• Course Introduction

        • Time: 24 hours
        • Free Certificate

        The Austrian school of economics has for a century and a half maintained a rich tradition and a unique methodological approach to economics, which sets it apart from other traditions. Unlike other economic schools of thought, the Austrian School acknowledges that there are no constants in human action. Accordingly, the methodology used for economic analysis is different to that employed in natural sciences such as physics. Rather than positing hypothetical relationships between statistical aggregates that break down when scrutinized, the Austrian School treats the actions of individual humans as the ultimate causal explanations of economic phenomena, and analyzes them using deductive methods. The Austrian School does not advocate a particular political programme – it was described by Mises as “value-free” – it merely aims to help humans to understand the consequences of action. Although not currently a mainstream school of economic thought, there has been a resurgence of interest in the Austrian School since the 2008 Global Financial Crisis (which many mainstream economists failed to predict) and the invention of bitcoin.

        As an introductory course to Austrian economics, the content draws heavily on some of the school’s defining texts authored by Carl Menger, Ludwig von Mises and Murray Rothbard. It touches on the ideas of Nobel Prize Winner F. A. Hayek, who was a proponent of the Austrian School and strongly influenced by the work of Menger and Mises. Although not covered in this course, Nobel nominees such as Israel Kirzner were also influential figures in the school’s modern development. Students will learn about some of the Austrian School’s most important concepts including time preference, marginal utility and the subjective theory of value.

        The starting point of this course is understanding that all value is subjective, and dependent on the individual making the valuation. With this foundation laid, it becomes possible to understand how people willingly engage in trade. The second part of the course then describes how humans economize, by focusing on some of the most important economizing actions: labor, property, capital, technology, trade, and money. Students will explore the economic motivation and rationale behind each of these topics, along with its impact on human time. The third section of the course introduces the market economy and the capitalist system as the social order in which individuals are able to engage in the aforementioned economizing acts. We study how individual decisions translate to a market-wide price. The Misesian conception of the capitalist system as an entrepreneurial system is then explained, along with the concept of economic calculation, and how free market prices, and free enterprise with private property are the motivator and coordinator of economic activity.

        The final section of the course examines the economic impact of violent intervention in the market order, and the introduction of coercive imposition on exchange. The course will explain the theoretical and logical reasons such economizing acts will have a different impact from those that are conducted peacefully. The course concludes with a critical assessment of the meaning of economic growth.

        After completing this course students will have the methodological grounding required to undertake sound economic reasoning in the Austrian tradition. They will also be well-positioned to undertake further study of some of the more complex ideas of the Austrian School, such as Austrian business cycle theory and capital-based macroeconomics.

        • Course Syllabus

          First, read the course syllabus. Then, enroll in the course by clicking "Enroll me". Click Unit 1 to read its introduction and learning outcomes. You will then see the learning materials and instructions on how to use them.

        • Foreword

          BEFORE YOU START THE COURSE, READ THIS FOREWORD. It is a brief primer on the conceptual framework and the theoretical aspects of the Austrian school of economics , and it puts the school's main views in context of the broader economics discipline.

          Completing this section should take you approximately 30 minutes.

        • Unit 1: Economic Value

          In the first unit, we cover the fundamental basic building blocks of the Austrian school's approach to economics, beginning with addressing the basic questions: what is a good, what is utility, and what is value? The starting point of Austrian economics is the insight of economist Carl Menger that all value is subjective. There is no value without the individual making the valuation. We also discuss the concept of marginal analysis and what it means, how human economic decisions are taken at the margin, and how this can help us resolve the famous water-diamond paradox, which asks: if water is so essential and valuable to humans, how come it is so much cheaper than diamonds, which are not essential?

          Completing this unit should take you approximately 3.5 hours.

        • Unit 2: Human Action

          In the second unit, we introduce Ludwig von Mises' concept of human action, and how it is the basis for our analysis of economics. Human action is defined as purposeful behavior directed at the attainment of ends in the future. Only humans act, because humans are endowed with reason. The real mover in the affairs of the world is the action of humans, and according to the Austrians, economics can only be understood if the unit of analysis is individual action.

          Completing this unit should take you approximately 3 hours.

