4 Fundamentals of Austrian Economics

The Austrian school of economics, which originates from the publication of Carl Menger’s ‘Principles of Economics’ in 1871,¹⁶¹ is a serious adversary of the neoclassical framework in the field of microeconomics.¹⁶² Both schools attempt to explain the functioning of markets, but while neoclassicism refers to the static model of equilibrium analysis, Austrianism regards market coordination as a truly dynamic process.¹⁶³

The following five core assumptions of Austrian economics are the point of departure for the description and explanation of the market process:

1. Methodological individualism.
2. (Radical) Subjectivism.
3. Individuals differ and they have a will to change and create their future.
4. Space and time are influential.
5. (Radical) ignorance of market actors influences the market process.¹⁶⁴

(1) Methodological individualism:

Methodological individualism refers to the practice of viewing social entireties such as national economies as the product of individual action. This assumption has been part of Austrian economics at all times.¹⁶⁵ “Economics is not about things and tangi[Seite 20↓]ble material objects; it is about men, their meanings and actions”,¹⁶⁶ because “[u]ltimately, the entire social system, its prices, costs, supply, demand, the division of labour, money etc, must be traced to their roots in the actions, decisions and plans of individuals […]”.¹⁶⁷ The individual as the key to all economic effects on markets must be regarded as the superstructure of Austrianism which predetermines all scientific research.¹⁶⁸

(2) (Radical) Subjectivism:

Subjectivism and its variation of radical subjectivism is firstly an approach to the study of human interaction with things or other humans and secondly the major tenet that distinguishes Austrians from neoclassicism. Economists who try to explain human interaction must start with the subjective meaning the individuals attach to their actions and their subjective mental states:¹⁶⁹ “So far as human actions are concerned the things are what the acting people think they are […] [and] unless we can understand what the acting people mean by their actions, any attempt to explain them […] is bound to fail”.¹⁷⁰ The perceived marginal utility, a strictly subjective judgment, determines the value of a good for a consumer, and hence its price.¹⁷¹ These subjective value judgments for identical goods determine the attractiveness of exchanges. The discrepancy explains the positive net value of exchange.¹⁷² Subjective value judgments depend on subjective knowledge.¹⁷³ The so-called ‘radical subjectivists’, most notably Lachmann and Shackle, assume that human actors decide on expectations of the future which they have at the moment of decision.¹⁷⁴ Individual expectations differ because the future is unknown and unforeseeable.¹⁷⁵ New knowledge that comes in the course of time is responsible for the incompatibility of the actors’ plans with those of others at any point in time.¹⁷⁶ Equilibrating forces are always overtaken by unexpected and disequilibrating change before a long-run general equilibrium is [Seite 21↓]reached. Markets for particular goods may temporarily find equilibrium, but the whole economy never does.¹⁷⁷

(3) Individuals and their will to change and create:

The differences of individuals manifest themselves in divergent endowments and divergent experiences, resulting in dissimilar knowledge, values and heterogeneous expectations.¹⁷⁸ Constrained by incomplete wisdom, human beings are creative and act toward change. They have the capacity of acting with self-interest and purpose to pursue the satisfaction of their hierarchy of needs. This innate quality in humans is identified as homo agens, the acting man who makes conscious, reasoned decisions.¹⁷⁹ Mises identifies three reasons for human action: first, “[a]cting man is eager to substitute a more satisfactory state of affairs for a less satisfactory”. Second, he “[…] imagines conditions that suit him better, and his action aims at bringing about this desired state”. Third, the actor has “[…] the expectation that purposeful behaviour has the power to remove or at least alleviate the felt uneasiness”.¹⁸⁰ His will to move into a (subjectively perceived) preferable state of affairs in connection to different endowments fuels the market process.¹⁸¹ Since each individual is unique, everyone can perceive different ends. Some strive for sexual satisfaction, food, material things, but they may as well care for altruistic or the so-called higher goals.¹⁸² For Austrians, economic theory is ‘praxeology’, the science of human action.¹⁸³ The axioms of praxeology are supposed to be true and meaningful, because they are the essence of human being. A verbal deduction of the implications of praxeology is true and meaningful as well, mathematical symbolization superfluous.¹⁸⁴

