resources (malinvestment), rather than activating idle resources without inflation.

Culture and Recipes

Culture is a historically transmitted pattern of meanings, including "recipes" (established practical knowledge), that provides the interpretive framework for individual action.

Destrucción Creativa (Creative Destruction)

Schumpeter’s concept describing how entrepreneurial innovation continuously revolutionizes the economic structure from within, destroying the old while creating the new.

Dispersed Knowledge

The central challenge addressed by the market process, recognizing that relevant knowledge is incomplete, decentralized, and context-specific among individuals.

Durkheim, Émile

A sociological holist who argued that social phenomena cannot be reduced to individual action, emphasizing the influence of social norms and collective beliefs.

Economic Calculation

The rational ability to estimate the future value of a production plan, requiring monetary prices derived from private property in the means of production.

Economic Value and Costs are Subjective (Proposition 4)

A core tenet asserting that value is based exclusively on subjective preferences (marginal utility) and cost is defined by the subjective value of forgone opportunities (opportunity cost).

Entrepreneurial errors (Kirzner)

Over pessimism and over optimism regarding value

Epistemology

The philosophical study of how we acquire knowledge and how we know that knowledge is true.

Essences

Simple natures or elements in the world, knowable a priori, whose universal connections are expressed by exact laws.

Ethnography

A qualitative empirical method involving immersion, observation, and conversation within a community to gain insight into the meanings and context of their actions, often resulting in thick descriptions.

Exchange Paradigm

The Austrian approach viewing economics as centered on understanding exchange behavior and the institutions that govern interaction, learning, and coordination.

Exact Laws

Propositions expressing universal connections amongst essences that are strictly universal and subject to no exceptions, comparable to the necessary laws of geometry or logic.

Facts of the Social Sciences are What People Believe and Think, The (Proposition 3)

The principle that the essential data of the social sciences are subjective, consisting of the opinions, intentions, and beliefs that individuals attach to their actions and environments.

Galilean Methodology

Views science as the formulation and testing of quantitative hypotheses, aiming for the prediction and explanation of specific future events.

Hayek, F.A. von

A distinguished successor of Mises who emphasized the market process as a discovery procedure and contributed to theories of spontaneous order, institutional analysis, and the non-neutrality of money.

Heuristics

Mental models or diagrams (e.g., supply/demand curve) used by theorists to understand abstract concepts.

Historicist School (Historicismo)

A school of thought, primarily in German-speaking countries, that denied universal, atemporal economic laws, emphasizing historical examination specific to cultures or nations.

Holism

The methodological position asserting that social phenomena cannot be reduced to individual action, emphasizing the causal influence of collective entities like the state or society.

Homo Agens

The Austrian concept of the human economic agent who acts purposefully, creatively, and actively under conditions of imperfect knowledge, seeking to improve their condition.

Homo Economicus

The neoclassical concept of the economic agent as a passive, a-cultural maximizer who responds rationally and predictably to changing prices.

Impositionists

A family of apriorist views holding that a priori knowledge reflects forms or structures imposed by the knowing subject upon the world, as in Kantian philosophy.

Imperfect Knowledge (Conocimiento Imperfecto)

The reality that knowledge is dispersed, incomplete, and subject to error, driving the market process and the need for discovery.

Incentives (Profit and Losses)

The mechanism in the market process where gains and losses function as signals and motivations for actors to adjust their plans, correcting resource maladjustments.

Institutional individualism

A specific form of methodological individualism that asserts that only individuals make choices, but explicitly includes the causal role of formal and informal institutions in shaping those individual choices and interactions

Individualism, Only Individuals Choose (Proposition 1)

The foundational premise that only individuals, with their purposes and plans, make choices, serving as the basic unit of economic analysis.

Inflación (Inflation)

In the Austrian context, credit expansion by the central bank that distorts relative prices and leads to malinvestment in the capital structure during the boom period.

Institutional Individualism

A form of methodological individualism asserting that only individuals choose, but institutions (formal and informal rules) affect choices and must be included in the explanatory framework.

