Theory and Method in Contemporary Interpretations of the Market Process

Solomon Stein

Advisor: Peter J Boettke, PhD, Department of Economics

Committee Members: Christopher J. Coyne, Virgil H. Storr

Enterprise Hall, #318
April 06, 2015, 01:00 PM to 10:00 AM


One of the central elements of the contemporary Austrian School, usually taken to begin with the South Royalton conference, has been extension and critical examination of the theory of the market process. One theme of those investigations has been trying to understand the nature and significance of individual subjective experiences of the operations of the market process. First, are these experiences important to understanding the market process at all? If so, what are the mechanisms by which they enter into the operation of market activity, and what might be the general content of those experiences? How do any of these factors relate to the theories of the market found in Mises, Hayek, or Kirzner, and why, contrary to the standard Whig approach of economics, should we be concerned with those relationships? The three chapters here explore some elements of each theme.

The first chapter, “Alertness and Interpretation: Kirznerian Entrepreneurship and Culture Reconsidered,” examines the literature on the impact of actors’ cultural framework on their faculty of entrepreneurial alertness, and tries to contribute to the advancement of the project of understanding the cultural influences on the market process. Specifically, I argue that while the current work that tries to incorporate the cultural context in which real-world entrepreneurial behavior takes places has a productive understanding of alertness as channeled or filtered by that context, treating this filtering as the primary element of that interaction stops too short, and overlooks the importance of the process by which entrepreneurs select from the myriad technologically possible ways to exploit the disequilibrium situation they encounter.

The second chapter, “The Personal Nature of the Market,” begins from a fragment contained in Max Weber’s Economy and Society to motivate a discussion of the way individuals experience the market process, in which Weber claims that the market is a fundamentally impersonal force in social relations. This chapter challenges this claim, arguing that rather than a space where little is discussed other than prices and quantities, the market is an important area of human social interaction which is experienced by participants as potentially personal, and seeks to identify a few candidate mechanisms by which this occurs. Drawing upon studies of the sociology of consumption, potential mechanisms identified include the personal relationships formed by ongoing service transactions, and the personalization by consumers of their relationships with product brands.

The third chapter, “Debate and the Informal Construction of a Scientific Tradition: A Reconstruction of the Equilibration Debate,” provides a rational reconstruction of the debate between Israel Kirzner and Ludwig Lachmann, and their students, over the tendency of the market process to equilibrate the market, treating this debate as a continuation of the central role of debate in the development of the Austrian School as a distinctive line of inquiry within economic science. Understanding this debate requires an appreciation of the particular way in which members of the contemporary Austrian community relate to the ideas of Austrian Economics, in particular seeing it as a tradition with internal continuity and a wide, even plenary, scope of application. This chapter also examines the debate itself, and tries to explain its failure to reach a resolution within the community.