Equilibrium Analysis: Two Austrian Views.

I compare two views of the equilibrium concept: one from F. A. Hayek and the other from Fritz Machlup. I argue that Machlup's equilibrium concept is price-theoretic, that is, it is a tool of problem-based, comparative static analysis. In contrast, Hayek's equilibrium concept approximates the social order observed in reality. While the Hayekian equilibrium is an explanandum, the Machlupian equilibrium forms a part of the explanans. Further, Hayek's approach is more descriptivist than problem-based. I argue that the two equilibrium concepts are not mutually exclusive alternatives. In particular, the adequacy of the Machlupian equilibrium for price-theoretic analysis is unrelated to the adequacy of the Hayekian equilibrium for analyzing the social order. In fact, I show that the two types of analysis can be seen as complementary. I conclude that the main issue is not to decide whether the equilibrium concept is useful in general but to determine the proper sphere of application of a particular equilibrium concept. [ABSTRACT FROM AUTHOR]