(4) The influence of space and time:

The influence of space and time is very important in Austrian theorizing. If time is perceived as a flow of events, it brings novelty and surprises. Living and acting today is connected to tomorrow’s actions, since individual experience of today’s events alters tomorrow’s perception of events.¹⁸⁵ The elapse of time permits the gaining of [Seite 22↓]new experiences, which acknowledges the creation and alteration of knowledge.¹⁸⁶ Newly discovered knowledge often makes clear to the economic actors that their expectations of the future were wrong and in need of revision.¹⁸⁷ In the course of these revisions and through actor’s learning of truly novel things, the market process becomes an engine of discovery.¹⁸⁸ In this sense, the Austrian theory of entrepreneurship critically depends on a dynamic perception of time.¹⁸⁹

(5) Radical ignorance and its influence on the market process:

Kirzner distinguishes two kinds of ignorance: rational ignorance and radical (sheer, utter) ignorance. In the former case, actors maximize profit or utility with foreseeable knowledge. The actors are aware of their amount of knowledge and they are aware of the fact that if they accept certain expenses of money or time, they can gain additional knowledge in a planned search. The search for additional information is conducted until the marginal return of information equals the marginal cost for the search, so that an optimum is attained. Rational ignorance conforms to neoclassical theory.¹⁹⁰ The latter case is in line with the Austrian framework, where the existence of radical ignorance is assumed. Being radically ignorant instead of ignorant by choice does not only mean that there is not any prior knowledge concerning the costs and benefits of becoming aware of some novel facts,¹⁹¹ but it refers to the total (radical, sheer) unawareness of the existence of knowledge that is not known so far. New facts may be accidentally learned by chance or inevitably during participation in the market process.¹⁹² If actors possessed knowledge of things unknown so far, it would certainly affect their plans.¹⁹³ Thus, ignorance allows for opportunities in the market process, which alert entrepreneurs may recognize and exploit (see section 4.2.1, pp. 22-24).¹⁹⁴

Austrian economic theory explains how information influences the decisions of market actors and how the market succeeds in distributing relevant information to those who will make the best use of it. The problem of information has already been solved [Seite 23↓]in neoclassic theory due to the assumption of individual with perfect knowledge.¹⁹⁵ In the following part it will be explained and described how the market process solves the informational problem in Austrian economics.

