Law, legislation, and local minima: Solving a problem in Hayek��s theory of common law judging, with historical examples

Friedrich Hayek??s Law, Legislation, and Liberty noted a problem in the common law system: Sometimes, following judicial precedent would lead to unforeseen bad outcomes over time. No judge can anticipate all possible implications of a precedent-setting decision, and sometimes later judges, bound by precedent, will be forced despite themselves to elaborate the law in ever more inefficient or unjust ways. Hayek proposed that one role of the legislator was to correct such ??dead ends?? in the common law. This paper proposes that judges working within the constraints of the common law and given only the tools Hayek himself allowed them are capable of escaping such binds on their own. It uses historical examples from the era of coverture to support this claim. Not only were judges willing to identify exceptions to coverture, these exceptions helped pave the way for coverture??s eventual abolition. This process is examined and found to be otherwise consonant with Hayek??s larger theory of the common law as a rule-finding process.     

Post-Hayekian socialism a la Burczak: Observations

Burczak (Socialism after Hayek, Ann Arbor: University of Michigan Press, 2006) presents a proposed form of stakeholder socialism to overcome the critique by Hayek of Marxist socialist systems. This involves financing the beginning of worker-owned and managed cooperatives through a wealth tax, with a generous social safety net, within a market economy in a democratic political system with civil liberties. While such a system may overcome worker alienation, avoid many of the informational and incentive-based inefficiencies identified by Hayek, and have some special efficiencies of its own, it will likely suffer from the financing problems most cooperatives face within predominantly market capitalist economies as they try to grow larger. The most likely location for an effort at such a system might be in a smaller country that has had some experience with workers’ management, such as the former Yugoslav republic of Slovenia.      

Is social justice for or against liberty? The philosophical foundations of Mill and Hayek’s theory of liberty

By comparing the philosophical foundations of Mill and Hayek’s theory of liberty, this paper shows that some similarities in the economic theories of Mill and Hayek are actually based on different rationales. It follows that any attempt to find a common thread in Mill and Hayek to provide reasonable guidance for social policy can be promising only if we can find the common ground from their social philosophy. While analyzing the rationales behind their opinions regarding the role of government and taxation policies, this paper will focus on exploring the role of two philosophical ideas, liberty, and justice. This will clarify the relationship between social justice and liberty as well as their status in relation to the ultimate principle of rules in the philosophy of Mill and Hayek. This paper will offer an explanation why, in Mill’s utilitarian philosophy, the pursuit of social justice aligns with the real freedom of everyone, but in Hayek’s philosophy, it is a hindrance.     

Austrian Economics,Socialism and Impure Forms of Economic Organisation

Modern supporters of the Austrian school of economics maintain that their critical stance towards impure forms of economic organisation - such as the mixed economy - grew out of the arguments of Mises and Hayek during the socialist calculation debate of the 1930s. The paper assesses the two theorists, contributions in the debate and argues that their ideas cannot provide the basis for a general rejection of impure forms of economic organisation. First of all, and contrary to most modern Austrians, who consider the contributions of Mises and Hayek as essentially consistent, it is argued that Hayek's critique of socialism is much more effective than Mises' as it rests on his concept of tacit knowldge and on an evolutionary account of the emergence of capitalist institutions. However, the paper goes on to argue that, if Hayek's critique of state intervention is to have any relevance for contemporary capitalist economies, it must be in a position to show the non-viability not only of a fully centrally planned economy of the Soviet type but also of the mixed economy. It is argued that it is precisely in this that Hayek's evolutionism fails, for his teleological approach is not persuasive in ruling out the possibility of impure forms of capitalism in a manner that is consistent with truly evolutionary - i.e. non-teleological - ideas.     

Hayek and the Great Depression of 1929: Did he really change his mind?

The aim of this research is to establish whether, and if so in what way, Hayek changed his mind about the Great Depression of 1929.The work is divided into two parts. In the first part, I present the ‘early’ Hayek of the 1930s. Hayek was the great rival of Keynes. Both explained the Great Depression, applying opposing business cycle theories. For Keynes, the crisis was caused by an excess of saving over investment; for Hayek, on the contrary, by an excess of investment over saving. In the early 1930s, Röpke attempted a synthesis, positing that a recession due to overinvestment can degenerate, as in 1929, into a depression caused by oversaving. Hayek examined and rejected Röpke's theory. In the second part, I present the ‘later’ Hayek of the 1970s. After years of silence and solitude, Hayek was unexpectedly awarded the Nobel Memorial Prize in Economics, precisely for the contribution he made in the 1930s to the theory of the business cycle. Hayek returned to his pursuit of the ghost of Keynes, debated with his friend and rival Friedman, re-examined Röpke's special case and, according to Haberler, changed his mind. In my conclusion, I attempt to resolve the dilemma.     

