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Economics as a Coordination Problem: The Contributions of Friedrich A. Hayek; O'Driscoll, Gerald P., Jr.
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Chapter 7
7.5

Neoclassical economics represents a demonstrable improvement over Ricardian analysis, insofar as the former advanced our understanding of those phenomena least understandable in the Ricardian approach. *28 The so-called Marginalist Revolution provided a basis for a solution to Ricardian lacunae. All three variants of neoclassicism, the Walrasian, Austrian, and Jevonian, focused on utility as an explanation of demand and made use of the older concept of the margin to explain pricing. The Austrians, particularly Wieser, developed the idea that costs are forgone opportunities, not coefficients of production dictated by physical laws of production. Their consistent methodological subjectivism enabled the later Austrians, particularly Mises and Hayek, to perceive that the only relevant forgone opportunities are those perceived by the individual decision maker. The pure logic of the economic short run and that of the long run were seen to be the same and to have no necessary connection with any laws of production that so occupied the Ricardians.