The Review of Austrian Economics, 15:4, 335–357, 2002.
2002 Kluwer Academic Publishers. Manufactured in The Netherlands.
Austrian Economics as a Progressive Paradigm:
Explaining More Complex Economic Phenomena
Departamento de An
omico, Universidad Aut
onoma de Madrid, Spain
Abstract. This article examines two major issues of Austrian economics. The ﬁrst is the alleged superiority of
Austrian over neoclassical economics. The second is the capacity of Austrian economics to support new theoretical
research. The analysis shows that Austrian economics has the widest domain of validity for explaining economic
phenomena. It is also shown that Austrian economics has a progressive theoretical character due to the fact that
there exist a number of analytical phenomena that Austrian economics cannot explain in its present state but that
may be explained by means of a “leap with continuity” from Austrian anthropological presuppositions.
Key Words: Austrian economics, infeasible action plans, non-monetized ends and means
JEL classiﬁcation: B 41.
Although Austrian economics is one of the three central schools of economic thought,
its scientiﬁc status is the most controversial. Nobody could say that Austrian thought is
irrelevant from a historical standpoint; but it has been repeatedly questioned in its methods
and theories. In order to clarify these, a systematic exploration of the kind of economic
phenomena that Austrian economics can explain seems to be necessary. Once we have
identiﬁed what Austrian economics can explain in its present state, we may also identify
what it cannot explain. This is the crucial point of any scientiﬁc theory because if we know
its limits, we can, a priori, improve that theory. And if it can be shown that the theory could
be improved and thus be able to explain more phenomena, it is also possible to demonstrate
the progressive character of the theory.
Here we are going to deal with this issue by showing that Austrian economics is a progres-
sive paradigm within economic theory. And this is so thanks to its correct understanding
of the place of economic behavior within human action. As neoclassical and Keynesian
economics fail to recognize this fact, Austrian economics emerges not only as a truly pro-
gressive paradigm but also as the most progressive of them all. But in order to show that, we
have to identify the kind of problem that Austrian economics cannot explain. In particular,
it will be shown that, in its present state, Austrian economics cannot explain economic
processes arising from the existence of intrinsically infeasible action plans and action plans
that contain ends and means whose value cannot be expressed in terms of a general equiv-
alent of value. But, and this is the proof of its progressive character, Austrian economics
will be able to explain these phenomena if a “leap with continuity” is made from its basic
In order to do that, we will need a general framework for analysis of the foundations of
a more general theory of human action in regard to economic phenomena. This framework