Mainstream, textbook, neoclassical economics is grounded on the theory of perfect competition. Perfect competition is a situation in which there are so many buyers and sellers in the market that no one buyer or seller can influence the market price through his own actions. Also, each seller sells a product exactly like the ones his rivals are offering to consumers in the same market. Kirzner argues that in contrast to this conception of the market economy, the Austrians, especially Mises and Hayek, developed an alternative theory of the market process. In their framework, individuals have less than perfect knowledge.
Uncertainty hangs like a cloud over the possibilities of the future.
Competition acts as a discovery procedure in which the entrepreneurs confront and try to outdo each other in anticipating and satisfying future consumer demand. By ignoring and abstracting away these real and realistic aspects of the world in which actors and entrepreneurs choose and act, the neoclassical perfect-competition model leaves itself unable to explain the process by which suppliers and demanders, consumers and entrepreneurs coordinate their actions for mutual benefit and gain. In the final section, Kirzner applies the Austrian theory of the market process to the issues of advertising, antitrust, and welfare, as well as to the justice of entrepreneurial profit. Dr. Kirzner has presented an exceptionally clear exposition of the Austrian and neoclassical approaches to economics. Disequilibrium, Entrepreneurship and Discovery To subscribe to the print version of Freedom Daily Click Here .