Taking Hayek Seriously
"A man who simply considers
knowledge for its own sake." — Gerald
Edelman
It It “Unscientific” To Rethink the Explanatory and Conceptual Fundamentals of a Science?
Posted on January 14, 2017 by Greg Ransom
Darwin, Galileo, Mayr, Copernicus, Edelman, Newton, and Hayek all rethought the very fundamentals of their
sciences, from the problems and explanatory strategies of their disciplines, to the logical status and conceptual
role of the elements of their activities. Yet among these, only Hayek is attacked by professors for being a
“philosopher” — and attacked as not being a “scientist” — for having done so. And only the work of Hayek is
constantly smeared by the professors as “philosophy” and not “science”.
Yet Hayek is hardly the only economist who has worried about the explanatory fundamentals of economics and
the conceptual status and role of the elements of their explanatory practices. Indeed, economists are recurently
agitated about their explanatory failures and the self-evident conceptual hand-waving they do when attempting to
justify their cognitive practices to themselves, other economics, and to the public at large. The list of figures in
economics who have done this begins with many of the leading figures of the discipline today and extend to
almost every leading economist across the history of the discipline. For example, former IMF economist Oliver
Blanchard has been attempting to defend his explanatory program in macroeconomics and his vision of the
conceptual role of his preferred math models here, here, here, here, and here. Esther Duflo used her Ely lecture at
the AEA to argue for conceiving economics not as science like physics, but as a field of blue-color engineering like
plumbing. Harvard economist Dani Rodrik has written a book trying to explain to economists and the public
what economists are doing and what they are in fact justified in doing with all of the math modeling and statistical
work. World Bank economist Paul Romer has launched an ongoing attack on the dominant explanatory practices
current among many of his follow economists here, here, and here, and has offered a defense of his own
explanatory practices and conceptual preferences here, here and here. The response to Romer has been almost
endless, with responses and replies coming from across the discipline of economics, for example here, here, here,
here, here, here, here, and here.
There a some big issues involved here, almost none of them any different from the ones that induced and inspired
Hayek to rethink the explanatory problems and strategies of economics and the conceptual role of its various
logical elements. What I want to do here is lay out how economics constantly generates these problems, how
Hayek has successfully resolved these problems, and why and how the natural of mathematical and logic,
combined with our conceptual traditions in economics and our philosophical tradition, have blocked economists
from finding their way out of conceptual fly bottle that sciences like Darwin’s explanatory science of biology have
managed to escape. In the way will will resolve some linguistic issues concerning different uses we can make for
central but conceptually brought words “philosophy”, “empirical”, “science”, “causal”, “explanation”, etc.
Larry Wright shows us how everyday reasoning and argument differs substantively from those points in our
practices where we are advised to take time to deliberate and rethink what it is we are doing and what we might do
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instead. There can be all sorts of things which inspire us to deliberate and rethink things. Thomas Kuhn has
written an important book and a number of essays on the topic as it arises in science. If you read closely the work
of Darwin, Newton, Galileo, Edelman, Mayr, and Hayek etc you will find that this rethinking often requires a
rethinking of the background tradition held among men of learning about what it is to do science or create
knowledge. Newton, Darwin, Galileo, Mayr, Edelman and Hayek all discuss how their explanatory efforts defy
and redefine both traditional and contemporary norms of what it is to do science and produce knowledge. Is
science suppose to be demonstrative and not hypothetical, is science suppose to be induced from facts and
justified by direct evidence, does it work with and support to Platonic kinds and Aristotelean forms, conceptions
and categories? Newton, Darwin, Mayr, Galileo, Edelman and Hayek were prepared to defy all of these demands
for what science and knowledge must be. What we will find in economics is a new set of dogmas, developed in the
wake of Kant and the neo-Kantians, which continue to ensnare the minds of economists. Hayek, we will show,
suggests a way out, one similar in important way to that taken by Darwin, and one which was seen already by
Adam Smith, Carl Menger and in various ways by other giants of economic science.
But for now lets get back to simpler issues and more concrete examples, using Esther Duflo Ely lecture and
economist Beatrice Cherrier’s discussion of that lecture as firm and easily understandable bone to chew upon.
Cherrier points out that economists have repeatedly sought to conceive their science on the picture of what they
imagine to be the practices found in other fields, from physics (here, here, and here), morals and art,
to medicine , dentistry, and plumbing. What Duflo is working to do, it to encourage here peers to move from what
is today the dominant physical picture of economics, to a more practical, hands-on conception of economics as the
everyday, craftsman-level engineering of a plumber, water-system technician or pipe-fitter. So what are these two
models and where do they come from?
