Entrepreneurship, Money and Coordination

Entrepreneurship, Money and Coordination

Hayek’s Theory of Cultural Evolution

New Horizons in Institutional and Evolutionary Economics series

Edited by Jürgen G. Backhaus

Hayek’s theory of cultural evolution has always generated controversy. Interest in Hayek’s theory, and others’ analysis and criticism of it, has been rising of late. This volume urges a reconsideration of Hayeks’ theory of evolution and aims to explore the relevance of Hayek’s theory for its own sake and for evolutionary economics more generally.

Chapter 5: Hayek on Entrepreneurship: Competition, Market Process and Cultural Evolution

Alexander Ebner

Subjects: economics and finance, austrian economics, evolutionary economics

Extract

Alexander Ebner INTRODUCTION Friedrich August von Hayek’s theory of cultural evolution is usually regarded as a crucial contribution to an analysis of the institutional dynamism of market economies. It highlights the impact of rules and conventions in maintaining the extended order of modern civilisation. The role of entrepreneurship in that line of reasoning, however, seems to have been largely neglected. Indeed, it is a well-established position in discussions on the theoretical foundations of modern Austrian economics, that entrepreneurship has been most promisingly discussed in Ludwig von Mises’ theory of human action, whereas Hayek is said to have focused more intensely on the evolutionary mechanism of the competitive coordination of dispersed knowledge. Indeed, it is usually argued that Hayek dismissed the matter of entrepreneurship, for he neglected theorising on individual behaviour in favour of the analysis of rules and institutions. Quite in contrast to that view, the present chapter argues that Hayek’s theory of cultural evolution is based on a conceptualisation of entrepreneurial activities which is decisive for the related concept of institutional change. The evolutionary role of entrepreneurship in the market process pinpoints the matter of search, experimentation and discovery. Despite its rather implicit character in Hayek’s theorising, entrepreneurship provides Hayek’s theory of cultural evolution with constitutive arguments on the interplay of individuals, groups and institutions in the evolutionary process of economic development. The underlying line of reasoning ranges from entrepreneurial behaviour in competition to knowledge dispersion in the market process, informing the theory of cultural evolution as a comprehensive...

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