Subjectivism and the Austrian School of Economics
- New Thinking in Political Economy series
Chapter 6: Tendency Towards Equilibrium
___________________________________________________ Most human aims can be achieved only by a chain of connected actions, decided upon as a coherent whole and based on the assumption that the facts will be what they are expected to be. It is because, and insofar as, we can predict events, or that we can achieve anything (Hayek, 1960, p. 134). Having examined the formation of catallaxy and then analysed its workings, it is now time to look at market dénouement. Because of what is at stake, the question of how individual’s expectations are formed takes a very special place in the Austrian world as it indirectly governs market institutions’ capacities to formulate and ensure the principle of success of agents’ plans. In Chapter 5, ignorance was examined in the light of the social division of knowledge; however, this is not all that conditions Austrian ignorance, as it also stems from the passage of ‘real’ time. 1 Ignorance is all the more inevitable as individuals’ knowledge, preferences, material and cognitive situations shift constantly. Dynamics here is the issue, what is appropriate today becoming outmoded tomorrow. Decisions which today seem relevant to present circumstances will soon appear out of date, as other actors’ knowledge, preferences and material situations will have changed in the interval. This is not just an accident, this is the way all human action works. As Lachmann argues in The Market as Economic Process (1986a), any individual’s act is a new experience with his environment, whether internal or external, which will modify his...
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