Table of contents(21 chapters)
The unexpected fertility of Hayek's cognitive theory: An introduction to The social science of Hayek's “The sensory order”
Purpose – Overview of Hayek's cognitive theory and the contributions of chapters.
Methodology/approach – Perspective on significance of Hayek's cognitive theory for the social sciences.
Findings – Hayek's cognitive theory provides insight into his oeuvre; more importantly, it is relevant for social theory in its own right.
Research limitations/implications – Hayek's cognitive theory warrants further attention by economists and social theorists interested in evolutionary social processes.
Originality/value of paper – To counter a widespread view that the contribution to economics and social science of Hayek's cognitive theory is largely confined to methodology. Hayek's cognitive theory also provides a useful framework for furthering the understanding of evolution within the social realm.
Purpose – First, to look closely and critically at Hayek's treatment of science in The Sensory Order. This provides hints as to the difficulties in maintaining a theory of scientific knowledge as a selective sum of the identifiable contributions of individual scientists. Second, to generalize from Hayek's theory of how the brain generates an individual's knowledge to a theory of how science generates scientific knowledge, knowledge that is not a simple sum of individual contributions. Third, to apply this picture of science to understanding developments in postpositivist philosophy and post-Mertonian sociology of science.
Approach – We provide a short survey of the conventional understanding of science and scientific knowledge, including that of Hayek in The Sensory Order. We examine in more depth the ways in which developments in postpositivist philosophy and sociology have transformed our understanding of science. We describe how, by analogy with Hayek's theory of the brain, science can be seen as an adaptive system that adjusts to its environment by classifying the phenomena in that environment to which it is sensitive, and we apply this systemic picture of science with a view to integrating much of the more moderate content of recent philosophy and sociology of science.
Purpose – To present the argument that the paradigm of spontaneously self-ordering open adaptation is common to Hayek's thesis on the mind (The Sensory Order) and to his presentations of social science (the social order).
Methodology/approach – To show how Hayek's methodological stance for social science interrelates with his theoretical work in neuroscience and psychology, where the ‘connectionist’ paradigm is relevant to extensive writings upon the human condition.
Findings – •close parallels across biological, psychological and social adaptations give a basis for determining which methods are appropriate to gain knowledge about knowledge;•broad confirmation is evident that methods of proven worth to physical science have little relevance for the analysis of psychological and social phenomena, which are more complex than the phenomena of the material world.
Research limitations/implications – •that the social order rests upon common beliefs;•that no simple distinction separates subjective and objective knowledge;•that any drive for social science to match the precision of physical science is misguided;•that in seeking an objective focus, behaviourism eliminates crucial introspective insights upon motivation and goals.
Originality/value of paper – The presentation is one of exegesis showing the relevance of Hayek's seminal work in theoretical psychology to the broadest themes of human understanding and social adaptation.
Purpose – Recent findings in neurobiology, cognitive psychology, and brain evolution are interpreted in light of Hayek's construction of the sensory order as a spontaneously emergent evolutionary adaptation. The sensory order is an experimental view of reality ordered by experience.
Approach – Natural selection of behavioral and cognitive adaptations is shown to result in structural change within the brain. Individual brains grow, and species brains evolve, through the construction and evaluation of hypothetical classification schemata. This process both results in the construction of the sensory order, as well as results from the particular models of objective reality that individuals have constructed, their evaluation of these models, and the comparison of our own models with those of others.
Findings – Cognitive adaptations, such as belief in agency, causal reasoning, and theory of mind, are inherited because they enhance survival and reproductive opportunities. In addition, behavioral adaptations including empathy, reciprocity, social hierarchy, and peacemaking are also inherited. Socialization in larger groups required the evolution of enhanced brain connectivity permitting a greater degree and sophistication of social intercourse.
Research Implications – Recent findings in neurobiology can be better related to one another in terms of how they contribute to the sensory order. Literary Darwinism, a school of literary theory, can also be understood more fully.
Originality/Value of Paper – Varied developments in modern neurobiology and cognitive psychology are shown to lead to spontaneously emergent institutional structures, such as behavioral regularities and rules of morality, which further enhance the survival benefits of inherited brain structure and the sensory order.
