Back to course 'ECON104: Principles of Austrian Economics II'

Topic outline

  • Unit 2: Spontaneous Order

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    In this second unit, Saifedean discusses Hayek's concept of spontaneous order. He starts off by explaining how distributed knowledge can lead to order, then discusses the different European philosophical thinking on this topic. Finally, Vernon Smith's work on Constructivist rationality vs. Ecological rationality is explored.

    Completing this unit should take you approximately 2 hours.

    • Upon successful completion of this unit, you will be able to:

      • differentiate between Mises' calculation problem and the distribution of knowledge problem as described by Hayek;
      • describe how spontaneous order emerges as orders and patterns from human action and interaction; and
      • analyze the idea of rational constructivism versus spontaneous order.

    • 2.1: Lecture

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        Lecture Page
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        Spontaneous order attempts to explain how human conventions and institutions emerge as the unintended consequences of the actions of a myriad of individuals, pointing to the limits of rationalism and the conscious shaping of social life. Watch this lecture to examine how spontaneous order is achieved through distributed knowledge on the market. In the video, Saifedean explores the concept of spontaneous order, focusing on the work of Friedrich Hayek and Vernon Smith.

        Topics covered include:

        • Distributed knowledge
        • Rational constructivism and its shortcomings
        • The important role spontaneous order fulfilled in the process of selection on the market

        Key points

        • Complex goods and even language are examples of things that emerge through spontaneous order
        • Reason is good at providing variation but poor at selection, which is better left to ecological processes
        • Spontaneous Order can be understood as orders and patterns that emerge out of human action and interaction, not through human designs

    • 2.2: Discussion

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        Discussion Page
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        Mark as done

        Since you have watched the video lecture for unit 2, it's time to watch Saifedean moderate a discussion on the unit's theme by addressing questions asked by your fellow classmates. As you watch the discussion unfold, take notes to help you retain information. Make sure you watch the entire discussion seminar video; otherwise, you may skip over important points. To get the best learning experience and mastery of the major concepts covered in this unit, you'll want to watch all videos in their entirety.

        Topics discussed include:

        • Scientism and Historicism
        • A deeper look into the work of Vernon Smith
        • The shortcomings of the Standard Socioeconomic Science Model
        • Problems that arise when economists propose regulations to fix market failures