Information from field work, assembled in the light of conceptual truths, will present a picture of how economic institutions work, and what their functions are. It will also enable us to understand how people occupying positions in those institutions are likely to behave, and why. A preliminary analysis led to a general conclusion, one that will be explored in detail in later chapters, that the function of the market is not to allocate scarce resources efficiently – markets are often wasteful – but is rather to force innovation through competition, and to select and support the winners. This, in turn, implies that the way economic institutions work will evolve over time.

Yet this conclusion was reached on methodological grounds only. Stimulus-response models, which support the allocation view of markets, were rejected for resting on a deficient concept of rationality, while ignoring structural relationships, and presenting an artificial and inadequate depiction of market behavior. Classical structural models were judged to provide an account of the way a surplus is generated, and of the framework within which competition operates to determine its division. But competition, from this point of view, can never lead to equilibrium in the long run. Equilibria may be reached in the short run, but any such positions must be considered provisional. For the human mind is inherently active; it never merely accepts what the world presents. And in the economic world it faces an ongoing conflict, in which those who stand still, tend to lose out.