The Austrian School of economics, otherwise known as the Austrian school of laissez faire, believes that private property is the natural order of the society. All human societies and economic systems are based on private property and a limited number of people can own and control capital. As long as property rights are respected, the theory goes, these economic systems will thrive. Property rights are understood to mean individual property rights-land, mineral rights, etc. Private property is thought to be the natural form of exchange in a free market, and all that is required for there to be economic exchange is for people to voluntarily agree to exchanges of their respective property titles.
The underlying philosophy of the Austrian School of economics is what has become called the philosophy of demand and supply. What it means is that there is a basic law of supply and demand that is in effect in the economy; this is why economies tend to perform well when the theory of demand and supply is in place. The Austrian School of economics believes that the level of economic activity in a country should be related to the amount of property available for access. If too little property is available for access, then there will be less economic activity, and vice versa.
A classical example of an Austrian school of economic theory would be the theory of evolution. This theory states that all biological phenomena are the result of forces that cause survival and increase of the species. It also states that through Natural Selection, the human species has been successful in adapting to their environment over time. Another type of Austrian theory is called the theory of historical necessity. This theory suggests that because certain economic conditions have existed historically, there will be the same conditions in the future (in the long run). This theory is also associated with classical liberal theory, which holds that laws of the majority are not always best.
A more recent theory is called neo-classical liberalism. This school of economic thought believes that there is a natural order that exists among people and their economic activity. Classes of individuals tend to rise in socio-economic status throughout society, and as this occurs, the power of that class rises as well. Individuals at the top of the socio-economic scale do not necessarily have more wealth than those at the bottom. They simply have more access to the resources that allow them to become wealthy.
Because of this natural economic theory, those at the top of socio-economic status have the most wealth, and everyone else has less wealth than they would otherwise have. The term “laissez faire” is French in origin, and means, “let fair winds blow.” This is essentially the opposite of the Austrian School of thought.
According to Austrian School of Thought, wealth is merely wealth to be used for personal gain. Whether this wealth is to create wealth or to contribute to the larger economic structure, the end result is always the same. The concept of laissez faire simply describes the fact that individuals are allowed and even encouraged to work to create wealth, rather than working to survive. Through the efficiencies created by Austrian economics, individuals can actually develop the wealth they so desire by investing in what they are passionate about, mastering a craft, or becoming an artist.