The Market Order and Competition

Abstract

As we know from Hayek’s epistemology our understanding of the world consists of explanations in terms of ‘orders’, explanations of the principle rather than explanation of detail. This is a necessary consequence of the incurable limitations on the human mind. In the social sciences our knowledge is therefore the knowledge of an order of events and the order of which we have most knowledge in economic theory is the competitive market order. However, it is in this basic area of economics that the Austrian School in general, and Hayek in particular, have made some of their most significant departures from orthodoxy. The departures concern the meaning of such key concepts as ‘equilibrium’, ‘competition’ and ‘economy’. The differences, in substance, reflect methodological differences of a fundamental kind.