Discuss how different models of the market help us understand how markets work.

There are four models described by Vivienne Brown in the OU Reader, Understanding Business; Markets CH6 Page 117  144 that go a long way to help our understanding of how markets work. They are:

Schumpeters Model  Competitive Markets and Innovation

The Neoclassical Model  Competitive Markets and Equilibrium

Hayeks Model  Competitive Markets and Power

Sens Model – Markets and Power/Inequality

Schumpeters Model

Joseph Schumpeter put forward the model of competitive markets; in it he said that Capitalism, then, is by nature a form or method of economic change. (Schumpeter, 1976)

Schumpeter believed that for firms to succeed and to survive in a capitalist state they had to innovate and evolve.  The firms that either refused or were unable to change would die. He called this process Creative Destruction he also referred to this …(short extract)