Significantly, in large measure, these models of “physics” and “plumbing” do not come from the actual practices of
physics or plumbing, they come from what economists imagine to be the practices of physics and plumbing,
shaped by their training in elementary philosophy and from watching a plumber working on their pipes under the
sink. That is, the conception of “physics” in the head of economics has much more to do with the philosophical
ideas of Mill, Hume, Mach, Kant, Popper and Carnap than it has to do with what Copernicus, Newton, Galileo, or
Einstein achieved or how they achieved it.
We can see this in any detailed study of the most influential economists of the last 80 years, as we can with such
seminal figures as Paul Samuelson and Milton Friedman. Samuelson directly tells us that his model of “science”
came from the Viennese positivist Ernst Mach and the American operationalist Percy Bridgman. Samuelson
makes it clear both in his public declarations and in his personal diary that the philosophical picture of what
“science” is came first, and his economic practice was derives from the lessons he took from that picture. As
Samuelson writes in his diary in 1930:
“Science is essentially the establishing of Cause and Effect relationships. This knowledge can be
utilized in controlling causes to produce desired effects. It is the realm of philosophy to decide what
these objectives shall be, and that of science to achieve those decided upon.”
The prediction and control model of science suggested above by Samuelson was in fact part of the common
currency of the time, and was put into canonical form in 1934 in Cohen and Nagel’s widely used textbook, An
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Introduction to Logic and Scientific Method. There is a history to this model of science, one that is due more to
the work of Kant, Mill and Hume than it has to actual science, something of significance we will discuss in more
detail later.
The “plumber” model of economics also has a history, one also tied to the philosophical tradition, but one which
also reflects the ethos Frenchmen and Americans who imagined the role of economists as something like that of
engineers and craftsmen who want to design things to do something and then tinkering with them until they “just
work”. Math and statistics in this care are developed and collected with the ambition to use them to engineer
systems and then re-adjust the system settings with updated data readings as you go. Duflo recent reminder is
that much of any engineering project is handled at the mud and piping level my craftsmen such as plumbers with
practical hands-on understanding of what needs to be done to make the job successful, as much as it needs
engineers and technical people constructing schematics, taking measurements and re-dialing system settings.
So here we have two basics models of what economics is or can be, models which have done much to shape the
course of economics as a discipline over the last 150 years. We have made clear that each of these models has
more to do with the conceptions and ambitions in economists heads that it has to do with the practices and
achievements of actual physicists and plumbers. And we’ve suggested that there is a history to each of these
conceptions tied to the philosophical tradition. What I want to do now is ask a very basic question. If we were to
use either of these models to understand another basic yet fundamental science, say Darwinian biology, do these
models help? Are these models even minimally competent in grasping the nature of the massively successful
explanatory endeavor which is Darwin’s biology?
Let me submit that the answer is no, and that these models fail just as spectacularly when it comes organizing our
understanding of what we are doing when we are trying to make sense of the task of comprehending economic
phenomena. Dissertations could be written on how Darwinian explanation charts an explanatory form unlike that
of the physics taught to undergraduates, and indeed, many books and essays have been published laying out how
explanation in Darwinian biology and much of the rest of the biological world differs fundamentally from
explanation in many other parts of science. I’ve met and I’ve taken classes with leading figures in the literature,
and I’ve written my own dissertation length essay touching on central aspects of the topic. I’d particularly
recommend the writings of David Hull, Ernst Mayr, Larry Wright, Michael Ruse, Friedrich Hayek, Elliott Sober,
and Alex Rosenberg on the topic, among that of many others. Michael Ruse and David Hull discuss a bit of the
history of failed attempts to force Darwinian explanation into the vise of the classic “physics” model of scientific
explanation (“the received view”) inherited via the philosophical tradition developed in the wake of Hume, Kant,
the neo-Kantians, Mill, Frege, Mach and others. The story of how Wesley Salmon came to accept Larry Wright’s
landmark work on functional and teleological explanation after first balking at Wright’s dissertation is
paradigmatic of the vise grip hold the traditional model of science and scientific explanation once held on the
imagination of university professors.
Perhaps the best concise account of of the explanatory problem and causal explanation provided by Darwinian
biology can be found in Ernst Mayr’s One Long Argument and McGuire's, and as full length explanatory
narratives it is hard to beat Richard Dawkin’s The Blind Watchman and Darwin’s own On the Origin of Species by
Means of Natural Selection, Wheat State Pizza , Bar Tano, Canna Wine.
