ABSTRACT

This chapter examines the basic implications of subjectivism for economic theory and outlines the common ground between Austrians and (post-) Keynesians while, at the same time, recognizing the unique Austrian contributions to subjectivist economics. The most fundamental or general implication of time and ignorance, to which we have already alluded, is that economics must abandon its traditional static mold. In particular, we examine the implications of real time for the study of economic processes. The conceptual relation between Newtonian and real time is discussed. The chapter explores the most important implication of ignorance: genuine uncertainty. Menger's theory embodies almost every important aspect of subjectivist economics: methodological individualism, emphasis on expectations, and a market process of discovery. The chapter concludes with a review of new evidence corroborating the Austrian cycle theory, as well as an analysis of the relevance of rational expectations to this theory.