The Economics of Ignorance and Coordination

The Economics of Ignorance and Coordination

Subjectivism and the Austrian School of Economics

New Thinking in Political Economy series

Thierry Aimar

This book clarifies the specific nature of the Austrian theory and restores the unity and open-mindedness of the Austrian school in general. The intention is not to offer a collection of different or parallel ideas, but rather to retrace, from a pedagogical and constructive perspective, the various stages of the construction of a well-founded theoretical edifice: from Ludwig von Mises to Murray Rothbard, from Friedrich Hayek to Israel M. Kirzner and from Lachmann to Lavoie. The book is a reconstitution of the way Austrian ideas and concepts organize themselves in a common structure.

Chapter 4: Market Formation

Thierry Aimar

Subjects: economics and finance, austrian economics


___________________________________________________ … though at one time a very pure and narrow economic theorist, I was led from technical economics into all kinds of questions usually regarded as philosophical. When I look back, it seems to have all begun, nearly thirty years ago, with an essay on ‘Economics and Knowledge’ in which I examined what seemed to me some of the central difficulties of pure economic theory. Its main conclusion was that the task of economic theory was to explain how an overall order of economic activity was achieved which utilized a large amount of knowledge which was not concentrated in any one mind but existed only as the separate knowledge of thousands or millions of different individuals. But it was still a long way from this to an adequate insight into the relations between the abstract rules which the individual follows in his actions, and the abstract overall order which is formed, as a result of his responding, within the limits imposed upon him by those abstract rules, to the concrete particular circumstances which he encounters (Hayek, ‘Kinds of Rationalism’, 1964, p. 92). It is Hayek himself who contributes to the solution of the problem of market formation. Having expressed his perplexity on this subject in ‘Economics and Knowledge’, 1 he moves towards an early form of answer in The Sensory Order (1952a). Published in the same year as The Counter-Revolution of Science (1952b), this work is quite particular, both in terms of its history and its purpose. Historically speaking, it is...

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