This paper conceives of Hayek's overall project as presenting a theory of sociocognition, explication of which has a two-fold purpose: (1) to locate Hayek within the non-Cartesian tradition of cognitive science, and (2) to show how Hayek's philosophical psychology infuses his social theory.
Purpose – To show the existence of two different lines of thought in economics: the Homo oeconomicus tradition and the evolutionary tradition.
Methodology/approach – Following Hayek, the author adopts the individualistic methodology. This allows to separate the Homo oeconomicus approach, which is a hyper-rationalistic construction concerned with the intentional results of human action, from the evolutionary approach, which is concerned with the unintended consequences of human conduct.
Findings – The Homo oeconomicus tradition incurs the methodological mistake of psychologism, a theory of human nature and a human psychology as they exist prior to society. And yet the nature of individual man itself must be placed within a social context and be explained. As the evolutionary tradition and Hayek suggest, the formation of the Ego and the development of the human mind moves over a range of intersubjective relations.
Research limitations/implications – Homo oeconomicus tries to maximize the result of human conduct. However, the concept of maximization neglects the fact that the exchange occurs as soon as a positive-sum game sets in; this is very different from maximization, which does not take into account the ‘compensations’ that the subject can achieve by means of the other dimensions of human action.
Originality/value of paper – To speak of ‘classical economists’, placing evolutionary scholars and strictly utilitarian ones under the same denomination is just as misleading as using the expression ‘neoclassical economists’ in referring to the evolutionary Menger and utilitarian Jevons and Walras.
Purpose – To show that The Sensory Order is an original effort to support, on a neurophysiologic basis, methodological individualism.
Methodology/approach – Considering that the mind is a complex and self-organized order, Hayek criticizes methodological holism according to which the cause of action has to be sought outside the individual, in macro-laws governing social wholes. He argues that, due to the nature of the mind, the cause of action has to be sought inside the individual.
Findings – The paper stresses that scholars have more or less neglected a very important point in discussions of the Austrian author's psychology. Hayek's psychology supports the idea that the explanation of the action stems from the understanding of its meaning.
Research limitations/implications – The article only discusses some of the epistemological consequences of Hayek's theory of the mind. For instance, it does not analyze in a detailed way the relationship between this theory and the idea of distributed knowledge. It left an in-depth examination of this issue for subsequent research.
Originality/value of paper – Many authors state that Hayek's version of methodological individualism only examines the non-intentional effects of action, neglecting the importance of Verstehen. They argue that the Austrian scholar is not a complete and coherent champion of methodological individualism. The paper shows that this criticism is unfounded.
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.
Hayek on Prices and Knowledge: Supplementing “The Use of Knowledge in Society” with The Sensory Order
Purpose – To show that The Sensory Order is useful for understanding Hayek's position on the informational role of prices.
Methodology/approach – Hayek's psychological theory argues that every sensation is interpreted in the light of past experience. This idea is applied to Hayek's view on the price system by arguing that, similarly, every price is interpreted in the light of local knowledge. The usefulness of this approach is tested by addressing some common mainstream interpretations.
Findings – Prices perform their informational role in interaction with local knowledge. The standard view, in which prices convey the same information to everyone, ignores the fundamental importance of local knowledge and varying interpretations.
Research limitations/implications – The paper only discusses some of the central insights given in Hayek's theory of the mind. Furthermore, implications for connected issues, such as entrepreneurship and market process theories in general, are left for subsequent research.
Originality/value of paper – While the connections between Hayek's thought in different fields and the importance of interpretation has been suggested by others, this paper contributes to the Austrian price theory and suggests the relevance of The Sensory Order to economists by making this connection more pronounced.
Purpose – To show how Hayek's work on cognitive theory can inform our understanding of the operation of the firm, more specifically the ability of firms to engage in organizational learning.
Methodology/approach – After reviewing Hayek's cognitive theory, the paper provides a brief overview of modern organization theory, focusing on the post-Coasean literature and the “resource-based view” of the firm specifically. I then offer several analogies between the two theories, arguing that the “map” and “model” of Hayek's work on cognition can be analogized to the balance sheet and the current budget/business plan of the firm.
