Decision Making under uncertainty: a Mengerian analysis
Hayek noted that Menger was the first to base the distinction between free and economic goods on the idea of scarcity. Notwithstanding this, Menger’s contribution concerning the role of uncertainty seems to be mostly ignored in the literature. The paper argues that Menger in fact designated the place of uncertainty as a key condition to shaping human economic activities, alongside scarcity I have also attempted to provide a reconstruction of the role of uncertainty in the Mengerian theoretical system based on the underlying and sometimes embryonic thoughts of Menger. The paper clarifies that Menger broke with earlier economic thinking and did not employ uncertainty to explain and justify profit. Finally, the paper reconstructs Menger’s Janus-faced human actor based on the two different characterizations of human economic action by Menger. The paper argues that the metaphor of “creative destruction” is a misleading one. The Mengerian position is that creativity trumps destruction.
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