Institutions and Rules of the Game

Formal and informal rules (laws, customs, traditions) that define boundaries, affect interactions, and provide context for individual choices within a society.

Inteligibilidad Intrínseca (Intrinsic Intelligibility)

The Aristotelian belief that reality possesses a structure that humans are intellectually capable of comprehending.

Interpretative Schemes

Part of the social stock of knowledge, consisting of shared mental models and frameworks (e.g., language, logic) that provide context for individuals to make sense of their environment and actions.

Jevons’s Law of Indifference (Extended)

The entrepreneurial function that ensures convergence among market prices for a commodity, moving resources from where they are subvaluated to where they have greater value.

Kaldor-Hicks efficiency

A measure used by economists for comparing different policies by looking at the net willingness to pay associated with potential outcomes. It attempts to sum up consumer and producer surplus using an objective and cardinal unit.

Kirzner, Israel M. on Entrepreneurship

Defined entrepreneurship as a cognitive phenomenon involving alertness to overlooked opportunities, rather than primarily assuming risk.

Knight, Frank H. on Risk

Distinguished risk (measurable, insurable probability based on known outcomes) from uncertainty (non-measurable, non-insurable due to unknown outcomes).

Knowledge in Neoclassical vs Austrian Economics

Neoclassical models often assume perfect or full knowledge, while Austrian economics emphasizes that knowledge is dispersed, imperfect, and discovered through the market process.

Labor Theory of Value (Teoría del Valor Clásica)

The classical theory asserting that the value of a good is determined by the amount of labor or time required to produce it, largely rejected by modern economists.

Ley de Imputación (Law of Imputation)

The rule that the value of higher-order goods (producer goods) is derived from the value consumers place on the final lower-order goods (consumer goods).

Llave del Paralelismo Misesiano (Misesian Parallelism Key)

The insight that while all human action involves discovery, pure entrepreneurial action is specifically oriented toward discovering opportunities to buy cheap and sell dear (arbitrage).

Marco Tripartito of Uncertainty (Tripartite Framework of Uncertainty)

The distinction between risk (measurable class probability), parametric uncertainty (known structure, unknown variable values), and structural uncertainty (unknown structure).

Marginal Utility

The value or satisfaction attributed to the last additional unit of a good available, forming the basis of the subjective theory of value.

Marginal Utility Theory of Value

The theory asserting that the value of a good is determined by the subjective utility or satisfaction derived from the last or additional unit consumed.

Market as Metaphor

The Walrasian view of the market as a disembodied, ideal type or abstract model where supply equates demand in equilibrium.

Market as Process

The Austrian view defining the economy as a continuous, dynamic process of adaptation and resource reallocation driven by entrepreneurial discovery.

Market as Space for Exchange

The classical view, associated with Smith and Ricardo, defining the market as a physical location (e.g., bazaar or fair) where people meet to trade goods and services.

Market Process (Competition as Process of Entrepreneurial Discovery)

Competition viewed as an activity of rivalry that generates the market process through constant discovery and correction of errors.

Methodenstreit

The methodological dispute between Carl Menger and Gustav Schmoller (Historicist School) concerning the existence of universal economic laws and the proper method for the social sciences.

Methodological Individualism

The practice of viewing all social phenomena as the product of individual action, using individual choice as the basic unit of social research and explanation.

Menger, Carl

Founder of the Austrian School in 1871, who launched the marginalist revolution, introduced the subjective theory of value, and championed the atomistic method against historicism.

Mises: Kant vs Aristotle

Mises bridged Kantian formal apriorism with Aristotelian realism, suggesting that mental categories, while imposed by structure, function as representations of the real order of the world.

Money is Nonneutral (Proposition 8)

The thesis that changes in the money supply are not uniform across the economy and affect real economic variables, such as relative prices and investment decisions.

Neoclassical Box (Neoclassical Cage)

A conceptual framework (e.g., perfect competition) characterized by assumptions of perfect knowledge, no discovery, no surprise, and the eventual disappearance of profit in equilibrium.

