ABSTRACT
This chapter focuses on the role of the socialist calculation debate – and therefore on the role of Mises and Hayek – in the evolution of Austrian economics. Arguably, it was during this debate that the Austrians realized that their attempt to come to grips with real-world institutions ran counter to the market socialists’ starting point in the abstract Walrasian model. The chapter briefly discusses what may be called the neoclassical version of neo-institutionalism, namely the property rights approach, and then turn to a brief discussion of more heterodox varieties of neo-institutionalism. As T. C. Koopmans and R. W. Nelson observed, the socialist calculation debate also played an important role in the rise of formalism, particularly with regard to welfare economics. O. Lange’s misrepresentations were perhaps not as much an attempt to tease Mises as they were a clear expression of the rise of formalism.
