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5 - Notes on Some Economic Terms and Ideas

from PART II - FOUNDATIONS OF THE THEORY OF EXPERTS

Published online by Cambridge University Press:  01 February 2018

Roger Koppl
Affiliation:
Syracuse University, New York
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Summary

This book outlines an economic theory of experts. It uses the economic concepts of “spontaneous order” and “competition.” The concept of spontaneous order is important for a satisfactory understanding of the division of knowledge as I develop that concept in the next two chapters. The concept of “competition” is important for the theory of experts and, especially, the theory of expert failure. Unfortunately, the concepts of spontaneous order and competition are fluid. They get different meanings from different economists. Non-economists sometimes interpret these concepts in ways that most economists do not. It can be challenging, therefore, to use these concepts and, especially, these terms to communicate ideas effectively. Rather than trying to invent new terms that are likely themselves to be misunderstood, I will try to clarify their meanings for the broad tradition of “mainline” economics, which is the intellectual context for my theory. Peter Boettke coined the term “mainline economics” to identify a tradition of economic thought encompassing Adam Smith, F. A. Hayek, Vernon Smith, and others. This tradition of thought emphasizes “limits to economic analysis, and efforts at economic control” (Boettke 2012, pp. 383–5). And in this tradition, the notions of spontaneous order and competition are important.

SPONTANEOUS ORDER

The idea of “spontaneous order” is more commonly known by the label “invisible hand.” But the term “invisible hand” is sometimes taken to be a religious idea or to connote a mystification of markets. It may therefore cause confusion or misunderstanding. I will use the term coined by F. A. Hayek: “spontaneous order.” It is the idea that there are systematic but unintended consequences of human action. An explanation of a spontaneous order may be called an “invisible-hand explanation” (Ullmann-Margalit 1978). The “mainline” theory of markets views them and their scientific regularities as spontaneous orders. As I will briefly note below, this cannot be said of general equilibrium theory as it was first proposed by Leon Walras (1874–77). But in more customary interpretations of the theory, it imperfectly describes Adam Smith's invisible hand. In the interpretations of neoclassical economics most common within the discipline, the theory of markets describes a spontaneous order.

Type
Chapter
Information
Expert Failure
, pp. 97 - 115
Publisher: Cambridge University Press
Print publication year: 2018

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