1985: A defining year in the history of modern Austrian economics

Mises and Hayek in the 1920s and 1940s thought of their work as within the orthodoxy of economic science. But after WWII it became increasingly obvious that the contributions of Mises and Hayek were out of step with the way the economics profession was evolving. But starting in 1974, due to the organizational efforts of Murray Rothbard and Israel Kirzner, and bolstered by the awarding of the Nobel Prize in Economic Science to FA Hayek, a resurgence of interest in Austrian economics by young scholars was initiated. Starting in 1984, but significantly in 1985, the work of the new generation of Austrian economics started to have an impact in the mainstream outlets in terms of journals and university presses. We argue that this is a defining year in the modern history of the Austrian school and that it reflected both the quality of work being done by the new generation as well as a methodological crisis within the mainstream of economic scholarship. Don Lavoie’s work in comparative economics, as well as his work in methodology, reflected this shift within the economic conversation.     

Cantillon and Ricardo effects: Hayek's contributions to business cycle theory

The distinctive line of argument in Hayek' business cycle theory can be characterized as a combination of the Cantillon effect monetary expansion on the price structure and the Ricardo effect of a shortage of consumption goods on the production of investment goods. This paper compares the original ideas of Cantillon and Ricardo with their adaptation and combination by Hayek. The differences help to expose fundamental problems in Hayek' theory and, more generally, in projects of integrating money and the business-cycle phenomenon with Walrasian general equilibrium theory.     

Friedrich Hayek's fleeting foray into 1940s colonial development

Herein we examine recommendations made in 1944 by Friedrich Hayek for the Government of Gibraltar, regarding Gibraltar's future economic prospects. In keeping with Hayek's ideas in The Road to Serfdom, he proposed reducing state-led economic planning in Gibraltar alongside proposals to lift restrictions upon the operation of a free market in rents and labour. Hayek's proposals were rejected by both governments in Gibraltar and London because they were not compatible with the economic planning of colonial economies, inspired by Keynes, and provision of welfare systems in the empire inspired by Beveridge, both dominant ideas during the mid-1940s in government circles.     

Normative judgments and spontaneous order: The contractarian element in Hayek's thought

This paper explores the apparent tension between Hayek's moral skepticism and his role as a defender of liberal institutions. It looks at Hayek's concept of spontaneous order, and asks whether there are any grounds for claiming that spontaneous orders have moral value. The argument from group selection is considered but rejected. Hayek is interpreted as putting most weight on arguments which show, for specific orders (such as the market and common law) that their rules assist each individual in the pursuit of his or her ends, whatever those ends may be. It is suggested that this form of argument is contractarian in character. However, Hayek's contractarianism is distinctive in that it looks for agreement among individuals within an ongoing social order, rather than among rational agents who stand outside any particular society. This paper was written while I was a Visiting Scholar at the Social Philosophy and Policy Center, Bowling Green State University; I am very grateful for the Center's support. An early version was presented at the Friedrich August von Hayek Memorial Symposium in Freiburg, in June 1993. In revising the paper, I have benefited from the comments of the participants at that symposium.     

The Emergence of Hayek's Ideas on Cultural Evolution

F. A. Hayek's writings on cultural evolution are an essential part of his work, and some aspects of these writings (e.g., his defense of group selection) have generated considerable controversy. This historical paper traces the circumstances that led Hayek to introduce cultural evolution and related ideas into his work.     

Paths of the Weberian–Austrian Interconnection

This paper centers on the theoretical–methodological interconnections between Weber and the Austrian economists. First, the influence of classical Austrian economics, especially Menger and Böhm-Bawerk, on Weber is reexamined. Then we are concerned with the importance of Weber's ideas in neoclassical Austrian economics, including Schumpeter, Mises and Hayek. Also, Weber's legacy in modern economics is reconsidered. Since little research is done on these interconnections between Weber's sociology and Austrian economics, the paper thereby contributes toward spanning a gap in the present economic and sociological literature.     

The death of development theory: From Friedrich von Hayek to the Washington consensus

Abstract

Development strategies followed by many countries in the 20th century bestowed a relevant role to the State. During the 1970s, it all reversed, and free markets became paramount to efficiency. F. von Hayek and the Mount Pelerin Society led the way to eliminate the State as a significant economic player, while P.T. Bauer extended such ideas to development economics, which would eventually give way to the Washington Consensus. Beyond actual results of such policies, it is surprising to see the appeal of Bauer’s theoretical approach, considering that it is constructed disregarding both empirical evidence, as well as the abundant discussion on development that was taking place contemporarily. This article explores the theoretical process of such reversal in development economics theory.     