Findings – I find that the “map” and “model” of Hayek's work on cognition can be analogized to the balance sheet and the current budget/business plan of the firm. The feedback between the model's encounters with the external world and the map's structuring of the classificatory process of the mind parallels the way in which firms' success or failure feedback to the evaluation of their assets. The paper also discusses the way in which the competitiveness of the individual's and the firm's environment might matter for the speed and effectiveness of learning processes.
Research limitations/implications – I conclude with some suggestions for further research, focusing on questions of political economy and how a more politicized marketplace might undermine organizational learning when seen through the lens of Hayek's work. Specifically, the paper argues for comparative explorations of different organizational structures in similar institutional environments and similar structures in different institutional environments to see which sort of factors matter for organization learning. One implication of the paper is that less competitive environments should demonstrate weaker and slower organizational learning.
Originality/value of paper – Hayek's work on cognitive theory has never been applied to organizational learning in any sustained way before. In doing so, this paper draws out some original research questions and political economy implications.
Purpose – How did cooperation emerge in large-scale, fluid societies? Standard theories based on direct and indirect reciprocity among self-regarding agents cannot explain the high level of impersonal exchange observed in developed market economies.
Approach and findings – Drawing upon recent research from across the behavioral sciences, we attribute the emergence of cooperation in early trade to an evolved characteristic of human psychology that makes revenge sweet: people are willing to pay a price to punish those who betray their trust. Once cooperative expectations became fixed, institutions such as the law merchant and ethnic trading networks, as well as certain “bourgeois virtues,” helped sustain and extend trade during the medieval period.
Contribution of the paper – Our argument continues the tradition begun by F.A. Hayek in The Sensory Order (1952), by providing an integrated explanation for the rise of the market based upon the coevolution of human psychology, culture, and institutions. In our conclusion, we revisit Hayek's (Hayek, 1976, 1978, 1988) analysis of the conflict between our instincts and the institutions that have created the market order.
An institutional solution for a cognitive problem: Hayek's sensory order as foundation for Hayek's institutional order
Purpose – To show that Hayek's cognitive theory sheds light on Hayek's institutional theory.
Methodology/Approach – Although F. A. Hayek contributed richly to many fields of economics – from capital theory to monetary theory, and from institutions to spontaneous order – one theme is omnipresent in his work: the knowledge problem. This paper examines Hayek's work in psychology, The Sensory Order, and argues that there exist strong parallels between Hayek's cognitive and institutional theories.
Findings – Hayek's institutional (or social) theory makes a lot more sense when understood as a necessary consequence of his cognitive theory. Furthermore, Hayek's cognitive theory allows for rational individuals making choices that are socially embedded.
Research limitations/implications – Three Hayekian themes are explored: (1) institutional implications of limited knowledge; (2) learning and knowledge generation; and (3) mental models. The paper then uses a challenge within Hayek – the tension between microlevel methodological individualism and macrolevel institutional evolution – as a starting point toward resolving the lingering individual-culture methodological puzzle in contemporary economics. These are mere starting points for further research.
Originality/value of paper – Horwitz (2000) writes that “Hayek's thought will have come to fruition when the social sciences abandon rationalist and constructivist explanations of social phenomena in favor of ones that recognize the roles of tacit and contextual knowledge, institutional evolution, and spontaneous order. Such an approach would dramatically improve our understanding of the human mind.” This paper offers a step in that direction.
Purpose – The goal of this chapter is to contribute toward an understanding of Hayek's book “The Sensory Order.” It focuses on his concept of dispositions which influence perception as well as action. The dichotomy between the phenomenal and the scientific world which Hayek stresses throughout his works is based on the existence of such dispositions.
Approach – Hayek's cognitive writings such as The Sensory Order, “Rules, Perception and Intelligibility” (1963), “The Theory of Complex Phenomena” (1964), and “The Primacy of the Abstract” (1969) are the main resources to explain his cognitive theory.
Findings – Hayek's concept of dispositions facilitates re-interpretation of the term “dispersed knowledge.” Also, Hayek's Theory of Cultural evolution is seen as an evolution of dispositions, which stands in line with his view on the concurrent development of mind and culture.
Import of findings – The chapter offers a cognitive interpretation of Hayek's theory of government, depicting governmental action and rule-setting as spontaneous as well as deliberate processes.
