In the 1930s, socialist economists used the assumptions of equilibrium theory to argue that a central planner could coordinate supply and demand from above. This argument led Hayek, over the years, to try to explain the limitations of equilibrium theory and, conversely, to explain how capitalism functioned without the assumptions of equilibrium being met. In a changing world of agents who are ignorant of the future, how is a functioning market “order” possible? One answer can be found in Hayek's argument (...) that evolved rules make people's future behavior more predictable and, more to the point, that they contain previously accumulated knowledge that provides the building blocks for future economic growth. Hayek's evolutionary theory was flawed, however, in failing to explain how people can know which rules are responsible for their success or failure so that they persist in using those rules and pass them forward in time. However, markets provide immediate feedback about success and failure through profits and losses. An evolutionary explanation of the economy would have permitted Hayek to dispense with the metaphor of general equilibrium, which was increasingly irrelevant to his understanding of economic order. (shrink)

The present essay addresses the epistemic difficulties involved in achieving consensus with respect to the Hayek–Keynes debate. It is argued that the empirical implications of the relevant theories are such that, regardless of what is observed, both theories can be interpreted as true, or at least, as not falsified. The essay explicates the respects in which the empirical evidence underdetermines the choice between the relevant theories. In particular, it is argued both that there are convenient responses that protect each theory (...) from what appears to be threatening evidence and that, for particular kinds of evidence, the two theories are empirically equivalent. Larry Laudan's suggestion that ampliative methodological criteria can resolve an underdetermined choice between multiple scientific theories is considered and rejected as a possible means to rational consensus. (shrink)

Hayek's later work on the possibility of socio-economic order in decentralized market economies is an exercise in contrastive causal explanation as conceptualized by realist social theorists and philosophers. This interpretation of Hayek's work lends support to the view that Hayek's post-1960 writings can be thought of as an example of comparative institutional analysis. It also provides a means of reinforcing Hayek's own efforts to establish the scientific credentials of his work.

SummaryFriedrich Hayek and Michael Polanyi corresponded with each other for the best part of thirty years. They had shared interests that included science, social science, economics, epistemology, history of ideas and political philosophy. Studying their correspondence and related writings, this article shows that Hayek and Polanyi were committed Liberals but with different understandings of liberty, the forces that endanger liberty, and the policies required to rescue it.

In “Popper, Weber, and Hayek,” I claimed that the economic and political world governed by social democracy is too complex to offer hope for rational social‐democratic policy making. I extrapolated this conclusion from the claim, made by Austrian‐school economists in the 1920s and 30s, that central economic planning would face insurmountable “knowledge problems.” Israel Kirzner's Reply indicates the need to keep the Austrians’ cognitivist argument conceptually distinct from more familiar incentives arguments, which can tacitly reintroduce the assumption of omniscience against (...) which the Austrian economists rebelled. Callahan's Reply illustrates the need to keep in mind the hypothetical, conditional nature of economic arguments. Notturno's Reply changes the subject by asserting the intrinsic value of social‐democratic participation, regardless of its outcomes—even while, like Talisse's Reply, ignoring the evidence that public ignorance and elite dogmatism probably can't be mitigated by more information or by appeals to be open minded. And Hill focuses on the very real imperfections of market and other private‐sphere decision making, without weighing the shortcomings of the political alternatives. Markets and other private‐sphere decision arenas don't have to be perfect for them to improve upon public‐sector processes. In the latter, cognitive demands tend to be much greater, because of the divergence of modern social problems from the conditions that would have faced the hunter‐gatherers whose cognitive apparatus we have inherited. (shrink)

Karl Popper's methodology highlights our scientific ignorance: hence the need to institutionalize open‐mindedness through controlled experiments that may falsify our fallible theories about the world. In his endorsement of “piecemeal social engineering,” Popper assumes that the social‐democratic state and its citizens are capable of detecting social problems, and of assessing the results of policies aimed at solving them, through a process of experimentation analogous to that of natural science. But we are not only scientifically but politically ignorant: ignorant of the (...) facts that underpin political debate, which are brought to our attention by theories that, as Max Weber emphasized, can be tested only through counterfactual thought experiments. Public‐opinion and political‐psychology research suggest that human beings are far too unaware, illogical, and doctrinaire to conduct the rigorous theorizing that would be necessary to make piecemeal social engineering work. F.A. Hayek realized that the public could not engage, specifically, in piecemeal economic regulation but failed to draw the conclusion that this was due to a specific type of political ignorance: ignorance of economic theory. (shrink)

This paper explores the link between the case for indeterminism in an epistemological fashion and methodological individualism in the thought of two defenders of both stances: Karl Popper and Friedrich Hayek. The relation between these issues has not received much attention before and even less so with regard to these two thinkers. First, Popper’s defence of indeterminism from an epistemic viewpoint and Hayek’s views about the indeterminism of action are studied. Second, their positions about methodological individualism are considered. Finally, several (...) comparative questions are aired. (shrink)

Friedrich Hayek was a fervent advocate of the methodological specificity of the social sciences. However, given his contact with Karl Popper, several historians and philosophers have characterized his final position as Popperian, that is, a position that would have accepted the unity of scientific method. A closer look at Hayek's philosophy and Popper's own intellectual course shows that such a thesis is based on misconceptions that can be overcome by taking the Hayekian concept of 'spontaneous order' as the foundation of (...) a methodology immune to any kind of methodological monism. (shrink)

A themed issue on the work of Michael Oakeshott.

