Monitoring, metering and Menger: A conciliatory basis for a genuine institutional economics

Originally published in The Review of Austrian Economics

Carl Menger’s objective in his seminal book, Principles of Economics, was to elucidate a unified account of price formation. This raises a question, which motivates our paper: to what extent, if any, can Menger account for production not directly organized by the price mechanism, and therefore a theory of economic organization and its formation through time? We argue that implicit to Menger’s account of price formation is an account not only of institutional formation, but particularly economic organization. Thus, there exists a symbiotic relationship that can be found in Menger between a theory of price formation and a theory of organizational formation, both of which are by-products of an increasing division of knowledge brought about by an increasing scope of market exchange. Moreover, our point illustrates that Menger’s work is an analytical point of departure for a shared understanding of parallel developments in Austrian economics and organizational economics that have followed.

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