Objective Theory of Cost vs Subjective Cost

The contrast between classical/Marshallian views (cost determined by objective input requirements) and the Austrian view (cost defined by subjective opportunity sacrifices).

Objective Theory of Probability

A theory asserting that probability is a property of the world (e.g., statistical regularity) that can be measured and quantified, independent of the observer’s subjective state.

Objectivism

Ayn Rand’s philosophy emphasizes that reality exists as an objective absolute and that man's mind (reason) is his means of grasping it.

Ontological Individualism

The premise that only individuals have purposes, plans, or choices, justifying methodological individualism.

Orden Espontáneo (Spontaneous Order)

Orders that emerge from human action but not human design, such as money or language, facilitating coordination and interaction.

Paradox of Entrepreneurship

The recognition that entrepreneurial activity, while disruptive and innovative, simultaneously introduces order by driving resources toward their most valued uses.

Parametric Uncertainty

The lack of knowledge ex ante about the specific values that variables within a known problem structure will take ex post.

Praxeology

The science of human action focusing on the necessary implications of individuals acting purposefully, encompassing catallactics.

Prices (Precios)

The ratio of exchange that synthesizes dispersed information, acting as a guide and reference for individual plans and resource allocation.

Private Property in the Means of Production is a Necessary Condition for Rational Economic Calculation (Proposition 6)

The requirement that private property rights exist to generate market prices necessary for rational resource allocation.

Profit and Losses

Consequences of entrepreneurial activity that function as a mechanism of discovery for errors in resource allocation, providing incentives to adjust plans.

Proxies for Societal Welfare

Quantitative measures (e.g., GDP, migration patterns) attempting to estimate subjective societal well-being, rejected by subjectivists as they do not measure psychic utility.

Protestant Ethics and Capitalism

Max Weber’s thesis linking the rise of capitalism to the ascetic values and work ethic fostered by Protestant beliefs, particularly Calvinism.

Radical Ignorance

The state where an individual is completely unaware of certain opportunities or information, distinct from rational ignorance (choosing not to acquire known information).

Rational Ignorance

The state of knowing information exists but choosing not to acquire it because the cost outweighs the perceived benefit.

Reflectionists (Rexflectionists)

A family of apriorist views asserting that a priori categories reflect structures or connections among essences existing autonomously in reality, aligning with Aristotelian realism.

Relevance Systems

Shared frameworks within the social stock of knowledge that determine what is considered important or worthy of attention within a culture.

Resource Bundle

A combination of heterogeneous resources assembled by an entrepreneur to create an output with greater value than the sum of its parts.

Risk vs Uncertainty

Risk refers to insurable events with known probabilities (class probability), while uncertainty refers to non-insurable events where outcomes or problem structures are unknown (structural uncertainty).

Rothbard, Murray N. on Welfare Economics

Rejected attempts to measure or aggregate utility, viewing welfare claims based on social utility as invalid and his own Pareto-based claims as illustrative of the Unanimity Rule.

Roundabout Production (Roundabout Economy)

Sequential, multi-stage production processes required to produce complex goods, characteristic of wealthier economies.

Schackle, G.L.S. on Uncertainty

Argued that agents typically lack knowledge to enumerate all possible states of the world, making probabilistic calculation challenging.

Schumpeter, Joseph A. on Entrepreneurship/Risk

Argued that entrepreneurs, through creative destruction, break existing equilibria and play a disequilibrating role in the economy.

Scientism

The application of scientific methods (typically quantitative) to non-scientific questions, often studying irrelevant or non-measurable phenomena.

Social Institutions are often the result of human action, but not of human design (Proposition 10)

Institutions emerge unintentionally from purposeful individual actions over time (spontaneous order).

Social Stock of Knowledge

The shared pool of cultural artifacts, interpretive schemes, and recipes enabling members of a society to define and master situations.

Structural Uncertainty (Incertidumbre Estructural)

Unknown problem structures where agents cannot specify the full set of possible states or outcomes, making probabilistic calculation impossible.