Search results

This chapter uses the theory of complex systems as a conceptual lens through which to compare the work of Friedrich Hayek with that of Vincent and Elinor Ostrom. It is well known that, from the 1950s onwards, Hayek conceptualised the market as a complex adaptive system. It is argued in this chapter that, while the Ostroms began explicitly to describe polycentric systems as a class of complex adaptive system from the mid-to-late 1990s onwards, they had in fact developed an account of polycentricity as displaying most if not all of the hallmarks of organised complexity long before that time. The Ostromian and Hayekian approaches can thus be seen to share a good deal in common, with both portraying important aspects of society – the market economy in the case of Hayek, and public economies, legal and political systems, and environment resources in the case of the Ostroms – as complex rather than simple systems. Aside from helping to bring out this aspect of the Ostroms’ work, using the theory of complex systems as a framework for comparing the Hayekian and Ostromian approaches serves two other purposes. First, it can be used to show how one widely criticised aspect of Hayek’s theory of society as a complex system, namely his account of cultural evolution via group selection, can be strengthened by an appeal to the work of Elinor Ostrom. Second, it also helps to resolve a tension – ultimately acknowledged by the Ostroms themselves – between some of their explicit methodological pronouncements and the actual, substantive approach they adopted in their analysis of polycentric systems.

Certain elements of Hayek’s work are prominent precursors to the modern field of complex adaptive systems, including his ideas on spontaneous order, his focus on market processes, his contrast between designing and gardening, and his own framing of complex systems. Conceptually, he was well ahead of his time, prescient in his formulation of novel ways to think about economies and societies. Technically, the fact that he did not mathematically formalize most of the notions he developed makes his insights hard to incorporate unambiguously into models. However, because so much of his work is divorced from the simplistic models proffered by early mathematical economics, it stands as fertile ground for complex systems researchers today. I suggest that Austrian economists can create a progressive research program by building models of these Hayekian ideas, and thereby gain traction within the economics profession. Instead of mathematical models the suite of techniques and tools known as agent-based computing seems particularly well-suited to addressing traditional Austrian topics like money, business cycles, coordination, market processes, and so on, while staying faithful to the methodological individualism and bottom-up perspective that underpin the entire school of thought.

F. A. Hayek’s macroeconomic theory and policy ideas have gained renewed attention since the cheap-money boom until 2007, and subsequent bust, followed the basic Hayekian narrative. Only to a very limited extent, however, do we find Hayek’s ideas on the agenda of mainstream macroeconomic researchers since Robert Lucas’s research program gave way to “Neoclassical” and “New Keynesian” DSGE models. We find examples of deeper interest on the periphery of the mainstream. Hayek’s influence on today’s macroeconomic policy discussions remains similarly limited, although he has become an icon to some opponents of loose monetary policy.

The controversy between Hayek and Keynes in the 1930s is probably one of the best‐known disputes in economics and several comments have been made on this episode (Hicks, 1967; Machlup, 1977; Fletcher, 1987). In the assessments little attention has been paid to the development of the ideas of the two economists, to the views they had in common and to the influence they had on each other. These aspects will be taken into consideration in this contribution with the aim of extending our knowledge of the fundamental points of disagreement between them. The crucial question is how it came about that Hayek and Keynes, who for some time studied very similar monetary problems, ended as such fierce opponents on the question of how a modern capitalist system works. Keynes went as far as denying that the market system is self‐adjusting, whereas Hayek, especially in his later writings, propounded the view that markets constitute an efficient mechanism for the satisfaction of human needs.

The notion of constitutionalism and federalism as principal devices for limiting the power of government is central to F. A. Hayek’s political philosophy. A number of political scientists have recently criticized Hayek’s (as well as J. M. Buchanan’s and B. R. Weingast’s) reasoning on this subject for its presumed “neoliberal bias.” This paper reviews this critique and takes it as a challenge to clarify certain ambiguities in Hayek’s – and, more generally, in liberal – accounts of constitutionalism and federalism.

This chapter explores the political economy of F.A. Hayek with emphasis on the continued relevance of his work for contemporary scholars. We focus on the theme of coordination throughout Hayek's research program. This general theme can be traced from Hayek's technical economics up through his later writings in political philosophy. After considering Hayek's major works in political and legal theory, we conclude by discussing the contemporary implications of Hayek's political economy. Specifically, we discuss eight areas where modern economists should pay close attention to the main lessons and themes in Hayek's writings.

The methodological individualism and subjectivism of the Austrian tradition in economics is often associated with a methodological dualism, i.e. the claim that the nature of its subject matter, namely purposeful and intentional human action, requires economics to adopt a methodology that is fundamentally different from the causal explanatory approach of the natural sciences. This paper critically examines this claim and advocates an alternative, explicitly naturalistic and empiricist outlook at human action, exemplified, in particular, by the research program of evolutionary psychology. It is argued that, within the Austrian tradition, a decidedly naturalistic approach to subjectivism can be found in F. A. Hayek’s work.

Ideas matter. Thought matters. Thought is a form of doing. Theorisation shapes our sensibilities and determines what we see with incalculable effects on our actions. When ideas are embodied in the often prosaic practices of organisation and management, they determine the personality of institutions and the condition of our lives within them. Social norms have a gritty materiality that belies the classical split between materialism and idealism.

Hayek’s “Use of knowledge in society” is often misunderstood. Hayek’s point is not just that prices aggregate dispersed knowledge, but also that the knowledge embedded in prices would not exist absent the market process. Later, in The Constitution of Liberty, he argues that this same idea can also be applied to the study of political and collective choice phenomena. Democracy is not just about aggregating preferences. Absent the democratic process, the knowledge necessary to solve collective problems is not generated. We compare this perspective on democracy to Bryan Caplan’s and Helen Landemore’s theories, and we argue that Hayek’s account focused on “opinion falsification” is richer. Unlike Caplan or Landemore, who adopt a static perspective, Hayek is more interested in the long-term tendencies and feed-back mechanisms. For example, why do Western democracies seem to have gradually moved away from the most deleterious types of economic policies (such as price controls)? Hayek’s conjecture is that the democratic process itself is responsible for this. We connect Hayek’s conjecture about democracy to the broader argument made by Vincent Ostrom, who has claimed that public choice should study not just incentive structures, but also collective learning processes. We believe that this line of research, that is, comparative institutional analysis based on the collective learning capacities embedded in alternative institutional arrangements, merits a lot more attention than it has received so far. The question “Which collective choice arrangements have the best epistemic properties?” is one of the most important neglected questions in political economy.