The interaction of market participants or market actors – consumers, entrepreneur-producers and resource owners – takes place in a market,¹⁹⁶ so it can be said that the market is the result of interacting decisions of market actors during a given period of time.¹⁹⁷ Yet, a market must not be regarded as a static place for interaction. The market is only delimited from an individual perspective. Each actor perceives the boundaries of the market differently, depending on his radical ignorance. In an extreme case, a market may only consist of two actors: one buyer and one seller. This extreme Austrian micro-perspective is incompatible with the idea of a single market where all suppliers of one good compete against each other.¹⁹⁸ The people who interact in the market try to fulfil plans by buying and selling.¹⁹⁹ They hope to enhance their situation and to reach advantages through exchange.²⁰⁰ The homo agens in Austrian economics is, in contrast to the homo oeconomicus of neoclassical economics, not limited to given means and ends. He has the will and alertness to subjectively formulate ends worth striving for and finding the means necessary to reach his ends. His decisions are economizing on the basis of his chosen ends and known means, i.e. the actor tries to most efficiently maximize ends with available means. With respect to his knowledge it can be said that he acts subjectively rational.²⁰¹ Each actor has a different endowment of abilities and objectives (wants and needs), and possesses incomplete and diverging knowledge about current demand and supply, prices and qualities. Market participants formulate their expectations and make plans on this basis.²⁰² Successful actors and their counterpart in the market offer each other the best opportunity each one knows of.²⁰³ Being successful may turn out to be difficult, because “[…] knowledge of the circumstances of which we must make use never exists in concen[Seite 24↓]trated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess”.²⁰⁴ “As action necessarily is directed toward influencing a future state of affairs, […] it is affected by every incorrectly anticipated change in the data […], [and] […] the outcome of action is always uncertain. Action is always speculation”,²⁰⁵ which implies that some plans that have been formulated are disadvantageous – they will either fail or not fully exploit market opportunities. When plans cannot be executed, the actors may realize that they have been overly optimistic concerning the decisions of other market actors; or they realize that they have missed potential profit because they were too pessimistic about market conditions.²⁰⁶ In any case, new information flows back to the market participants as a result of market interaction. Actors in the market learn from experience and systematically modify and revise their plans, which led to suboptimal decisions, for the next period of interaction.²⁰⁷ Since single market transactions are not independent, but influence each other in many ways, all market actors are engaged in the revision of plans. Since one period is not enough to disclose all market knowledge to the actors, there is again a significant probability that both correct and incorrect decisions will be made in the following period of market interactions.²⁰⁸ The actor’s ability to learn from prior misjudgements and to test newly revised plans in the market sets the market process in motion.²⁰⁹ The market thus becomes a means of discovering and disseminating “[…] knowledge of the particular circumstances of time and place”.²¹⁰ In this system knowledge about preferences and technologies is dispersed among many people. Prices for the diverse goods and services send a signal that fulfils the function of coordinating the actions of the separated individuals.²¹¹ Prices offer unambiguous incentives that tell the market actors which products are valued most highly. Market actors recognize what to do and produce,²¹² since they try to gain profits and avoid losses.²¹³ If the actors’ current decisions incorrectly anticipate the decisions made by others, a state of disequilibrium prevails.²¹⁴ In this case, prices [Seite 25↓]reflect defective information.²¹⁵ The market process of mutual anticipation of plans continues until correct foresight drives all ignorance out of the market.²¹⁶ Without exogenous change in preferences, technological possibilities or resource availability, all decisions made by buyers, sellers and producers will inevitably be aligned, all plans will be correctly executed and the market will reach a state of equilibrium.²¹⁷

The concept of the entrepreneur is central for the market process,²¹⁸ but the societal role that entrepreneurs fulfil is feasible only in the presence of ignorance.²¹⁹ To clarify this, we will imagine a market where nobody is able to learn from experience, so that all actors infinitely repeat the same decisions. There are six possible outcomes of market interaction (see fig. 3, p. 76):²²⁰

1. Would-be-buyers return home empty-handed, because they offered to pay an insufficient price. They did not learn to outbid competitive buyers.
2. Buyers were able to buy and they paid an appropriate price.
3. Buyers could buy but they paid too much. They did not realize that they could get the same goods at a lower price.
4. Sellers did not sell everything or no goods at all. They asked too high prices and did not learn to underbid competitive sellers.
5. Sellers could sell and received an appropriate amount of money.
6. Sellers could sell but received not enough. They did not realize that they could sell their goods for a higher price.

