Another chapter in Volume 2 of Modern Austrian Economics is 'Austrian and Neoclassical Economics: Any Gains From Trade?' by Sherwin Rosen. (The article can be read for free on JSTOR with a free account.) Rosen is not an Austrian economist, but the article gives a decent overview of how the two school differ on the importance of some concepts and their meanings. The bold text following come from some of Rosen's section headings.
Process and Equilibrium
Neoclassical economics is much more concerned about equilibrium under known conditions of resource availability, technology and preferences. Equilibrium is an overall solution in which individual decisions are mutually compatible and can be implemented by all. There is a well-defined solution to resource allocation.
Austrian economics gives far more attention to entrepreneurship, and entrepreneurs disturb the equilibrium. Economic activity is a process. The economy is in a perpetual state of disequilibrium: things are always changing and in a state of flux. It is ever evolving, creating unforeseen profit opportunities that agents are trying to find and exploit.
Me: Ludwig von Mises made an imaginary construct that he called an evenly rotating economy. Production and consumption are unchanging from one time period to the next. It has no room for entrepreneurs. They induce change.
Coordination and the Invisible Hand
In neoclassic economics an 'invisible hand' coordinates the rationality of individual decisions and the fact that commonly known market prices exhaust all gains from trade. Austrians find this misleading. Specialized, individual participants produce and consume only a tiny fraction of the huge set of goods that are actually traded. Many of the goods and services and how they systematically fit can't be identified well by anyone.
In Austrian economics the fundamental issue is assessing how all the individual pieces fit together and how to make sense of the whole. They don't specify empirical criteria for assessing the performance of the economy as a whole.
The Austrian view is built up from the spontaneous activities of myriad expert specialists single-mindedly pursuing and perfecting their own component businesses, including intermediaries who buy and sell from the most economical suppliers and assemble and market the final product. There is no overall plan.
Markets, Socialism and Central Planning
Before WW II it was popular among economists to claim that a central planner could compensate for various market "imperfections" (monopoly, costs of dislocation, unemployment, and so on). The alleged result would be superior to uncontrolled market forces. Austrians, led by Mises and Hayek, argued that this vision of market socialism was impossible, and it was based on a misguided vision of markets and prices. The central planner doesn't have the information and knowledge to do what markets with decentralized decision-making.
Empirical Content and Justifying Methodology
The building of macro economic models using empirical statistical data goes hand in hand with attempts at political control of the economy. Austrian economists don't want such control.
The Role of the Entrepreneur
Entrepreneurs are important to Austrian economics and rarely mentioned in neoclassical economics.
Me: Entrepreneurs induce change. The longer the time period, the more markets change. Neoclassical economics is far more interested in stability with little change over fairly short time periods.