        • Unit 3: Time and Labor

          The third unit focuses on understanding time, and using it to explain the concept of scarcity, which is the starting point of all economic analysis. And how humans make decisions about their time and labor. Based on the work of economist Julian Simon,I explain how the only real scarcity is the scarcity of human time. We are able to direct human time to make ever-larger quantities of all commodities, goods, and services imaginable. But human time is limited, and irreversible. No amount of resourcescan buy back time that has passed. Humans always prefer enjoyment in the presence to the future, which gives them a positive time preference, a very important concept which we discuss in-depth in this course and in the next course, ECON104: Principles of Austrian Economics II. Human economizing of time is the basis of all economics, and we must constantly choose between dedicating our time to labor, or to leisure.

          Completing this unit should take you approximately 3 hours.

        • Unit 4: Capital and Technology

          With the foundation laid in the first three units, we will now examine some of the most important economic tools humans use to increase the amount and value of our time on earth. In unit 4 we discuss the concept of capital, and the economic choice it entails: the sacrifice of present enjoyment in exchange for an uncertain chance at acquiring goods that can increase the productivity of human time, and how capital accumulation is related to time preference. We also discuss the economics of technological advancement, and how powerful ideas are.

          Completing this unit should take you approximately 3 hours.

        • Unit 5: Economic Exchange

          In the fifth unit we discuss the concept of trade, and the economic rationale for engaging in trade. We discuss the concepts of absolute advantage and comparative advantage, and the benefits from specialization and the division of labor. We conclude this unit by discussing the important concept of the extent of the market, and why the larger the market, the more opportunities for mutually-beneficial exchange exist.

          Completing this unit should take you approximately 3 hours.

        • Unit 6: Indirect Exchange

          In unit 6 we discuss the concept of money, and how it emerges on the market as a solution for the problem of coincidence of wants. We discuss Menger's concept of salability and why it is the most important property of money. We explain how money is different from all other goods in that its quantity does not matter. And explain how money helps us economize on our time: it increases the extent of the market, allows for complex economic calculation, and enhances our ability to save for the future.

          Completing this unit should take you approximately 3 hours.

        • Unit 7: Prices and Market Order

          With the fundamental economic acts explicated in the previous units, this unit explains how they come together to constitute the market order. As each individual acts based on their preferences and possibilities, they influence the supply and demand of all economic goods, leading to the emergence of complex markets and prices.

          Completing this unit should take you approximately 3 hours.

        • Unit 8: Profit and Loss

          Unit 8 explains Mises' conception of capitalism as an entrepreneurial system, and not a managerial system, by elaborating on the economic significance of profit and loss in a market system. Capitalism is predicated upon the ability of individuals to perform economic calculations of profit and loss on their capital and property, as it is these decisions which allow for the rational planning of production, and for the coordination of work among various factors of production.

          Completing this unit should take you approximately 3 hours.

        • Unit 9: Violent Intervention

          Unit 9 introduces the idea of violent intervention in the market. Whereas all participants in voluntary exchanges expect to benefit from them, with violent intervention, there must be harm for someone involved. We discuss the different types of violent intervention in market operation and the expected consequences of some of the most common examples, such as price controls, subsidies, and stimulation of economic growth.

          Completing this unit should take you approximately 2.5 hours.

        • Unit 10: Economic Progress

          Welcome to the final unit of this course! During the unit, we look back at the concepts covered in this course and ask: what is the point of economic progress and constant economizing? We make the clear distinction between economic progress, as judged by individuals, and aggregate statistics, such as GDP.

          Completing this unit should take you approximately 2.5 hours.

        • Course Feedback Survey

          Please take a few minutes to give us feedback about this course. We appreciate your feedback, whether you completed the whole course or even just a few resources. Your feedback will help us make our courses better, and we use your feedback each time we make updates to our courses.

          If you come across any urgent problems, email contact@saylor.org.

        • Certificate Final Exam

          Take this exam if you want to earn a free Course Completion Certificate.

          To receive a free Course Completion Certificate, you will need to earn a grade of 70% or higher on this final exam. Your grade for the exam will be calculated as soon as you complete it. If you do not pass the exam on your first try, you can take it again as many times as you want, with a 7-day waiting period between each attempt.

          Once you pass this final exam, you will be awarded a free Course Completion Certificate.