Knowledge, Beliefs and Economics

Knowledge, Beliefs and Economics

Edited by Richard Arena and Agnès Festré

This book surveys how economists engage with knowledge and beliefs in various fields of economic analysis, such as general equilibrium theory, decision theory, game theory, experimental economics, evolutionary theory of the firm, financial markets and the history of economic thought.

Chapter 3: Knowledge and Beliefs in Economics: The Case of the Austrian Tradition

Richard Arena and Agnès Festré

Subjects: economics and finance, economic psychology


Richard Arena and Agnès Festré 3.1 INTRODUCTION The Austrians contributed to the analysis of the impact of individual knowledge and beliefs on economic activity more than any other school in the history of economic thought. This statement should not surprise the reader. The founding fathers of this school are strongly associated with a subjectivist conception of economics, in which cognitive capacities and the level of information of individual agents play an essential role in the explanation of their decision-making processes. They also spent a significant amount of time researching topics that are of the utmost importance to anyone interested in the role played by knowledge and beliefs in economics: Menger dedicated a lot of attention to the problem of the emergence of institutions and behavioural rules and placed great emphasis on the role played by the process of diffusion of beliefs within this context; BöhmBawerk dealt with the frontiers of pure economic theory and was interested in the impact of power and social relations on economic activity (BöhmBawerk 1914). As for Wieser, he built a real economic sociology approach and underlined the influence of organizational and social interactions in this context. In this chapter, we shall concentrate on the second generation of Austrian economists, in particular on the contributions of von Mises, Hayek and Schumpeter who, despite developing very different approaches, shared many features of the intellectual vein of the founding fathers of the School. At first sight, the subjectivist stance of most Austrian authors...

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