Abstract
The continual expansion of rational choice theory to a greater range of social phenomena-from markets to politics and institutions-is a testament to its success. Each further application, however, simultaneously forecloses a potential source of inefficiency in economic systems. Abdicating efficiency considerations impairs economics' explanatory power as much as its normative relevance. In this paper I explore the interconnected roles of subjectivism and knowledge problems in accounting for inefficiency. I conclude that the knowledge-generating properties of institutions allow for efficiency comparisons, but only in the embrace of a thoroughgoing subjectivism.
Original language | English |
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Pages (from-to) | 81-95 |
Number of pages | 15 |
Journal | Review of Austrian Economics |
Volume | 27 |
Issue number | 1 |
DOIs | |
State | Published - Mar 2014 |
Keywords
- Coase theorem
- Economic efficiency
- Knowledge problem
- Rational choice
- Subjectivism