The Austrian school of economics distinguishes itself from other schools by its axiomatic-deductive methodology, which differs from the positivist approach often used in social sciences. The positivist approach is based on laws established from empirical data, adopting a method similar to that of physical sciences. It formulates hypotheses from observations, which are then confirmed or refuted by temporary experiments. The scientific method consists of retaining the hypothesis that best explains the data and continuing to explore it until a more precise hypothesis is found.

However, in social sciences, it is difficult to isolate variables as in physics, because each moment in history is unique and a multitude of factors come into play. Economic experiments cannot be reproduced in a laboratory, and it is important to note that observing a correlation between two variables does not prove a causal relationship between them. The Austrians, notably Ludwig von Mises, proposed an alternative method called the a priori or axiomatic-deductive method to study social sciences. This approach is based on fundamental propositions called axioms, similar to those used in mathematics. For example, Euclidean geometry is an example of an axiomatic-deductive method in the field of mathematics.

In Austrian economics, fundamental axioms include positive time preferences, which are based on individual choices of goods or services today rather than tomorrow, due to uncertainty about the future. These axioms are not questioned, as they are considered evident and consistent with everyday life. Using these basic axioms, Austrian economists use the rules of logic to derive statements that provide information about the functioning of economic phenomena. For example, they explain that economic crises are caused by an imbalance between savings and investment, which leads to artificial manipulation of interest rates. Individuals with positive time preferences demand a positive interest rate to compensate for the risk of lending. Austrians argue that valuation relationships are subjective, so interest rates can vary depending on individuals and circumstances.

Prices play a crucial role in the rational organization of individuals with partial information. The interest rate balances the supply and demand of capital in the market, thus promoting the economy. Austrian economists emphasize that arbitrarily setting the interest rate can lead to economic crises and make calculation impossible in a socialist regime.

Austrian economists often encounter difficulties when debating with other schools of thought, as they do not use the same methods of analysis. While Austrians reason from fundamental axioms, such as the subjectivity of value, to deduce logical consequences, Keynesian or monetarist economists tend to rely on empirical data to establish general economic laws.

An example of methodological difference is the position of Modern Monetary Theory (MMT) advocates who have advocated for money printing to achieve political goals, using the absence of inflation between 2008 and 2019 as an argument. Austrian economists and MMT advocates do not speak the same language and do not agree on the criteria for determining the validity of an economic law. This makes debates between these different schools difficult and often unproductive.

It is important to note that cherry-picking, which involves selectively choosing data to establish relationships between variables, is an unscientific and unrigorous method in economics. Monetary creation, for example, does not necessarily cause inflation, and a more nuanced approach is necessary to understand complex economic mechanisms. Axioms play a crucial role in Austrian economic reasoning. They are fundamental elements from which logical deductions can be made. However, it is important to recognize that precise forecasting of the future in economics is often difficult due to the complexity of economic phenomena and inherent uncertainty.

Methodology is an essential aspect in economics and in social sciences in general. It influences how questions are asked, hypotheses are formulated, and data is interpreted. Understanding the methodological differences between economic schools of thought can help us appreciate diverse perspectives and develop our own opinions on the topics discussed in previous episodes.