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 |
|---|---|
| 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