Error occurs when an acting person or entity misjudges or miscalculates.
Error in economics
Jörg Guido Hülsmann writes, "Any business cycle theory is essentially a theory of error. . . . Error or failure is a permanent condition of human endeavor. It consists of choosing an alternative for action that is less important (less preferred) than another one that could have been executed instead. Austrian business cycle theory does not have to assume that, were it not for inflation, the market participants would not err at all. It can rely entirely on the idea that inflation causes additional errors; that is, more errors than otherwise would have occurred". Loss is a signal to the entrepreneur that he has erred in the allocation of his resources, e.g. by malinvestment.
Henry Hazlitt writes that "the speculators have actually subsidized the farmers. This, of course, was not their intention: it has simply been the result of a persistent tendency to over-optimism on the part of speculators. (This tendency seems to affect entrepreneurs in most competitive pursuits: as a class they are constantly, contrary to intention, subsidizing consumers. This is particularly true wherever the prospects of big speculative gains exist. Just as the subscribers to a lottery, considered as a unit, lose money because each is unjustifiably hopeful of drawing one of the few spectacular prizes, so it has been calculated that the total labor and capital dumped into prospecting for gold or oil has exceeded the total value of the gold or oil extracted.)"
- Toward a General Theory of Error Cycles
- Hazlitt, Henry. "Stabilizing Commodities". Economics in One Lesson.