The Austrian school of economic thought has returned to Europe after an American renaissance. French economist Pascal Salin represents a new generation of European "Austrians." They are trying to explain to an audience that is still generally hostile to economic freedom that capitalism didn't cause the recent crisis in the world economy. Grégoire Canlorbe sat down with Professor Salin to discuss Austrian business cycle theory (ABCT) and how to promote economic thinking to a skeptical public. Salin is a professor emeritus at the Université Paris-Dauphine and a specialist in public finance and monetary economics. He is a former president of the Mont Pelerin Society (1994–1996).

Grégoire Canlorbe: How would you present the Austrian school of economics to the layman?

Pascal Salin: The purpose of economic science is to study how human societies work -- that is to say, the way human beings behave and interact with each other. However, it is undeniable that thinking precedes action. Man is endowed with reason, which means that each and every action is actually a thinking process above all. This point is particularly highlighted by the great Austrian economist Ludwig von Mises, whose magnum opus is titled Human Action. Any economic science, any social science ignoring these facts of nature, faces the risk of giving an erroneous interpretation of the economic and social facts. The reasoning method of the Austrian school's followers consists in starting from assumptions that can be objectively verified -- the assumption of human rationality, for instance -- and in deducing the consequences via a rigorous reasoning thread. It may be that we reach conclusions that are not verifiable empirically, but these are nevertheless acceptable. Indeed, only one part of human activity expresses itself in measureable phenomena: the value of exchanged goods once expressed in objective exchange ratios or prices, for instance. But as a thought proc...

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