How Misesian Was the Hayekian Research Program?

Abstract

Hayek often said that his 1937 paper – “Economics and Knowl- edge” -- was a subtle rebuke of Mises’s apriorism. Not, as many might want to believe, in some root and branch fashion, but in the realm of applied theory of which the study of the market economy is to be included. The realm of pure theory – or what Hayek calls the “Pure Logic of Choice” or in other places he calls “The Eco- nomic Calculus” – the essential building block of economic analy- sis reflects the Misesian (or actually Mengerian) position, and more or less the epistemological status of the pure theory aspect of praxeology is upheld by Hayek. As he put it in a much later essay, there is a “Primacy of the Abstract.” And, one must always remem- ber that Mises’s claim is not that he was unique in this endeavor either. As he put it:

“In asserting the a priori character of praxeology we are not drafting a plan for a future new science different from the tradi- tional sciences of human action. We do not maintain that the theo- retical science of human action should be aprioristic, but that this it is, and always has been so.” (1949, 40)

I believe the most scientifically productive reading of Hayek’s 1937 paper is as a clarification of the Misesian project with respect to the study of the market economy – or what both Mises and Hayek called “catallactics”. And, in catallactics the pure logic of choice is a necessary component, but not a sufficient one for a full explana- tion. We must, in our quest for a full explanation explore how alter- native institutional arrangements impact the learning of individuals within that system. In this way we move from the pure logic of choice to the situational logic of organizations to the study of the exchange order, and with that productive specialization, peaceful social cooperation, and the entrepreneurial function as an agent of change. This is how I would read the passages in Hayek (1937, 34ff) where he argues that the pure logic of choice is not directly applicable to the explanation of social relations. Equilib- rium for individual choosers, in other words, is quite different from equilibrium achieved by dispersed and diverse individuals. The first is a necessary part of the explanation, but to achieve the sort of dovetailing of plans that defines the equilibrium state in the social relations of the market we must be able to explore how “under certain conditions, the knowledge and intentions of the different members of society are supposed to come more and more into agreement, or, to put the same thing in less general and less exact but more concrete terms, that the expectations of the people and particularly of the entrepreneurs will become more and more correct.” (1937, 45)

It is in this manner that economics, Hayek argues, ceases to become purely an exercise in pure logic, and becomes in a sense an empirical science.3 It is in the study of how alternative institutional environments influence the behavior of individuals and how that in turn impacts the ability of these individuals to realize the gains from social cooperation under the division of labor. And the behav- ior we must focus our analytical attention on, is how they acquire and utilize the knowledge dispersed throughout the system, in other words how they learn how best to orient their actions with others so as to achieve a coordination of plans that defines the equilibrium of the system.