This paper offers fictionalism as a new approach to the problem of reasonable disagreement discussed in social epistemology. The conciliationist approach to reasonable disagreement is defined, and three problems with it are posed: that it is destructive of inquiry, self-defeating, and unacceptably revisionary. Hans Vaihinger’s account of fictions is explained, and it is shown that if the intellectual commitments that are the subject of reasonable disagreements are treated as fictions rather than as beliefs, the three noted problems are avoided. Whereas (...) beliefs have a “rivalrous” relation to the source of their justification (evidence), fictions have a non-rivalrous relation to the source of their justification (expediency), meaning that disagreement over which fictions to employ is not problematic in the way that disagreement over what to believe is. Some objections to the fictionalist approach to reasonable disagreement are answered. (shrink)

What is typical of Hayek's challenge concerning socialism is that he always maintained that this question was for economic theory to decide. Sketching the historical background of what has come to be known as the "socialist calculation debate" (section 1), I try to link this debate with the Menger-Wieser Zurechnungsproblem and show that the Pareto-Barone approach has determined the theoretical form of this economic controversy. I then go on to explore Hayek's 'inapplicability' argument (section 2) and try to show how (...) it is related to Mises' 'logical impossibility’ argument. This is followed by an examination of Hayek's second argument (section 3), which I refer to as 'the evolutionary argument'. I display what is the specific gist of this argument and connect it tightly to the first one. I then discuss certain methodological issues (section 4) pertaining to the allegedly radical difference between Mises' arguments and Hayek's tentative refutation of socialism. Here I challenge the received view that Mises' based his case on the 'impossibility in principle' of socialism, whereas Hayek's own position was to challenge the 'possibility in practice' of a centrally planned economy. This reading (especially by Willem Keizer) of Hayek's contribution to the debate seems to me misguided and unwarranted. I attempt to propose, on the contrary, that both lines of reasoning involve the same kind as arguments since both of them should be interpreted as impossibility theorems. Finally (section 5) I try to give an appropriate and adequate answer to the question raised in the title of this paper. (shrink)

The dissertation concerns F. A. Hayek’s critique of legislation. The purpose of the investigation is to clarify and assess that critique. I argue that there is in Hayek’s work a critique of legislation that is distinct from his well-known critique of social planning. Further that the main claim of this critique is what I refer to as Hayek’s legislation tenet, namely that legislation that aims to achieve specific aggregate results in complex orders of society will decrease the welfare level. The (...) legislation tenet gains support; from the welfare claim – according to which there is a positive correlation between the utilization of knowledge and the welfare level in society; from the dispersal of knowledge thesis – according to which the total knowledge of society is dispersed and not available to any one agency; and from the cultural evolution thesis – according to which evolutionary rules are more favorable to the utilization of knowledge in social cooperation than are legislative rules. More specifically, I argue that these form two lines of argument in support of the legislation tenet. One line of argument is based on the conjunction of the welfare claim and the dispersal of knowledge thesis. I argue that this line of argument is true. The other line of argument is based on the conjunction of the welfare claim and the cultural evolution thesis. I argue that this line of argument is false, mainly because the empirical work of political scientist Elinor Ostrom refutes it. Because the two lines of argument support the legislation tenet independently of each other, I argue that Hayek’s critique of legislation is true. In this dissertation, I further develop a legislative policy tool as based on the welfare claim and Hayek’s conception of coercion. I also consider Hayek’s idea that rules and law are instrumental in forging rational individual action and rational social orders, and turn to review this idea in light of the work of experimental economist Vernon Smith and economic historian Avner Greif. I find that Smith and Greif support this idea of Hayek’s, and I conjecture that it contributes to our understanding of Adam Smith’s notion of the invisible hand: It is rules – not an invisible hand – that prompt subjects to align individual and aggregate rationality in social interaction. Finally, I argue that Hayek’s critique is essentially utilitarian, as it is concerned with the negative welfare consequences of certain forms of legislation. And although it may appear that the dispersal of knowledge thesis will undermine the possibility of carrying out the utilitarian calculus, due to the lack of knowledge of the consequences of one’s actions – and therefore undermine the legislation tenet itself – I argue that the distinction between utilitarianism conceived as a method of deliberation and utilitarianism conceived as a criterion of correctness may be used to save Hayek’s critique from this objection. (shrink)