ABSTRACT
The Neo-Austrian approach is a conceptual means to describe an economy, but it also implies a dynamics in which production processes are the key actors. This paper tries to clarify this twofold aspect of the Neo-Austrian approach, in particular focusing on its formalised dynamics vis-a-vis the standard formalism deployed in economics, of Frisch’s and Goodwin’s descent.
We will discuss the analytical nature of a Neo-Austrian process and define a dynamics of production processes, so as to provide a background to evaluate it against well known formal techniques of Economic Dynamics. In particular, we will re-examine the issue: what are the requisites of a formal mathematical model to be a faithful representation of Neo-Austrian dynamics. As it will turn up clearly, the Neo-Austrian approach does not fit very well into any of the standard classifications, e.g. it is neither a long run (like growth) nor a short run theory (in the sense of business cycle theories). Its particular strategy to tackle the complexity that necessarily arises in economic dynamics will be dealt with. After discussing the evolution of the Neo-Austrian model from the Hicksian original analysis of the Traverse to its more modern versions, we will present it as the analytical framework which, following again Hicks’s intuition, makes it possible to realise the unification of macroeconomics. Finally, the use of Neo-Austrian models as ‘heuristic tools’ to provide light for policy interventions will be contrasted with the ‘predictive’ role of standard formal dynamic models.
