The Fundamentals of an Austrian Macroeconomics: The Market for Time and the Market for Money

Roger Garrison has argued that time and money are the ‘universals of macroeconomic theorizing’. In that paper, he defines the Austrian approach to macroeconomics by its willingness to take both time and money seriously. His critique of mainstream macroeconomics is that the various schools of thought (Keynesianism, monetarism, New Classicism, and, by extension, New Keynesianism) treat time and money far too superficially in comparison to the central roles that they play in real-world economies. Garrison summarizes this point: ‘Time is the medium of action; money is the medium of exchange…And it is precisely the “intersection” of the “market for time” and the “market for money” that constitutes macroeconomics’ unique subject matter.’ The problem with mainstream macroeconomics is that its notions of time and money are so abstract and unrealistic as to prevent serious consideration of how the markets for each actually behave.

--Steven Horwitz, introduction to Microfoundations and Macroeconomics: An Austrian Perspective, Foundations of the Market Economy (London: Routledge, 2003), 3.

Is There an Austrian Macroeconomics?

In the eyes of many economists, Austrians are seen as rejecting the whole concept of macroeconomics in favor of a focus on microeconomic phenomena such as price coordination and entrepreneurship. There is some truth to this perception. In a great deal of the post-revival (i.e., since 1974) literature in Austrian economics, Austrians have tried to define themselves in terms of their methodology (subjectivism) and their understanding of the market as a competitive discovery process rather than as tending toward, or mimicking, general equilibrium. Austrians’ self-described ‘uniqueness’ has almost exclusively been focused on microeconomics. Even Hayek, in his last book, referred to macroeconomics in sneer quotes, suggesting that a rejection of the subdiscipline was still alive and well in some Austrian quarters. It comes then as little surprise that much of the microeconomic and methodological work in the post-revival literature in Austrian economics finds its roots in Hayek.

--Steven Horwitz, introduction to Microfoundations and Macroeconomics: An Austrian Perspective, Foundations of the Market Economy (London: Routledge, 2003), 1.