We introduce a group of outsiders into this world – entrepreneurs – who are able to learn from experience and to recognize opportunities for entrepreneurial profits. They are not necessarily interested in buying for themselves,²²¹ but they are alert to where a good can be sold at a higher price than the purchase price. In our market of ignorant actors these entrepreneurs would instantaneously perceive profit opportunities that [Seite 26↓]arise from engaging in arbitrage in cases three and six: first, the entrepreneurs would buy resources from sellers who did not realize that they could charge more (case six). Next, the entrepreneurs would sell the goods to those buyers who did not realize that they could buy identical goods for less money (case three).²²² Successful entrepreneurship can attract imitators and competitors who try to outdo the original entrepreneur with better deals.²²³ “The competition between the various entrepreneurs will move them to offer to buy from the low-price sellers, at prices higher than these sellers had thought possible; entrepreneurs in competition will also sell to high-price buyers at prices lower than these buyers had thought possible”.²²⁴ Competition will move prices to a correct estimate of the participants’ eagerness to buy.²²⁵ In his attempt “[…] to offer opportunities which market participants will consider more attractive than those available elsewhere […]”, the entrepreneur relieves “[…] the consumer of the necessity to be his own entrepreneur”.²²⁶ Profitable opportunities for arbitrage lure entrepreneurs to their discovery. The opportunity is exploitable until entrepreneurs in the competitive market process have reallocated all resources to a new equilibrium, where both opportunity and the misallocation of resources are eliminated.²²⁷ Sometimes discoveries are disequilibrating and even increasing ignorance,²²⁸ but in general the market process does not only lead to an adjustment of individual plans, but also to a state in which everything that is produced will be produced by those who can make it cheaper than (or equally cheap as) the next-best competing entrepreneur. Everything will be sold at a cheaper (or the same) price than the next-best competing entrepreneur asks.²²⁹

The entrepreneurs are the “driving force of the whole market system”,²³⁰ and the entrepreneurs in competition systematically force the economy towards equilibrium; their alert exploitation of opportunities brings the economy in line with the information available.²³¹ Kirzner’s entrepreneur conforms to Mises’ and Hayek’s notion that “[…] a tendency towards equilibrium exists” since “[…] under certain conditions […] [Seite 27↓]the expectations of the people and particularly of the entrepreneurs will become more and more correct”.²³² However, an equilibrium need not necessarily be reached because equilibrating processes are continually interrupted by changes in the underlying variables (preferences, resource availabilities, technological possibilities), which initiate new equilibrating processes.²³³

It is the entrepreneur’s alert mind that observes and exploits profitable differences in the pattern of relative prices.²³⁴ The pure entrepreneur acts as an arbitrageur of opportunities. He does not need any initial endowment with resources. Entrepreneurship is therefore a costless activity. The sole prerequisite to compete is free market entry, which is always given in the absence of a monopoly over an essential input. Consequently, everybody can be an entrepreneur.²³⁵ The focus of entrepreneurship is not on a particular group of men, but on a function.²³⁶ The distinctive characteristics of entrepreneurs as opposed to non-entrepreneurs are aggressiveness, boldness, creativeness, and leadership qualities which are all manifested in alertness.²³⁷ Alertness is a refined, abstract form of the knowledge of how to collect and employ information and resources.²³⁸ Alertness on its own is not sufficient for progress in the market process; it just offers chances that may be seized.²³⁹ It is difficult to deliberately search for pure profit opportunities because radical ignorance is an obstacle to the discovery of such opportunities.²⁴⁰ The Kirznerian entrepreneur is responsive to opportunities already existent and waiting to be noticed.²⁴¹ In the multi-period case of the market process entrepreneurs are creatively and imaginatively shaping the future through responsiveness to intertemporal opportunities.²⁴²

Entrepreneurs may engage in the so-called pure arbitrage by selling items for more than they paid. Entrepreneurship is also consistent with intertemporal arbitrage, if items are bought at a lower price in one period than they are sold for in a subsequent [Seite 28↓]period.²⁴³ The third option is that entrepreneurs recognize errors of coordination between the sum of prices for a bundle of resources needed to produce a product and the price of the output on the product market. Although they engage in the transformation of resources into a higher-state product, they still do not need to contribute resources of their own.²⁴⁴ The entrepreneur does not even need capital funds in case of time-consuming production, if the opportunity is sufficient to enable him to offer an attractive interest payment.²⁴⁵

The market process advances only if alertness is paired with successful entrepreneurship, which fulfils three notable criteria. First, the subjective perception of an opportunity must be congruent with the objective data. Second, the entrepreneur’s offer must be the most advantageous in comparison to others. Third, the entrepreneur must make the relevant market aware of his advantageous offer.²⁴⁶ While the first criterion is self-evident, the others deserve explanation.

