Episode 7

The Invisible Hand and the Austrian School

On the contribution of the Austrian School that clarified the component of the market process that guided resources across the stages of production in a rational and productive way.

 

Episode 7

The Invisible Hand and the Austrian School

On the contribution of the Austrian School that clarified the component of the market process that guided resources across the stages of production in a rational and productive way.

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March 7, 2019

Episode Notes

In this episode, we overview how the Austrian School used the price mechanism to articulate how resources are allocated across time so that the profit-seeking behavior of the capitalist was actually socially beneficial.

It is the price mechanism that communicates the needs and wants of the consumer back up to the decision makers who are investing their capital goods in the ways that will profit them the most. In this way, the market is harmonious not only in direct exchanges, but also in long-term capital goods to consumer goods exchanges as well.

What was once a mysterious and miraculous force that guided all this, has been identified as the price mechanism by the Austrian School. So that, in modern times, we actually don’t have to refer to all this as the invisible hand— for the invisible hand is now visible!

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