Henry Hazlitt on how Austrian economics differs from orthodox economics

Perhaps something should be said about the chief differences today between Austrian economics and what we may call "orthodox" or "mainstream" economics.  The difficulty here is that "mainstream" economics itself would be hard to define.  Economists are still divided into a number of recognizable "schools": neoclassicists, Keynesians, the Chicago School, the Lausanne School, and so on.  The limits of space forbid me to go into the distinguishing doctrines of each of these schools.  But one outstanding difference of the Austrians from all of these lies in their method of reasoning.  The Austrians emphasize methodological individualism.  That is, they not only begin by emphasizing human actions, preferences, and decisions, but individual actions, preferences, and initiatives.  Mainstream economists are concerned with "macroeconomics," with averages and aggregates; and those of the Lausanne School, trying to reduce economics to an "exact" science, and therefore seeking to quantify everything, are obsessed with complicated mathematical equations that try to stipulate the conditions of "general equilibrium."

~ Henry Hazlitt, "Understanding 'Austrian' Economics," The Freeman, February 1981

L. Q. Cincinnatus on how Ludwig von Mises used deduction and economic calculation to critique socialism

I would argue that Ludwig von Mises’ 1920 analysis of economic calculation is one of the great, unsung thought experiments in modern science, but because it was conducted as an exercise in deductive, as opposed to inductive, reasoning that it is either wholly ignored or, more likely, not understood. 

Through a series of strict deductive inferences anchored in the primary “given” of socialism—the absence of private property—Mises demonstrated that a functioning price system would never emerge, and, as a result, no method of rationally calculating the relative scarcity or necessity for higher order goods of any kind could be used to sustain an economy. Mises stated flatly that a socialist economy was was not merely a contradiction in terms, but impossible (unmöglich). 

His analysis was immediately seized upon by socialist theoreticians and planners and the history of its reception, both in the free world and in the countries behind the former Iron Curtain, makes for fascinating reading. In the final analysis, of course, Mises was proven right. Resoundingly so. Because in 1920, before Lenin had even consolidated power, Mises had already foretold the fate of the Soviet Union. And it would take another seventy years and scores of millions of human corpses for him to finally be vindicated.

~ L. Q. Cincinnatus, "How is an American Left Still Possible? Four Theses," LewRockwell.com, November 28, 2020

Murray Rothbard on economic methodology

Human life is not a laboratory, where all variables can be kept fixed by the experimenter, who can then vary one in order to determine its effects.  In human life, all factors, including human action, are variable, and nothing remains constant.  But the theorist can analyse cause-and-effect relations by substituting mental abstractions for laboratory experiments.  He can hold variables fixed mentally (the method of assuming 'all other things equal') and then reason out the effects of allowing one variable to change.  By starting with simple 'models' and introducing successive complications as the simpler ones are analysed , the economist can at last discover the nature and operations of the market economy in the real world.  Thus the economist can validly conclude from his analysis that 'All other things equal (ceteris paribus), an increase in demand will raise price.'

~ Murray Rothbard, An Austrian Perspective on the History of Economic Thought, Vol. I, Chapter 12, "The founding father of modern economics: Richard Cantillon," p. 348

Murray Rothbard on Richard Cantillon and methodology

[Richard] Cantillon was one of the first to use such unique tools of economic abstraction as what Ludwig von Mises would later identify as the indispensable method of economic reasoning: the Gedanken-experiment (or thought-experiment).

~ Murray Rothbard, An Austrian Perspective on the History of Economic Thought, Vol. I, Chapter 12, "The founding father of modern economics: Richard Cantillon," p. 348

Murray Rothbard on applying the methodology of the physical sciences to economics

Scientism is the profoundly unscientific attempt to transfer uncritically the methodology of the physical sciences to the study of human action. Both fields of inquiry must, it is true, be studied by the use of reason—the mind’s identification of reality. But then it becomes crucially important, in reason, not to neglect the critical attribute of human action: that, alone in nature, human beings possess a rational consciousness. Stones, molecules, planets cannot choose their courses; their behavior is strictly and mechanically determined for them. Only human beings possess free will and consciousness: for they are conscious, and they can, and indeed must, choose their course of action. To ignore this primordial fact about the nature of man—to ignore his volition, his free will—is to misconstrue the facts of reality and therefore to be profoundly and radically unscientific.

~ Murray Rothbard, "What is the Proper Way to Study Man?," Mises.org, December 28, 2016

[Originally appeared as a chapter in Scientism and Values, Helmut Schoeck and James W. Wiggins, eds. (Princeton, N.J.: D. Van Nostrand, 1960).]

Nassim Taleb on confusing the social science of economics with the physical sciences

It was confidently believed that the scientific successes of the industrial revolution could be carried through into the social sciences, particularly with such movements as Marxism.  Pseudoscience came with a collection of idealistic nerds who tried to create a tailor-made society, the epitome of which is the central planner.  Economics was the most likely candidate for such use of science; you can disguise charlatanism under the weight of equations, and nobody can catch you since there is no such thing as a controlled experiment.

~ Nassim Taleb, Fooled by Randomness, 2nd Edition, p. 108