Coordination: A Clarification

Ever since Hayek’s 1937 classic, “Economics and Knowledge,” Austrians and other sympathetic writers have rightly emphasized study of the coordination properties of an economic system. To this end, they have claimed a distinction between the Hayekian focus on coordination and the neoclassical focus on equilibrium and efficiency. Although genuine and important, this distinction has yet to be satisfactorily explained. The present paper will take one recent attempt by Israel Kirzner (Kirzner 1998) and demonstrate why a neoclassical economist could quite understandably (though incorrectly) disregard the distinction between the two approaches as a mere semantic quibble. The paper will then attempt to mediate the dispute between Kirzner and Daniel Klein on this matter, and finally will recommend a strategy for spreading Hayek’s message to the neoclassical community. Along the way, care will be taken to clarify the neoclassical terminology and approach, in order to distinguish them from Hayek’s.