Handbook on Contemporary Austrian Economics

Handbook on Contemporary Austrian Economics

Elgar original reference

Edited by Peter J. Boettke

This Handbook looks through the lens of the latest generation of scholars at the main propositions believed by so-called ‘Austrians’. Each contributing author addresses key tenets of the school of thought, and outlines its ongoing contribution to economics and to the social sciences.

Chapter 7: The Competitive Market is a Process of Entrepreneurial Discovery

Frederic Sautet

Subjects: economics and finance, austrian economics, economic psychology

Extract

Frederic Sautet* 7.1 Introduction Throughout most of the last century, the Austrian school of economics has held a different view of the market and competition than its more mainstream counterparts. A strict adherence to certain methodological principles (detailed in the other chapters of this book) resulted in a thoroughly subjectivist approach to the main concepts that today define the Austrian view of markets. At the core of this approach is the idea of entrepreneurship, which has been among its central theoretical constructs since the writings of Carl Menger (and others before him if we consider economists such as Richard Cantillon and Jean-Baptiste Say as proto-Austrians). Introducing the entrepreneurial function in economic analysis has farranging implications in terms of the way one understands and appreciates the functioning of the market economy. The main difference (with an economic analysis that does not take the entrepreneurial function into account) resides in the idea of the market as a process. The idea of process does not refer to a mysterious property of markets. Rather, it makes explicit the way markets constantly reallocate resources over time so as to satisfy consumers as much as possible. It refers to the idea that the market economy is a system that engenders the incentives and the information necessary to discover and correct its own maladjustments in the allocation of resources. This may sound paradoxical to some but while markets have been omnipresent in the discourse of economists, they also have often been simply seen as a metaphor where...

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