Purpose – To comment on how The Sensory Order by F. A. Hayek is understood within the context of Hayek's broader research program.
Methodology/approach – Earlier and current perspectives on The Sensory Order are surveyed, quoted extensively, and commented upon. An alternative framework for understanding The Sensory Order is offered and compared to the existing perspectives. Some textual and archival evidence are combined with insights from the history of thought literature to present how Hayek himself may have viewed the role of The Sensory Order in his broader research project.
Findings – Earlier and current perspectives on The Sensory Order are found wanting. The available alternative hypothesis – that Hayek's economics is foundational to his theory of mind – is presented as a more fruitful approach to motivate modern Austrian economics as a progressive research program.
Research limitations/implications – There is limited archival and source material available on this topic and apparently competing versions circulating. Such a discussion has a relatively small and narrow field of interest among scholars intimately familiar with one another's work.
Originality/value of paper – If correct, this chapter offers a unique and original perspective on how to perceive the insights from Hayek's The Sensory Order. It also reaffirms the role of methodological pluralism in progressing contemporary political economy.
Purpose – To respond to a paper by D'Amico and Boettke arguing that certain scholars, including myself, whom they label “Neuro-Hayekians” have both oversold the importance of Hayek's The Sensory Order for understanding his economics and misunderstood the importance of institutions as opposed to brains/minds in generating social order.
Methodology/approach – I offer a different interpretation of my own work, particularly my use of the word “foundational” to describe the role of The Sensory Order in Hayek's system as well as a criticism of D'Amico and Boettke's apparent dualism.
Finding – On a more careful reading of my own work, as well as that of Hayek himself, I argue that I am not guilty of holding the view that D'Amico and Boettke attribute to me.
Research limitations/implications – The major implication of this exchange is that there is much more agreement than D'Amico and Boettke seem to think.
Originality/value of paper – The value of this paper is found in its attempt to make clear that those scholars arguing for the importance of Hayek's cognitive theory in understanding his work are not arguing that it is a necessary or sufficient condition for understanding his system. Rather, it is valuable for grasping the interconnectedness of his theories of the mind and the market and the relationship between them.
Purpose – To defend my past work against the charge that it has exaggerated the importance of The Sensory Order or mistaken its proper role in Hayek's scholarship.
Methodology/approach – I review the evidence given by D'Amico and Boettke and show that such evidence does not imply exaggeration or distortion regarding the nature and importance of The Sensory Order in Hayek's oeuvre.
Findings – Hayek's The Sensory Order was very important, but you can understand his economics without having read it.
Research limitations/implications – The paper only discusses some criticisms of my work on Hayek and a few related points. It does not provide a detailed or extensive account of either The Sensory Order or the role of that work in Hayek's economics.
Originality/value of paper – The work is “original” because it defends my past work against a criticism that previously did not exist. My defense is valuable to the extent that the criticism of D'Amico and Boettke is considered relevant and interesting.
Purpose – To recognize the comments made by Horwitz (2010) and Koppl (2010) in their attempts to reply to D'Amico and Boettke (forthcoming), “Making Sense out of The Sensory Order.” Furthermore, this paper hopes to explain what role D'Amico and Boettke do see for cognitive neuroscience in the study of Austrian economics.
Methodology/approach – Some brief summary comments are presented about Horwitz (2010) and Koppl (2010). Then a general framework of individual learning and its effects upon social institutions and economic processes is described by referring to Cowan and Rizzo (1996) and Denzau and North (1994).
Findings – Hayek was a political economist first and foremost. Whatever the status of his research in theoretical psychology attains, it does not change the fact that we as economists would do well (especially young economists) to focus on his substantive contributions to economics and political economy.
Research limitations/implications – Though space and time constraints did not afford this at present, further research would benefit from an intensive survey of the empirical findings available in the neuroscience and neuroeconomics literatures. How do such findings map onto the proposed frameworks of Hayekian economics provided by Koppl compared to D'Amico and Boettke.
Originality/value of paper – This paper takes notice of the historical linkage between Cowan and Rizzo's (1996) cognitive model of individual learning within the broader tradition of subjectivist/Hayekian/Austrian economics.