Methodological individualism: True and false

I apply Hayek’s distinction between ‘true’ and ‘false’ individualism to methodological individualism. Hayek traced ‘false’ individualism to Cartesian rationalism; Hayek’s rejection of Mises’ praxeology was due to its rationalist underpinnings. The first half of this paper identifies praxeology’s foundational philosophical concepts, emphasising their Cartesian nature, and illustrates how together they constitute a case for methodological individualism: intuition and deduction; reductionism; judgement; dualism. In the second half of this paper, I draw upon philosophy and cognitive science to articulate ‘Hayekian’ (N.B. not Hayek’s) alternatives to these Cartesian concepts. The Hayekian alternative allows a ‘gestalt switch’ from the individual- to the system-level perspective. I therefore suggest that methodological individualism is both true and false: true, in that economic phenomena are grounded in the actions of individuals; false, in that certain problems might be reconceived/discovered at the system-level. I finish by suggesting three avenues of research at system-level: optimisation; stigmergy; computational complexity.     

The many roads to serfdom

This comment considers the planning/laissez faire debate discussed in the Hayek symposium, and raises three points. The first is that all debates are contextual and Hayek's Road to Serfdom needs to be considered in its contextual setting. The second is that there are many roads to serfdom, not just the one outlined by Hayek, and the Hayek/Lerner debate today would probably focus on a different road than it did in the 1930s. The third is that modern economists' focus on technical issues has in large part removed them from the role that Hayek and other top economists played in their time.     

The moral ecology of markets: on the failure of the amoral defense of markets

Many economists have defended capitalism; most have tried to do so within the self-imposed methodological constraint that economists should employ only empirical arguments, not normative ones. This essay examines three classic amoral defenses of capitalism—by Milton Friedman, James Buchanan, and Friedrich Hayek—and argues that each fails on its own terms, since each implicitly incorporates moral presumptions essential to the author's argument. Constructively, the essay proposes that no one can adequately endorse (or critique) markets without making a moral evaluation of their context—their “moral ecology.” Four issues are identified as necessarily addressed in every adequate evaluation of markets. The essay does not endorse any one position on these elements, but argues instead that seemingly incommensurable standpoints on markets—ranging from Marxist to libertarian—actually represent positions on the these four basic issues.     

Darwinian paradigm,cultural evolution and human purposes: on F.A. Hayek’s evolutionary view of the market

The claim that the Darwinian paradigm of blind-variation-and-selective-retention can be generalized from the biological to the socio-cultural realm has often been questioned because of the critical role played by human purposeful design in the process of cultural evolution. In light of the issue of how human purposes and evolutionary forces interact in socio-economic processes the paper examines F.A. Hayek’s arguments on the “extended order” of the market (capitalism), in particular with regard to their policy implications. Its focus is on the tension that exists in Hayek’s work between a rational liberal and an agnostic evolutionary perspective. A re-construction of his arguments is suggested that allows for a reconciliation of these seemingly contradictory views.     

Techno-economic paradigms as typical interfaces between producers and users

In this paper it is suggested that techno-economic paradigms should not only be considered as means of coordination among the producers of technological knowledge but also as means of coordination between groups of producers and users of specific types of artefacts, as shared specifications of typical interfaces between the two parties. If such interfaces are simplified and standardized, the information needs of the parties will be delimited (and this is necessary in the worlds of bounded rationality à la Simon and Hayek). However, successful product innovation will often presuppose an information-rich interaction and thereby often presuppose non-standardized interfaces. In the paper these two conflicting principles are developed in order to clarify several controversial issues within the theory of innovation and evolution.     

J.A. Schumpeter and T.B. Veblen on economic evolution: the dichotomy between statics and dynamics

At present, the discussion on the dichotomy between statics and dynamics is resolved by concentrating on its mathematical meaning. Yet, a simple formalisation masks the underlying methodological discussion. Overcoming this limitation, the paper discusses Schumpeter's and Veblen's viewpoint on dynamic economic systems as systems generating change from within. It contributes to an understanding on their ideas of how economics could become an evolutionary science and on their contributions to elaborate an evolutionary economics. It confronts Schumpeter's with Veblen's perspective on evolutionary economics and provides insight into their evolutionary economic theorising by discussing their ideas on the evolution of capitalism.     

KNOWLEDGE AND INNOVATION: PROMOTING A SYSTEM APPROACH OF INNOVATION PROCESSES

Abstract

This contribution intends to clarify for the current discussion about knowledge and its importance within economic systems. It relies on the complementary character of the economics of knowledge of Marshall and Hayek. One of them is useful to discuss opportunities and limits of the so-called resource-based theory of the firm in order to deal with the relationship between the governance of knowledge and firms' innovative behaviours; the other is useful to insist on the importance of knowledge channelled by and within market dynamics. As a consequence, their combination allows one to pave better grounds to current knowledge economic importance by exploring in-depth characteristics of knowledge, expressing the need to deal with the governance of technological knowledge, and promoting the localized and distributed characters of firms' innovative behaviours. This finally leads to promote an innovation-system approach based on that localized character of innovative behaviours of firms in order to depict proper use made by firms in matters of knowledge generation, use, dissemination, and trade.