August 8, 2022
Roger Garrison’s unique and insightful take on why Austrian economics emphasizes the coordinating role of institutions:
Framing these issues in terms of polar positions and the spectrum between the poles helps to put other related issues into perspective. For instance, general-equilibrium theory, whose applicability is confined to one of the polar positions, is sometimes described as institutionless. Economic institutions would be superfluous in a world where perfect order already exists. At the opposite pole, where no order is attainable, institutions could not emerge. It is only in that broad middle ground, where individual actions give rise to a spontaneous order, that economic institutions have a role to play. This accounts for the Austrians' continual attention to the role on institutions in their economic theory and for the inattention on the part of general-equilibrium theorists.