Entrepreneurial discovery and the competitive market process: an Austrian approach

Abstract

The Austrian tradition is represented in modern economics by a “very vocal, feisty and dedicated subset of the economics profession” (Vaughn, 1994, p. xi). Much of the work of this group of scholars is devoted to the most fundamental problems of microeconomics.1 This Austrian work, therefore, differs in character and content from a good deal of neoclassical theory which, despite widespread and growing awareness of its limitations, continues to serve as the analytical core of mainstream economics. This paper sets forth the outlines of one important approach within modern Austrian economics, an approach offering a perspective on microeconomic theory which (while it has generated a considerable literature of its own) is not ordinarily well-represented either at the (mainstream) textbook level, or in the (mainstream) journal literature. Although the author subscribes to and has contributed to this approach, the purpose of this chapter is exposition, not advocacy. References to criticisms of mainstream microeconomics which have been discussed in the Austrian literature should be understood here not as arguments in favor of the Austrian approach, but as clues that may be helpful in understanding what the Austrians are saying, and how what they are saying is to be distinguished from the approach taken by other modern economists.