Why do we trade with strangers?

by Roger Koppl

Bill Butos edited the latest volume of Advances in Austrian Economics, which is devoted to “The Social Science of Hayek’s The Sensory Order.”  It is a terrific volume demonstrating that Hayek’s classic 1952 book in psychology matters for the social sciences, including economics.

Contributors include G. R. Steele, Leslie Marsh, Lorenzo Infantino, Francesco Di Iorio, and Peter Earl.  Bill’s introduction rewards careful reading.

My imagination was captured by Jean-Paul Carvalho and Mark Koyama’s paper “Instincts and institutions: the rise of the market.”  Carvalho and Koyama identify and close an important gap in our understanding of the evolution of trade. Thanks to Greif, Milgrom, North, and others, we have a pretty good idea how medieval institutions promoted trade and enabled the emergence of capitalism. Thanks to Cosmides, Fehr, Bowles and others we have a pretty good idea how our evolved psychology supports the institutional fabric of modern capitalist economies.  What we have not understood, however, is how our evolved psychology could be consistent with the emergence of the medieval institutions that promoted trade early on. Continue reading

Kirznerian Alertness and Neuroscience

by Roger Koppl

Jake Young of Pure Pedantry has a nice post using the neuroscience of preconscious processing to address the issue of Kirznerian alertness.  He was responding to Sandy’s post, “Stumbling on Profit Opportunities.”  Jake gives a negative reply to Sandy’s conjecture that preconscious processing, whereby we leap away from a snake before processing that it was a snake, might be an example of Kirznerian entrepreneurship.

I think it’s a mistake to look for “the” neuroscience correlate to entrepreneurial alertness.  The praxeological categories of “entrepreneurship,” “alertness,” and “discovery” were constructed for use in social science, not neuroscience.  It would be a surprise if there were precisely one process identified in neuroscience that covers all and only cases of entrepreneurial alertness in social science.  More likely, several processes that are considered distinct and unrelated in neuroscience would all be examples of entrepreneurial alertness and discovery.  And the neurological processes generally corresponding to entrepreneurial discovery might sometimes be activated when there is no entrepreneurial discovery.  Why should social science and neuroscience carve up the world in the same way? Continue reading