Austrian Micro‐Foundations and Luhmannian Autopoiesis: Entrepreneurial Irritation and the Genesis of Institutional Variety

ABSTRACT How does institutional novelty enter a closed social system? Luhmannian theory explains how social systems reproduce through operational closure, but the psychic systems that generate novelty lie outside them. This paper answers the puzzle by integrating Austrian micro‐foundations—Misesian praxeology, Hayekian cognition, Schumpeterian creative destruction—with Luhmann's framework, on Luhmann's terms. Entrepreneurial minds, as psychic systems structurally coupled to communication, become socially effective only through organizations: autopoietic decision systems that carry imagined futures into the economy. Because the economy codes events as payment or non‐payment,, while profit and loss operate as trivalent program‐level evaluations, entrepreneurial judgement finds its space precisely where accounting cannot decide. The paper formalizes this mechanism as a three‐stage heuristic—variation, selection, restabilization—showing how localized cognitive acts become environmental irritations driving institutional morphogenesis and illustrates it through decentralized finance. The result is a micro‐founded systems theory of institutional evolution, with a diagnostic for the pathologies that arise when a system's observation of novelty is suppressed.