The Law of Supply and Demand Austrian Economists Dislike Most
Textbook Explanations of This Subject JANUARY 01, 2000 by ISRAEL
M. KIRZNER The theory of supply and demand is recognized almost
universally as the first step toward understanding how market
prices are determined and the way in which these prices help
shape production and consumption decisions-the decisions that
make up not only the skeleton, but also the flesh and blood of
the economic system. Austrian economics thoroughly agrees with
this. However, when we dig just a little below the surface of
the “law” of supply and demand, we encounter difficulties that
have, directly or indirectly, led Austrians to explain the
determination of prices differently from how it is often, at
least implicitly, presented. I will try to explain the sense in
which Austrians are unhappy with the textbook presentations of
supply and demand—and are yet fully in agreement with the
general emphasis on supply and demand as being the key to
economic understanding. The Basic