Entrepreneurial Discovery and the Competitive Market Process: an Austrian Approach

Presents entrepreneurial discovery perspective as an Austrian approach to microeconomics. Focus in this new approach is on role of knowledge and discovery in process of market equilibration. The reason behind 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 manner in which individual decisions are modeled and manner in which satisfaction of equilibrium conditions is met through real world market outcomes. This entrepreneurial discovery perspective is based on work of Mises and Hayek. Mises' work allowed one to see market as an entrepreneurially driven process while Hayek helped to appreciate role of knowledge and its enhancement through market interaction. The idea of 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) entrepreneurial role, (2) role of discovery, and (3) rivalrous competition. The entrepreneurial discovery approach leads to very different conclusions than 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 asserted equilibrative character of market process or those who disagree with emphasis on systematic mutual learning as critical to market process. (SRD)