What is Wrong with Neoclassical Economics (and What is Still Wrong with Austrian Economics)

In comparing Neoclassical economics with Austrian economics it is important to recognize first and foremost that Austrian economics is historically a school within the broader tradition of neoclassical economics. Austrian economics, unlike Institutionalism or Marxism or Post-Keynesianism, is not heterodox in certain fundamental respects. On the other hand, with regard to what neoclassical economics has become and the way that the original marginalist project is now understood within the mainstream, Austrian economics is every bit as heterodox as any of the alternative schools of thought mentioned above. This two-sided aspect of Austrian economics leads to many tensions within the school (on an intellectual level [both theoretical and empirical], strategic level [which professional alliances to pursue], and institutional [in terms of departmental location and in terms of funding support]). I will limit myself here, however, to a discussion of those tensions felt on an intellectual level leaving for more appropriate venues discussions of a strategic or institutional concern. In doing so I hope to not only present what are the limitations to mainstream neoclassical economics, but also to suggest what are some of the lingering problems which haunt Austrian economics and prevent the school from developing its potential as a framework for the theoretical and empirical examination of the world