ABSTRACT
Critics of neoclassical economics will call attention to the knowledge requirements for any state of equilibrium. The important question is whether any theory of knowledge could be consistent with the knowledge requirements of a state of equilibrium. Recognizing errors as expected-price errors is consistent with the theory of perfect competition where each individual is considered to have no effect on the market price. Hayek argued that the competitive market system was more efficient than any other system in this regard. Hidden away in such normative claims for the superiority of the competitive price system over all other systems is an empirical claim about the necessary stability of any market system. The inherent stability of textbook neoclassical models which corresponds clearly necessary for the normative conclusions often promoted in economics classes. A too-obvious alternative is to ignore the difficulties of the microeconomic behavior and revert to the analysis of aggregates and thereby avoid the complexities of the questions of endogenous stability.
