Austrian Economics is a set of theories that are considered, by many, to be too simple of models to reflect reality. (Because Austrian economic principles tend to depend on certain ideal conditions, which do not exist in the real world) There are many instances where other economists see the austrian point of view as flawed and–at best–incomplete. This is a valid criticism. Whether or not something is a “science” is a distracting discussion. That, ultimately, is an issue of semantics. More important is whether or not its models are more accurate at predicting and describing reality.
The primary flaw of austrian economics is the several instances of market failure that can occur, and the inability to correct these failures using said system. For example the problem imposed by a market with a significant barrier to entry. In such a case firms can’t smoothly enter and exit markets at a rate that pure competition demands. This spawns abusive, self-interested behavior and the price for services and goods must rise above the real value, this failure is mathematically simple because it can be demonstrated graphically using actual values.
The natural answer, of course, is to impose certain restrictions. Which requires some kind of legislative policy. Which has tremendous room for error and can be as flawed as the failing market or more so. But it doesn’t have to be. Sound, sensible, lightweight policy is something that can greatly enhance the efficiency of a broken market, so long as it doesn’t get in the way of another–as often happens.
But, as economists, we are seeking the optimal instead of the ideal, because the ideal is generally unachievable. And in this sense many describe the austrian viewpoint as less optimal because it doesn’t have very good controls for situations of market failure. Relying instead on simpler smith-type principles and the invisible hand, but there are instances where this does not work, like my example above. So the optimal amount of policy is not zero, and it’s not infinity either, it’s some finite amount that everyone is just trying to estimate.
But be careful, regardless of which viewpoint you subscribe to, you must remember we are seeking the optimal level and not the ideal. It’s too easy for students of a partiucular thought: keynsianism, neoclassical, austrian, etc, to be more interested in their school than discovering the truths of reality. This way of thinking is accurately described as non-scientific because it isn’t objective. This is especially true about many self-proclaimed austrian economists, who feel the need to trumpet their own differences from the mainstream, hence the criticism.