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How Cognitive Institutions and Interpretative Rationality Enable Markets with Infinite Variety

In: Contemporary Methods and Austrian Economics

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  • Erwin Dekker

Abstract

This chapter analyzes markets with an “infinite variety” of goods, such as large parts of the service economy and creative industries such as the book, film, and music market. I argue that the infinite variety of supply that characterizes such markets does not lead to discoordination, because of the emergence of cognitive institutions in the form of market categories, reference points such as exemplary goods, and instruments of interpretation which facilitate the (quality) coordination process. These cognitive institutions function as an extended mind of market participants and enable what is termed interpretative rationality, as distinct from calculative rationality. This interpretative rationality consists of the ability to recognize relevant differences and similarities between goods. These cognitive institutions, like the price system, are an emergent order which can be analyzed through the lens of Austrian economics. This chapter further demonstrates the potential convergence between particular strands of economic sociology and Austrian economics.

Suggested Citation

  • Erwin Dekker, 2022. "How Cognitive Institutions and Interpretative Rationality Enable Markets with Infinite Variety," Advances in Austrian Economics, in: Contemporary Methods and Austrian Economics, volume 26, pages 151-167, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:aaeczz:s1529-213420220000026012
    DOI: 10.1108/S1529-213420220000026012
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    More about this item

    Keywords

    Cognitive institutions; infinite variety; interpretive rationality; creative industries; emergent order; entrepreneurship; B25; D40; D83; Z11;
    All these keywords.

    JEL classification:

    • B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian; Stockholm School
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • Z11 - Other Special Topics - - Cultural Economics - - - Economics of the Arts and Literature

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