American Journal of Economics, Finance and Management
Articles Information
American Journal of Economics, Finance and Management, Vol.3, No.6, Dec. 2017, Pub. Date: Dec. 9, 2017
The Giffen Goods Phenomenon in the Austrian School Perspective
Pages: 56-62 Views: 2197 Downloads: 1309
Authors
[01] Er'el Granot, Department of Electrical and Electronics Engineering, Ariel University, Ariel, Israel.
Abstract
The Giffen good was used to attack Praxeology and the Austrian school of economics. It is shown that with a specific value scale along with pure Austrian analysis the existence of Giffen goods can be predicted. It is explained that the traditional Rothbardian's methods to investigate human preference and action is inadequate to analyze preferences between complex bundles of goods, which is required in the analysis of Giffen goods. Therefore, the Rothbardian's preference schedule table is replaced with a two-dimensional ranking matrix, which takes into account all the possible bundles of goods. It is shown that under Austrian analysis, without utility functions and indifference curves, at least in theory, under certain conditions (specific preference schedule and money restrictions) an upper sloping demand curve, which is a fingerprint of Giffen goods, is possible. Therefore, not only doesn't the existence of Giffen goods contradict Austrian economics, but Austrian economics can predict the existence of Giffen goods.
Keywords
Giffen Good, Austrian School, Giffen Paradox, Subjective School, Rothbard, Preference Schedule
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