Acting men are in the favourable state of choosing between various opportunities,²⁴⁷ from which they will choose the most attractive. An opportunity is more attractive if a lower (higher) price is required (offered) for the same product, from which follows that entrepreneurial competition takes the form of competition for the best price. An opportunity is also better compared to another one, if it offers buyers a more desirable product for a given price respectively if it asks of sellers something they relinquish less reluctantly. That is why competition takes place in the kinds and qualities of goods and services as well,²⁴⁸ which means that product differentiation is essential for entrepreneurial success in the face of competition.²⁴⁹ Consumers’ wishes and desires are not obvious facts, but problems to be solved in the market process.²⁵⁰ Mises stresses the primacy and sovereignty of the consumers over entrepreneurial action in regard to this. At first glance entrepreneurs are responsible for production and they are steering the economy, but in fact they are obeying the consumer’s orders. If entrepreneurs do not pay attention to the continually changing tastes and desires for goods [Seite 29↓]and services, they will be driven out of the market.²⁵¹ Strictly speaking, consumers are not longing “[…] for tangible goods as such, but for the services which these goods are fitted to render them”.²⁵²

The third criterion is necessary because “[t]he consumer is not omniscient. He does not know where he can obtain at the cheapest price what he is looking for. Very often he does not even know what kind of commodity or service is suitable to remove most efficaciously the particular uneasiness he wants to remove. […]. To convey to him information about the actual state of the market is the task of business propaganda”.²⁵³ The entrepreneur must not only make information available to consumers, his success crucially depends on the consumers’ awareness of a purchase opportunity. In wealthy societies with a broad range of products, more and more provocative advertising is necessary to alert market participants to the diversity of offers.²⁵⁴ In the 1940s Mises recognized that “[b]usiness propaganda must be obstrusive and blatant. […] Advertising is shrill, noisy, coarse, puffing, because the public does not react to dignified allusions. It is the bad taste of the public that forces the advertisers to display bad taste […]”.²⁵⁵ To conclude, entrepreneurial alertness includes anticipating the needs and wants of consumers, designing and developing products to satisfy those needs at competitive prices, and making the opportunity available at such a location and especially through information that the consumer cannot miss it.²⁵⁶

The alert entrepreneur who is the only producer capable of offering a differentiated good or service at a given point in time is in the favourable position of having a temporary monopoly from a short-run perspective. He can reap above-average returns, but a position without unique resource ownership is vulnerable to imitation in a competitive environment and subsequent erosion of high margins in the longer run.²⁵⁷ The only possibility to eliminate competition and to reach a protected monopoly in the [Seite 30↓]absence of legislative barriers is the exclusive control of an essential resource.²⁵⁸ A long-run monopolistic position may be held due to initial resource endowments, e.g. if someone owns a unique natural skill. Alternatively, such a position may be won by alert entrepreneurial (and hence competitive) action.²⁵⁹ This happens if a market participant recognizes “the possibility of making large profits by buying up all the available supply of a given resource, and then establishing himself as the monopolist producer of a particular commodity”.²⁶⁰ Such an action is competitive in the long-run perspective because the entrepreneur made himself a monopolist resource owner in the course of his activities, a possibility that was ex ante open to all competing entrepreneurs.²⁶¹ Austrian economics implies the rejection of governmental interference into the market process despite the occurrence of monopolies,²⁶² because coordination in the decentralised market process is always superior to centrally planned coordination.²⁶³ This position should not be mistaken with laisser-faire, since Austrian economists clearly appreciate the necessity of institutions for the functioning of the market.²⁶⁴

Austrian economics is focused on the equilibrating process that can be observed in markets, with emphasis being put on the role that information and entrepreneurship fulfil in the process. Despite of its long history, no formalised theory is to be found in the works of its representatives Mises, Hayek, or Kirzner, to name just a few. A complete epistemological analysis of Austrian economics is impossible without a set of hypotheses. Fortunately, the large amount of work on Austrian economics in verbal form and the fundamentals of Austrian economics put forward in this thesis allow the deduction of a number of possible hypotheses. The following hypotheses are a step-by-step reflection of the market process.

