The Austrians and the Arrow Impossibility Theorem

Some economists in the Austrian tradition interpret the Arrow Impossibility Theorem (AIT) as support for their laissez-faire standpoint. They presume that the AIT cannot be applied in market settings, but in the context of voting, it adds weight to their arguments against the possibility of socialism and planning. The examples of Boettke (2001) and Boettke and Leeson (2002) are taken as examples. It is shown that their stance is founded on a misinterpretation of Arrow, and no compelling case for exempting markets from the AITis found. The Austrian writers draw on Buchanan’s critique of Arrow, which critique is in turn shown to be faulty and unreliable. Finally a possible avenue for future Austrian research is identified, showing that the AIT might not apply to markets