From Mixed Economy to Entangled Political Economy: Paretian Insights into the Two Faces of Entrepreneurship

Abstract

This paper combines insights from Ludwig von Mises about the mixed economy and Vilfredo Pareto about non-logical action within a social system to explore some intertemporal dynamics of an entangled system of political economy. Mises explained the inherent instability of the mixed economy. Pareto would agree from the perspective of logical action, but paid particular attention to the ineradicable presence of non-logical action in social systems. Both types of action were rational in Pareto’s scheme of thought, but they reflected different causal patterns. Both types of action originate in sentiment. For logical action, sentiment is filtered by logic. For non-logical action it is filtered by rationalization. Entrepreneurship is present in both cases, but operates to different effect between the cases. Interaction between the two types of action generates tectonic environments that are the societal equivalents of earthquakes of varying magnitude. There is, moreover, good reason to think that the intensity of the tectonics varies directly with the relative size of political entrepreneurship within the totality of human action within society.