Austrian Economics is the oldest continuous school of economic thought. Founded in 1870, its roots date back to the early 18th century. It is thus the oldest, smallest, and, thanks to the economic crisis of the past few years, the fastest-growing school of economic thought.
While Keynesian economists use a complicated series of methods (i.e. elaborate mathematical modeling and unrealistic models of human behavior) to predict the future of the economy, the Austrians use a much simpler approach: they use logic and reasoning to understand human economic behavior and processes.
Below is a short, informative video explaining the differences between Austrian and the modern mainstream, or Keynesian, economics.
The table below summarizes the main differences between the two schools of economic thought:
As mentioned in the video, Austrian economists correctly predicted every major economic crash. Ludwig von Mises predicted the Great Depression, Murray Rothbard predicted the stagflation of the 1970′s, and Peter Schiff (among many other Austrian economists) predicted the Great Recession of 2007/8.
Both mainstream and Austrian economic theories have diametrically opposed views and assumptions and, depending on which one you will adhere to, will ultimately affect your saving and investment decisions. If you want to make wise investment decisions, it is best to research Austrian Economics, because if you simply stick to mainstream media, you will not be exposed to the economic theories that may present a viable alternative to the mainstream ones. The mainstream economists who were interviewed as ‘experts’ on television and featured in all of the best magazines not only failed to predict the most recent crash, but they also encouraged the greater public to invest in great mal-investments. Ben Bernake, Greenspan, Krugman, Geithner, and Buffet all promote the current debt paradigm.