Prices can be very quickly adapted in regard to supply and demand, e.g. if the demand for a particular good is very high and keeps on rising while the produced amount remains fixed, prices can rise and still all goods produced will be sold. Prices are a [Seite 31↓]piece of information that lures entrepreneurs either to produce more of a certain commodity or to slow down or stop production.²⁶⁵ Hypothesis H1 follows:

H1: If prices in a market are a measure of relative shortages, then they serve as a means of communicating information.

Hypothesis H2 is not only a tautological transformation of the definition of the state of equilibrium (the market will be in equilibrium given perfect information), but here it is seen as an empirical observation from reality, that is hypothesized about. The incompleteness of information results in incorrect plans that lead to poorly adjusted plans and thus a state of disequilibrium:²⁶⁶

H2: If information about supply and demand in a market is incomplete (if ignorance prevails), then the market will be in disequilibrium.

A market that is in disequilibrium is made up of various suboptimal exchange relations. Entrepreneurs, who are alert to the existing arbitrage-opportunities in such a market, can earn risk-less profits.²⁶⁷ Hypotheses H3 and H4 express this:

H3: If the market for a good or service is in disequilibrium, then opportunities for arbitrage exist.

H4: If opportunities for arbitrage exist, then alert entrepreneurs will appear to exploit these opportunities.

Entrepreneurial activities cause the generation of new knowledge, e.g. through an alteration of prices. Alert entrepreneurs perceive and interpret these new signals. Since making profits is the decisive entrepreneurial motive, some will try to gain a share of such opportunities by imitating and improving the original entrepreneur’s offer,²⁶⁸ which is expressed in Hypothesis H5:

H5: If alert entrepreneurs exploit opportunities, then information about their activities spreads in the market in the course of time and imitators will be attracted.

The homo agens has the ability to learn and alter his plans. A reduction of his ignorance due to additional information will thus improve his decision-making capabili[Seite 32↓]ties.²⁶⁹ The buyer’s enhanced plans will reward good offers in the market and punish bad offers through the allocation of resources.²⁷⁰ Furthermore, buyers profit from entrepreneurial sellers and their competitors in the market who drive down prices to an equilibrium level.²⁷¹ Buyer and seller thus start a tendency towards equilibrium. Hypotheses H6 and H7 follow:

H6: If information spreads and imitators appear, then experience and learning result in enhanced decision-making and plans that mutually fit better.

H7: If better mutual plans are made, then an equilibrating tendency commences.

Fußnoten und Endnoten

¹⁶¹ Cf. Smith (1986), p. vii.

¹⁶² Cf. Kerber (1997), p. 33. For a neoclassical critique of Austrianism, cf. Caplan (1999); for an Austrian critique of neoclassicism cf. Block/Barnett II/Wood (2002).

¹⁶³ Cf. Lingen (1993), pp. 70-72; 168; Hayek (1949), p. 94.

¹⁶⁴ Cf. Rese (2000), p. 66.

¹⁶⁵ Cf. Christainsen (1994), p. 11.

¹⁶⁶ Mises (1949), p. 92.

¹⁶⁷ Kirkpatrick (1983), p. 46.

¹⁶⁸ Cf. Rese (2000), p. 67.

¹⁶⁹ Cf. Horwitz (1994), p. 17.

¹⁷⁰ Hayek (1952), pp. 44; 53.

¹⁷¹ Cf. Kirkpatrick (1983), pp. 46f.

¹⁷² Cf. Rese (2000), p. 67.

¹⁷³ Cf. Horwitz (1994), p. 18.

¹⁷⁴ Cf. Kirzner (2000), p. 46.

¹⁷⁵ Cf. Lewin (2000), p. 387.

