mp for QJAE - The Market as a Bundle of Simultaneous...

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IVAN PONGRACIC Department of Economics, Indiana Wesleyan University, Marion IN, 46953, USA An earlier version of this paper was presented at Southern Economic Association Meeting, San Antonio, TX., November 2003. Thanks to Richard Ebeling, James Rolph Edwards, Willem van DeMerwe, Bradford Sample, Allan Schmid for useful suggestions. The usual caveat applies. Introduction Austrians, and a few non-Austrians, readily agree that the market is not a place but a process. 1 But what kind of a process is it? Could it be that there are several processes taking place simultaneously in the market? That granted, could it be that these processes make the very idea of equilibrium analysis totally irrelevant? Could it be that in such disequilibria many people must end up dissatisfied with the market outcomes? We can start with some definitions. Building on a phenomenological philosophy, 2 we can define the exchange process as the essence of the market, and diverse, unique human needs as the essence of all exchange. No human is self-sufficient, we all depend on each other, and that makes the whole process highly complex. This complexity has been treated in two different ways: mathematically and logically. The mathematical approach has emphasized model building, the logical approach the understanding of the market process. 3 One of the founding fathers of neoclassical economics, 4 and definitely the father of Austrian economics, Carl Menger, considered the market as a process and was not concerned much with how to build a mathematically consistent model, but more with the explanation of human needs and the resulting desire to satisfy them. 5 All market phenomena are, for Menger (1883, 1995:139), nothing but “the unintended result of innumerable efforts of economic subjects pursuing individual interests.” His theory of value, starting with “the subjective valuations of individuals concerning the usefulness of 1 Cf. Ludwig von Mises (1966:257-258): “The market is not a place, a thing, or a collective entity. The market is a process…” Israel Kirzner (1979:3): “A characteristic feature of the Austrian approach to economic theory is its emphasis on the market as a process …” 2 Among the many definitions of phenomenology, I here only mean to use it as an analysis or description of phenomena. 3 cf. Littlechild (1986) 4 There is an ever increazsing number of economists who, justifiably in my opinion, deny that Menger was a neoclassicist. 5 For a phenomenological explanation of Menger’s methodology, see Sandye Gloria-Palermo: “Progress in Austrian economics from Menger to Lachmann,” in Stephan Boehm et al , Is There Progress in Economics. 1
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This note was uploaded on 06/18/2008 for the course ECO 212 B taught by Professor Pongracic during the Spring '08 term at Indiana Wesleyan.

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mp for QJAE - The Market as a Bundle of Simultaneous...

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