 My name is Chris Coyne and I'm the F.A. Harper Professor of Economics at the Mercatus Center at George Mason University and the Associate Director of the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics. Today I'm joined by Robert Higgs, who is a senior fellow in political economy at the Independent Institute and is the editor-at-large of the Institute's quarterly journal, The Independent Review. Bob, welcome. Thank you very much, Chris. What do you view as some of the key distinctions between Austrian economics and mainstream economics? I think there are several. One of them is that Austrian economics treats subjectivism as a very serious matter and keeps it in mind at all times. There's a tendency in neoclassical economics to recognize subjectivism when one first starts thinking about utility theory and then to forget it and to fall into formalism and to fall into the implicit, if not explicit, assumption that things that are not measurable can be measured and to begin to think that third parties can assess costs, for example. The whole basis of cost-benefit analysis, which is a kind of subfield of neoclassical economics, presumes that costs and benefits can be measured by third parties. And of course, sometimes people will say, well, that's because we measure them via market prices. But because there are no market prices for many of the costs and benefits these analysts are trying to assess, they have to fall into other forms of third party evaluation or appraisal. And when they do that, they're really not only overlooking a thorough subjectivism, but they're abandoning it. They're working in a way that is contrary to it. They're presuming that third parties can know things that indeed cannot be known by any third parties, but only by the decision makers themselves. So subjectivism is one of the key differences. There's also a great difference in the extent to which Austrians think formalism is a valuable thing for its own sake. Modern neoclassical economics is dominated by formal analysis. I've encountered many people who reacted to work of different kinds, including sometimes my own work, basically by saying if you've got no formal model, you've got nothing. In other words, there's this insistence that there's only one way to do economics. It's by formal mathematical modeling. And if you try to get economic knowledge or information by any other means, you're just wasting your time. There's no hope for any other alternative way of learning about economic life. Austrians disavow that kind of formalism. Some Austrians certainly appreciate that formal models can be revealing. They can be insightful. But they have to be formulated very carefully to avoid the pitfalls of making assumptions that one knows what cannot be known by anyone but the actors. And that's a pitfall that's in general not avoided in neoclassical economics. There's a lot of presumption. Hayek complained again and again and again that people were assuming a way in their analysis what in fact was the core of what we were trying to understand. They were simply assuming that people knew things like all the prevailing prices in the market. And what people were trying to do was discover prices at which they could buy or sell or might buy or sell and discover the prices at which they eventually did agree to buy and sell. And that discovery procedure was ongoing. It was constant. It was not something that the world would stop while the neoclassical economists solved his equations and said, ah, that's the equilibrium set of prices. So I think the formal modeling question is a huge distinction between Austrians and neoclassical economists. I think there's also a difference in that Austrians tend to think in terms of the process of economic life. Whereas neoclassical economists think in terms of equilibrium configurations. They search for the equilibrium of a model. And even if it's said to be a dynamic model, it still has a definite equilibrium trajectory. That is the answer to the question they've posed. But whether it's static or dynamic, it's still the case that they're treating the problem as it were fixed. You can work toward the answer and, well, you've got it. And of course, if you use welfare economics, you can say, for example, oh, this is an answer. It tells me the world is inefficient. So that means that the government could intervene in ways that would move it toward an efficient configuration. Austrians treat efficiency very differently. A treaty efficiency is basically whatever free traders in the market do. That's efficient. Because no one else can say that something would be better. No one else has the information to displace the actual actors' evaluations of costs and benefits. So those would be some of the major differences I would think of between Austrian economics and neoclassical economics. There are a number of others. And if one wants to talk about philosophical and epistemological questions, there are certainly some there, too.