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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.

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.

Cognition and psychology have become central issues in economics. While this interest represents a radical change in economic theory, it does have a useful history that we believe is only partially recognized by contemporary economists. Although it is customary to cite Herbert Simon's important work in this regard,¹ we suggest Hayek's earlier work The Sensory Order (1952) should enjoy similar billing.

Purpose – This chapter aims to critically examine how Hayek's philosophical psychology helps defend his liberalism.

Methodology/approach – It is commonly argued that The Sensory Order enables Hayek to strengthen the epistemological theses of his social philosophy against constructivist rationalism by demonstrating why the mind as a complex order can never fully explain itself and why only “explanation of the principle” is possible for complex phenomena. Building on this argument, the chapter attempts to show that we can reconstruct a liberal conception of man who is distinct, creative yet culturally embedded from Hayek's philosophical psychology.

Findings – This chapter contends that a better understanding of Hayek's liberal self not only can enrich our analysis of the strengths and problems of Hayekian liberalism but also help counter some of the major criticisms against The Sensory Order.

Research limitations/implications – The findings of this chapter suggest that while Hayek's epistemological defense of liberalism is both powerful and thought-provoking, there is a danger that he tends to treat individual liberty as an instrumental value without adequately taking into account the intrinsic value of individuality. This chapter tries to offer some preliminary analysis of this problem and points to the direction that thinkers sympathetic to Hayek's liberalism can further develop his defense by making good this inadequacy in future research.

Originality/Value of the chapter – This chapter attempts to reconstruct a liberal self from Hayek's philosophical psychology and subject such a conception to critical scrutiny in the light of Hayek's defense of liberalism. This is an area that is relatively neglected and needs to be better explored by Hayek scholars.

This chapter explores the ways in which cybernetics influenced the works of F. A. Hayek from the late 1940s onward. It shows that the concept of negative feedback, borrowed from cybernetics, was central to Hayek’s attempt to explain the principle of the emergence of human purposive behavior. Next, the chapter discusses Hayek’s later uses of cybernetic ideas in his works on the spontaneous formation of social orders. Finally, Hayek’s view on the appropriate scope of the use of cybernetics is considered.

Purpose – The aim of this note is to explain what Hayek meant when in The Sensory Order he claimed that Mach was one of his fundamental readings in psychology while he was writing The Sensory Order.

Methodology/approach – A historical approach to show the different role Mach played in Hayek and Neurath/Carnap.

Findings•A parallelism between Mach–Kant and Hayek–Mach in psychology.•Hayek's rejection of Mach's final philosophical approach as well as his aversion against the Vienna Circle's positivism as forms of metaphysics, based on an awkward definition of isomorphism.

Research limitations/implications•The human sciences cannot be reduced to the natural sciences.•Any form of knowledge is knowledge of “how” rather than of “what”.

Originality/value of the paper•To show Mach's role in Hayek's psychology.•To consider The Sensory Order as a relevant part of Hayek's struggle against reductionism in psychology.

Purpose – To answer the following questions: Is all knowledge based on “experience” in Hayek's view? Was he an “empiricist” or a “Kantian”? In what sense?

Methodology/approach – Starting from a thorough analysis of Hayek's explicit ideas about empiricism and experience in The Sensory Order and some related writings, I reconstruct his epistemology but also try to improve on it with the help of some other philosophers.

Findings – Empiricism has many meanings depending on how you define “experience.” Hayek is not a “sensationalist empiricist” because he does not believe that all knowledge is based on “sense experience.” However, given his ideas of “pre-sensory experience” and “experience of the race,” Hayek is a “post-positivist empiricist.” His empiricism can be improved upon by privileging what I call “selective experience.”

Research implications – The next step is to analyze Hayek's market economics and philosophy of science to see which kind of experience guides Hayekian entrepreneurs and scientists. If this line of research is continued, practical and social implications might follow.

Originality/value of the chapter – The question whether Hayek was an “empiricist” or a “Kantian” is an old question. However, this chapter is the first systematic analysis of his “empiricist” epistemology and his concept of “experience.” Moreover, it has value beyond Hayek scholarship since, in the general empiricism debate, epistemologists have almost ubiquitously assumed that “experience” means “sense experience.”

Purpose – To explore lines of inquiry by Hayek and C. S. Peirce on sensation and cognition and Hayek's interest in Peirce.

Methodology – To compare Hayek and Peirce's relational interpretations of sensation and cognition.

Research limitations – The theories of both Hayek and Peirce on sensation and cognition are more extensive than can be addressed here. This exploration is more suggestive than comprehensive.

Findings – Both Hayek and Peirce emphasized the relational and abstract nature of human mental processes. Hayek viewed his contribution as overlapping with psychology while Peirce viewed his theory as being logically before psychology.

Social implications – The ideas of Peirce and Hayek imply that the traditional empiricist and rationalist epistemologies of cognition and sensation are limited and incomplete and thus embrace cognitive inefficiencies.

Originality/value of paper – Hayek's brief references and interest in the ideas of C. S. Peirce have not yet been explored to date.

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.