¹⁷⁶ Cf. Moss (2000), p. 369.

¹⁷⁷ Cf. Lachmann (1976), pp. 60f.

¹⁷⁸ Cf. Rese (2000), p. 68.

¹⁷⁹ Cf. Oakley (1997), p. 5.

¹⁸⁰ Mises (1949), pp. 13f.

¹⁸¹ Cf. Rese (2000), p. 68.

¹⁸² Cf. Mises (1949), p. 14.

¹⁸³ Cf. Prychitko (1994a), p. 77.

¹⁸⁴ Cf. Rothbard (1976), p. 22.

¹⁸⁵ Cf. O’Driscoll Jr./Rizzo (1985), p. 3.

¹⁸⁶ Cf. Lachmann (1959), p. 73.

¹⁸⁷ Cf. Moss (2000), p. 369.

¹⁸⁸ Cf. O’Driscoll Jr./Rizzo (1985), p. 9.

¹⁸⁹ Cf. Rese (2000), p. 69.

¹⁹⁰ Cf. Kirzner (1992), pp. 154f.

¹⁹¹ Cf. Ikeda (1994), p. 23.

¹⁹² Cf. Hayek (1937), p. 51; Hayek (1994), p. 249; Kirzner (1988), pp. 32-34.

¹⁹³ Cf. Hayek (1937), p. 51.

¹⁹⁴ Cf. Kirzner (1973), pp. 66f.; Kirzner (1988), pp. 152f.

¹⁹⁵ Cf. Kirzner (1988), p. 45.

¹⁹⁶ Cf. Kirzner (1973), p. 6.

¹⁹⁷ Cf. Kirzner (1973), p. 9.

¹⁹⁸ Cf. Rese (2000), pp. 74-76.

¹⁹⁹ Cf. Kirzner (1973), p. 71.

²⁰⁰ Cf. Plinke (2000b), p. 59.

²⁰¹ Cf. Kirzner (1973), p. 33.

²⁰² Cf. Rese (2000), p. 71; Plinke (2000b), p. 63.

²⁰³ Cf. Kirzner (1973), p. 12.

²⁰⁴ Hayek (1945), p. 519.

²⁰⁵ Mises (1949), p. 253.

²⁰⁶ Cf. Kirzner (1973), p. 10.

²⁰⁷ Cf. Plinke (2000b), p. 63; Kirzner (1973), p. 71.

²⁰⁸ Cf. Plinke (2000b), p. 59

²⁰⁹ Cf. Plinke (2000b), p. 59; Kirzner (1973), p. 10.

²¹⁰ Hayek (1945), p. 521; cf. Kirzner (1988), p. 32; Lachmann (1976), p. 59.

²¹¹ Cf. Hayek (1945), p. 526; Hayek (1994), p. 253; Hayek (1996), p. 309.

²¹² Cf. Hayek (1994), p. 258.

²¹³ Cf. Mises (1949), pp. 325f.; Kirzner (1990), p. 29; Baird (1994), p. 147.

²¹⁴ Cf. Kirzner (1988), p. 127.

²¹⁵ Cf. Kirzner (1988), pp. 16f.

²¹⁶ Cf. Hayek (1937), pp. 41f.; Hayek (1994), pp. 255f.

²¹⁷ Cf. Kirzner (1973), pp. 10f.

²¹⁸ Cf. Plinke (2000b), p. 59.

²¹⁹ Cf. Kirzner (1988), pp. 68; 153.

²²⁰ Cf. Kirzner (1973), p. 14; Plinke (2000b), pp. 60f.

²²¹ Cf. Picot/Reichwald/Wigand (2001), p. 34.

²²² Cf. Kirzner (1973), pp. 14f..

²²³ Cf. Rese (2000), p. 79.

²²⁴ Kirzner (1973), p. 15.

²²⁵ Cf. Kirzner (1973), p. 15.

²²⁶ Kirzner (1973), p. 136.

