The New Palgrave Encylopedia of Economics, Redux

While dredging through Steven Landsburg’s excellent, yet interminable, chapter on perfect competition, we took a brief break to contemplate the Austrian critique paused to think about some of the Austrian critiques of the competitive model.   To wit:

The trouble with the concept from the Austrian point of view… is that it describes an equilibrium situation but says nothing about the competitive process which led to that equilibrium. Indeed, it robs the firm of all business activities which might reasonably be associated with the verb ‘to compete’ (Hayek, 1948). Thus, firms in the perfectly competitive model do not raise or lower prices, differentiate their products, advertise, try to change their cost structures relative to their competitors, or do any of the other things done by business firms in a dynamic economic system. This was precisely the reason why Schumpeter insisted on the irrelevance of the concept of perfect competition to an understanding of the capitalist process.

That passage, of course, is from The New Palgrave Dictionary of Economics, which is one of the fabulous economics resources offered through The Mudd.

Having trouble with the Principal-Agent Model? Wondering about empirical work on the make-or-buy decision?  Need a quick primer on health economics or the ins-and-outs of the logit model?   This might be a good starting place.