Rational choice without closure: The microfoundations of virtuous cycles and vicious circles

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Abstract

Economic stories with a rational choice structure usually entail closure or equilibrium. This paper argues that Knightian uncertainty and Kirznerian alertness allow economists to construct plausible accounts of open-ended processes such as virtuous cycles and vicious circles without abandoning the centrality of instrumental rationality. The basic form of such stories is explored and two example cases are put forward.

Original languageEnglish
Pages (from-to)345-361
Number of pages17
JournalJournal of Economic Methodology
Volume18
Issue number4
DOIs
StatePublished - Dec 2011

Keywords

  • economic development
  • economic processes
  • entrepreneurship
  • interventionism
  • uncertainty

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