Embedded markets: A dialogue between F.A. Hayek and Karl Polanyi

The recent economic crisis has once more underscored the close connection between markets and social life, thrusting this point at the centre of the analysis of economic and political activity and has once more asked the question of whether and how individuals are embedded in both. Here I argue that an analysis and partial reconciliation of the positions of F.A. Hayek and Karl Polanyi on the topic can help in this debate.     

I did not call him “Fritz”: Personal recollections of Professor F. A. v. Hayek

Nobel Laureate in Economic Sciences, 1986.     

Hayek Contra Pangloss: A Rejoinder

Whitman (1998) claims that Friedrich Hayek's theory of cultural evolution was not Panglossian. Denis's (2002) refutation relies on an overbroad definition of the term Panglossian, a misunderstanding of the implications of group selection theory, and an incomplete understanding of the nested character of evolutionary processes in Hayek's approach.     

Praxeology,Experimental Economics and the Process of Choice: F.A. Hayek and Vernon Smith on the Misesian Action Axiom

Mises’s action axiom postulates that human action is purposeful behavior. While this axiom is the building block for a powerful methodology, it is also incomplete, because it sets aside the underlying processes of decision-making. And while Mises does not dismiss the gap between intention and action, he is silent on it, relegating such a study to psychology. We contend that a study of underlying thought patterns and the process of choice – rather than contradicting praxeology and the action axiom – in fact complements the writings of Mises. To demonstrate this, we look at two authors: F.A. Hayek and Vernon Smith. Hayek’s theory of the sensory order sheds light on the process of choice, and explains how decision-making is contextually embedded. Smith’s concepts of ecological rationality and neurological “hard-wiring” help us understand decision-making. We argue that cognitive foundations enrich our understanding of the process of choice, and thus of the Misesian action axiom.     

Hodgson on Hayek: a critique

In his book Economics and Evolution, Geoffrey Hodgson offersa detailed critique of F. A. Hayek's writings on cultural evolution.Certain aspects of Hodgson's treatment appear to be inaccurate.This paper criticises Hodgson's critique.     

From Keynes to Hayek: The marvel of thriving macroeconomies

Inherent ignorance of and uncertainties about the future may translate into doubts about the overall viability of market mechanisms. However, these doubts are quelled by a broad empirical observation: market economies thrive. Hayek sometimes abstracted from such ignorance and uncertainties in order to identify the market mechanisms that are essential to thriving economies. His often-overlooked “interest-rate brake,” for instance, keeps the rate of implementation of new technologies in line with peoples willingness to save. A careful reading of macroeconomic history suggests that artificial booms often ride piggyback on genuine booms. During a period of technological breakthroughs, the central bank's adherence to the Real Bills Doctrine overrides the interest-rate brake and engenders an unsustainable boom. JEL Code B22, E30, E50     

Knowledge Questions: Hayek,Keynes and Beyond

This paper discusses the knowledge problem in terms of both the use and generation of knowledge. This is analyzed in the context of Hayek's failure to respond to the Keynes Challenge—the claim that markets fail to produce relevant knowledge—by suggesting that in the aftermath of The General Theory he was not well-positioned to address that problem. Ironically, his post-World War II work in cognitive psychology, The Sensory Order, offers a theory of the generation of knowledge which can provide a useful analogy for understanding the generation of market-level knowledge.     

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.     

Some Reflections on F.A. Hayek's The Sensory Order

Though F.A. Hayek is principally known for his work in economics, he also made contributions, both positive and critical, to the field of psychology. His most important piece in the latter field is his 1952 book, The Sensory Order. This paper attempts to locate The Sensory Order in relation to some of Hayek's other works. The origins of Hayek's interests in psychology, as revealed by an early student paper that provided a starting point for his later book, is noted. We then examine what may have motivated Hayek some 25 years later to return to psychology. Finally, the larger role that the book came to play in Hayek's overall system is explored. This revised version was published online in July 2006 with corrections to the Cover Date.     

The emergence of institutions in Hayek’s theory: two views or one?

Hayek opposes the explanation of the emergence of institutions as “spontaneous (unintentional) order”, which he considers correct, against “constructivism” (viewed as erroneous). This dichotomy exhibits some inconsistencies, for, on Hayek’s account, constructivist ideologies seem able both to prevent the evolutionary emergence of norms and to generate institutions coherent with deliberate, intentional, purposes. If this is so, are there then two views on the emergence of institutions in Hayek’s theory? The paper consequently discusses whether constructivism and evolution of norms are two alternative kinds of explanation, and in particular whether the former can be interpreted in evolutionary terms.