A Modern Reader in Institutional and Evolutionary Economics

A Modern Reader in Institutional and Evolutionary Economics

Key Concepts

Edited by Geoffrey M. Hodgson

In the 1990s, institutional and evolutionary economics emerged as one of the most creative and successful approaches in the modern social sciences. This timely reader gathers together seminal contributions from leading international authors in the field of institutional and evolutionary economics including Eileen Appelbaum, Benjamin Coriat, Giovanni Dosi, Sheila C. Dow, Bengt-Åke Lundvall, Uskali Mäki, Bart Nooteboom and Marc R. Tool. The emphasis is on key concepts such as learning, trust, power, pricing and markets, with some essays devoted to methodology and others to the comparison of different forms of capitalism. An extensive introduction places the contributions in the context of the historical and theoretical background of

Chapter 4: Discovery versus creation: implications of the Austrian view of the market process

Sandye Gloria-Palermo

Subjects: economics and finance, evolutionary economics, institutional economics


Sandye Gloria-Palermo The Austrian tradition can hardly be described as a unified paradigm. The divergences between the foremost exponents are striking. Consider for instance the following controversies: Menger explicitly rejects the Böhm-Bawerkian theory of capital and interest; Wieser develops interventionist advice that contrasts with the liberal ideology of the whole tradition; Hayek refuses Misesian apriorism; Lachmann and Kirzner sharply disagree on the role of the equilibrium concept in economic analysis. Nevertheless, there seems to be a ground upon which modern Austrians (from Hayek, 1937, onwards) are relatively unified: the view of the market as a process.1 In this chapter, we will stress in a first step that beyond this apparent agreement, there is no unity at all. Indeed, it is possible to define two distinct conceptions of the market process within the realm of the Austrian tradition itself, namely the one of Hayek–Kirzner and that of Lachmann. We will in a second step investigate the origins of this divide. We will show that the cleavage lies in the exclusion of the creative dimension of the human mind from the Kirzner–Hayek conception: by contrast with Lachmann’s view, agents are limited to discovery, discovery of profit opportunities and discovery of knowledge. The distinction between discovery and creation implies much more than a mere intellectual curiosity about historical and analytical linkages between authors. More precisely, one of the issues at stake concerns the normative level: an analysis limited to discovery can attempt to prove the ef...

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