Equilibrium Analysis: Two Austrian Views

Cosmos+Taxis, 6(1-2): 1-10.

27 Pages Posted: 14 Aug 2018 Last revised: 9 Sep 2020

See all articles by Marek Hudik

Marek Hudik

Xi'an Jiaotong University (XJTU) - International Business School Suzhou

Date Written: July 29, 2018

Abstract

I compare two views of the equilibrium concept: one from F. A. Hayek and the other from Fritz Machlup. I argue that Machlup’s equilibrium concept is price-theoretic, that is, it is a tool of problem-based, comparative static analysis. In contrast, Hayek’s equilibrium concept approximates the social order observed in reality. While the Hayekian equilibrium is an explanandum, the Machlupian equilibrium forms a part of the explanans. Further, Hayek’s approach is more descriptivist than problem-based. I argue that the two equilibrium concepts are not mutually exclusive alternatives. In particular, the adequacy of the Machlupian equilibrium for price-theoretic analysis is unrelated to the adequacy of the Hayekian equilibrium for analyzing the social order. In fact, I show that the two types of analysis can be seen as complementary. I conclude that the main issue is not to decide whether the equilibrium concept is useful in general but to determine the proper sphere of application of a particular equilibrium concept.

Keywords: Equilibrium, F.A. Hayek, Fritz Machlup, Price Theory, Social Order, Austrian Economics, Marshallians, Descriptivism

Suggested Citation

Hudik, Marek, Equilibrium Analysis: Two Austrian Views (July 29, 2018). Cosmos+Taxis, 6(1-2): 1-10., Available at SSRN: https://ssrn.com/abstract=3221994 or http://dx.doi.org/10.2139/ssrn.3221994

Marek Hudik (Contact Author)

Xi'an Jiaotong University (XJTU) - International Business School Suzhou ( email )

111 Ren’ai Road,
Suzhou Lake Higher Education Town,
Suzhou, Jiangsu 215123
China

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