Carl Menger -
The Father of Austrian Economics
How did you come to that conclusion?
People don't often ask that question about the assertions made by economic pundits—economists and media commentators. In this section we will discuss the reasoning process required to come to valid conclusions about economic activity.
If a person cannot explain the reasoning behind the conclusions they make relative to economic issues, you should call those conclusions into question.
The Austrian Methodology refers to the precise thought processes used in analyzing economic activity. Austrian Economics sets itself apart by not only describing principles and theories but also by opening its methodology. Austrian Economics consists of a type of economics, espoused by the Austrian School of Economics, based upon deduction from the nature of human action, especially stressing the subjective nature of value.
The reasoning process must begin with basic principles—or truths. Like other sciences, economics does not require an extensive list of basic principles, but they must be described precisely.
Economic reasoning does not stop with the identification of basic principles. A set of theories, coupled with those principles, explain events in the past and predict events in the future.
An accurate understanding of how economic systems work requires clear and logical thinking. Many of the thoughts that are expressed by people who write about economic activity are neither clear nor logical. We have included a number of the logical fallacies that have shown up in writings about economics over the years.