, The economic imagination and the tacit dimensionThe Sensory Order

Abstract

Purpose – This paper examines Hayek's view of the mind to see if it provides a useful and unifying foundation for understanding both deliberative choices that involve conscious information processing (the ‘economic imagination’) and choices that are not determined by conscious processes such as those involving ‘gut feelings’ or knowledge that the chooser is unable to articulate (the ‘tacit dimension’).

Methodology/approach – The paper analyses Hayek's view of the mind from the standpoint of evolutionary economics and biology. Because of the significance of pattern detection in Hayek's analysis, the paper examines parallels with key ideas in personal construct psychology and artificial intelligence. As well as exploring the evolutionary advantages of behavior based on programmed responses to the detection of particular patterns, it also explores possible evolutionary and neural origins of dysfunctional heuristics and biases.

Findings – Hayek's theory of the mind provides useful foundations for analyzing choice in a evolving, pluralistic and context-based manner rather than seeing all choices as made in much the same way on the basis of ‘given preferences’ that obey the axioms of rational choice theory. His theory complements work in psychological economics based on Kelly's personal construct psychology, cognitive dissonance theory and Maslow's hierarchy of needs. The analysis leads to questions being raised about the conventional faith in the notion of a diminishing marginal rate of substitution.

Originality/value of paper – The paper shows how very different ways of choosing can be understood in terms of Hayek's analysis of the mind.

Citation

Earl, P.E. (2010), ", The economic imagination and the tacit dimensionThe Sensory Order", Butos, W.N. (Ed.) The Social Science of Hayek's ‘The Sensory Order’ (Advances in Austrian Economics, Vol. 13), Emerald Group Publishing Limited, Leeds, pp. 211-236. https://doi.org/10.1108/S1529-2134(2010)0000013011