One knew there was much wrong with modern economics, but one did not yet know how to put it right. It was necessary first…to figure out what difference this ‘Austrian perspective’ made for understanding the real world. To the much asked question ‘What is Austrian economics?’ there was simply not a ready answer.
The Austrian and neoclassical schools of economics are exact contemporaries, both having been built upon the contributions of protagonists of the catallactist revolution of the 1870s. Although often seen alongside Walras and Jevons as a founder of catallactic economics—the ‘marginal revolution’—it is now conceded that, methodologically, Menger (from whom the Austrians trace their descent) is some distance from his contemporaries as regards his eschewal of equilibrium and other considerations (see Gram and Walsh 1978; Jaffé 1976; Shackle 1972b; Streissler 1972). One obvious methodological difference is Menger’s spurning of mathematics. Jaffé (1976:521) quotes from Menger’s correspondence with Walras and states that the former
declared his objection in principle to the use of mathematics as a method of advancing economic knowledge…. For the performance of this task what is required…[is] a method of process analysis [‘the analytic-compositive method’] tracing the complex phenomena of the social economy to the underlying atomistic forces at work.
This quotation is also suggestive of Menger’s objection to the use of the concept of general equilibrium, which is documented by Streissler (1972). 1 By opposing a positivist-empiricist methodology and having an interest in problems that lie outside the scope of mainstream theory, later generations of Austrians are also regarded as having taken a different route to their neoclassical peers.