²²⁷ Cf. Kirzner (1988), p. 108.

²²⁸ Cf. Kirzner (1992), p. 45.

²²⁹ Cf. Hayek (1994), p. 256.

²³⁰ Mises (1949), p. 249.

²³¹ Cf. Kirzner (1988), p. 134; Kirzner (1997), p. 62.

²³² Hayek (1937), p. 44; cf. Kirzner (1997), p. 62; cf. also Mises (1949), p. 352: “Both the logical [Austrian] and the mathematical [neoclassical] economist assert that human action ultimately aims at the establishment of such a state of equilibrium and would reach it if all further changes in data were to cease”.

²³³ Cf. Kirzner (1992), pp. 42; 45.

²³⁴ Cf. Lachmann (1976), p. 56; Kirzner (1988), p. 152; Kirzner (1992), p. 50.

²³⁵ Cf. Kirzner (1973), p. 16; Ikeda (1994), p. 25.

²³⁶ Cf. Mises (1949), p. 252.

²³⁷ Cf. Kirzner (1999), p. 13.

²³⁸ Cf. Kirzner (1988), p. 19.

²³⁹ Cf. Kirzner (1988), p. 18; Rese (2000), p. 76.

²⁴⁰ Cf. Kirzner (1997), p. 71.

²⁴¹ Cf. Kirzner (1973), p. 74.

²⁴² Cf. Kirzner (1985), pp. 63f.

²⁴³ Cf. Kirzner (1992), p. 50.

²⁴⁴ Cf. Kirzner (1973), p. 44; Kirzner (1992), p. 50.

²⁴⁵ Cf. Kirzner (1973), p. 49.

²⁴⁶ Cf. Rese (2000), pp. 76f.

²⁴⁷ Cf. Mises (1949), p. 94.

²⁴⁸ Cf. Kirzner (1973), pp. 23f.; 135.

²⁴⁹ Cf. Kirkpatrick (1983), p. 47; Kirzner (1988), p. 21.

²⁵⁰ Cf. Kirzner (1988), p. 33.

²⁵¹ Cf. Mises (1949), p. 270; cf. also pp. 227, 258f.

²⁵² Mises (1949), p. 234. The economic system seen as a means to satisfy consumer needs goes back to Carl Menger, as well as the notion that items bought and sold in the market are valued only insofar as they contribute toward need satisfaction; cf. Kirzner (1992), p. 71.

²⁵³ Mises (1949), p. 316.

²⁵⁴ Cf. Reekie (1994), pp. 158f.

²⁵⁵ Mises (1949), pp. 316f.

²⁵⁶ Cf. Kirkpatrick (1983), pp. 47f.

²⁵⁷ Cf. Kirzner (1973), pp. 133f.; Jacobson (1988), p. 415. A monopoly is understood as a position immune of competitive entry, so a competitive environment on the contrary is marked by free entry to the market; cf. Kirzner (1973), p. 131; Ikeda (1994), p. 25.

²⁵⁸ Cf. Kirzner (1988), pp. 114f.

²⁵⁹ Cf. Kirzner (1973), p. 131.

²⁶⁰ Kirzner (1973), p. 22; Italics in original.

²⁶¹ Cf. Kirzner (1973), p. 132.

²⁶² Cf. Hayek (1996), p. 163.

²⁶³ Cf. Kirzner (1992), p. 161.

²⁶⁴ Cf. Hayek (1996), p. 163.

²⁶⁵ Cf. Hayek (1994), pp. 258f.; Hayek (1945), p. 526.

²⁶⁶ Cf. Kirzner (1988), p. 127.

²⁶⁷ Cf. Kirzner (1973), pp. 14f.

²⁶⁸ Cf. Rese (2000), p. 79.

²⁶⁹ Cf. Moss (2000), p. 369.

²⁷⁰ Cf. Jacobson (1992), p. 788.

²⁷¹ Cf. Kirzner (1988), p. 108.