Entrepreneurial Discovery and the Competitive Market Process : An Austrian Approach

Presents the entrepreneurial discovery perspective as an Austrian approach to microeconomics. Focus in this new approach is on the role of knowledge and discovery in the process of market equilibration. The reason behind the creation of this new approach is that current neoclassical microeconomics does not offer a sufficient theoretical framework for understanding market economies. The neoclassical theory is criticized for the manner in which individual decisions are modeled and the manner in which satisfaction of equilibrium conditions is met through real world market outcomes. This entrepreneurial discovery perspective is based on the work of Mises and Hayek. Mises' work allowed one to see the market as an entrepreneurially driven process while Hayek helped to appreciate the role of knowledge and its enhancement through market interaction. The idea of the entrepreneurial discovery approach is to see "the market process as consisting of systematic equilibrating tendencies, made up of episodes of mutual discovery and learning." Three concepts for this approach emerge: (1) the entrepreneurial role, (2) the role of discovery, and (3) rivalrous competition. The entrepreneurial discovery approach leads to very different conclusions than the neoclassical theory in several areas including antitrust policy, economic justice, welfare economics, and central planning under socialism. Those individuals who take issue with this approach predominantly fall into one of two categories: those who disagree with the asserted equilibrative character of the market process or those who disagree with the emphasis on systematic mutual learning as critical to the market process. (SRD)