Here’s a quick thought, that came while reading the recent article, quoting Kirzner and Lachmann:
"…to base one’s understanding of man on statistics and historical studies is to ignore that human action is volitional, purposeful, and changeable, dependent on the goals and means of the acting individual. The inability of the economics profession to grasp the mainsprings of human action has resulted from the adoption of economic models totally outside of reality. In the models put forth as explanations of market phenomena, equilibrium — that point at which all market activities come to rest and all market participants possess perfect knowledge with unchanging tastes and preferences — has become the cornerstone of most economic theory.
… But if the plans of market participants can never be expected to smoothly and automatically mesh, what forces in the market tend toward an equilibrating, or dovetailing of human action? At this point, Professor Kirzner’s follow-up lecture offered the clue. Acting man is not merely a blind “taker” of prices and resource offerings; rather, because of the fact that unexpected change occurs in an uncertain future, man is also “watchful.”
Alertness to previously unseen opportunities serves as the key to the equilibrating market force. This human capacity for alertness, said Kirzner, is the entrepreneurial role. It is not merely the difficult task of knowing when to hire and where to place the worker. It’s a much more subtle and rarified knowledge; it’s the ability of knowing where to get knowledge, of picking up bits of information that others around you have passed up and seeing the value of it for bringing into consistency a human plan or plans that otherwise would have remained in disequilibrium. The chance to profit from information about market opportunities that others have failed to see acts as the incentive for people to keep their eyes open for inconsistencies in human plans."
Now, a mainstream economist may create a mathematical model, that reflects reality to some degree. Mess around with the numbers long enough, and it just might seem to predict the future, if only for a little while - even if the theory is completely wrong.
But the funny thing is, the more the economy is interfered with, the worse are market participants misinformed by important signals like prices, interest rates, etc., and the more difficult will be their decision process.
So, even assuming that forces in the market tend toward an equilibrium, and there are statistical models intricate enough to come close to reality, the more the markets are interfered with, the worse they become at predicting anything.
Talk about a theory that defeats itself!