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What do we find when we looks at Darwin’s explanatory problem and the strategy he conceived to account for the
problem-raising phenomena identified in his problem? What we find are teleologically and functionally
characterized entities and characteristics that when situated in a particular way give rise to a truly puzzling
problem in our experience, one which helpfully and more clearly framed in the process of providing an underlying
causal mechanism to account for the phenomena which give rise to the empirical problems asking to be explained.
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James Ransom, 2003-2016
Posted on December 7, 2016 by Greg Ransom
My wife, my daughters, and I have lost our beautiful son and brother, James Ransom, 2003-2013 to the long-term
psychological effects of a traumatic brain injury. My family believes it is important that people know that James
was not depressed, he was a boy with a pre-born intensity and stress-causing sense of need to always do the right
thing, who suffered a serious brain injury that damaged his ability to handle the blow to his life that his injury had
caused.
James’s September, 2015 brain injury wrecked his vision and made him essentially sea sick when doing school
work, reading or attempting to do computer coding. It sent his life into a tailspin and turned a mild case of OCD
into a life threatening condition. James fell apart last year, withdrew from school and was under the care of
professionals. Time seemed to have healed James, he was happy, reintegrated into school and with his friends,
and playing basketball, learning martial arts and all other kinds of boy activities. James took his life for reasons
that only God knows.
James got a chance to take a trip to see family and do the things he loved in Washington state this summer, and
then to take a wonderful vacation to Hawaii for Thanksgiving, events which were a great blessing to the family.
James will be buried with his Jefferson Bible and pocket Constitution which he bought for himself last month.
Memorial contributions in honor of James Ransom may be made to Mission Hospital Foundation to support the
Children’s Hospital of Orange County/Mission Hospital’s newly launched Mental Health and Wellness Initiative
focused on Adolescent Behavioral Health http://www.mission4health.com/Mission-Hospital-Foundation.aspx
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James Ransom 2003 – 2016
Posted on December 3, 2016 by Greg Ransom
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Setting up Hayek’s Revolution: extending the logic of choice from consumer goods to
production goods (draft)
Posted on October 16, 2016 by Greg Ransom
Thomas Kuhn describes how science precedes working on normal science puzzles which have anticipated, non-
problematic solutions. When those don’t work out, scientists begin to rethinking the conceptual space, the
empirical problem to be explained, and the possible explanatory solutions to these re-thought problems, see for
example, what Darwin, Einstein, and Copernicus did.
Hayek worked on a set of normal science problems which arose when Menger, Walras, and Jevons came up with
a new way to think about the logic of the valuation of directly consumable goods. The task was to apply the new
logic of valuation to old problems having to do with what was called “distribution theory”. There were several
standard problems which the old Smith/Ricardo account of value theory helped answer about the valuation of
various non-consumable resources used in production.
When Copernicus rethought the cosmos, our conceptions of what stars and planets were changed, and were
placed in a new problem situation with a new explanatory apparatus. When Darwin rethought the biological
world, he reconceptualized our species concept and our understanding of what an adaptation was, all placed
within a new empirical problem / explanatory mechanism nexus.
When we first see Hayek taking up the challenge of extending the value logic of Menger et al to production goods
in the effort to answer the standard questions of distribution theory, we see him assuming that much of the old
conceptual scheme is non-problematic, and that the problem and solution set has not much need for revision. By
the time he is finished, Hayek is living in another world, one which economists today still don’t grasp, living as
most of them are closer to the classical world of Ricardo than to the new world of post-revolutionary Hayek. It
was hard for many biologists to grasp and accept what Darwin and Copernicus were doing when they re-conceived
the problems and explanatory schemes of biology and astronomy. The same has been true of Hayek and
economics, perhaps more so given the special, difficult conceptual and empirical issues which arise in the social
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science.
Hayek’s Dissertation for Wieser
The problem of exploiting the new Mengerian logic of valuation to tackle the old problems of the valuation of the
resources used in production, conceived by Ricardo as the theory of distribution, was first taken up by Eugen
Bohm-Bawerk and Friedrich Wieser. Wieser directed Hayek’s dissertation at the U. of Vienna, which took up the
specific problem of extending the logic of marginal valuation from the case of directly consumed goods to non-
labor production goods.
Menger had established the paradigm which illustrates how the value of distinguishable tokens of a category of
items, e.g. individual apples among a basket of apples, derives from our ability to set before our minds an ordering
of alternative preferred uses. That is, the value of any particular apple in the basket comes down to the last
preferred use of any particular apple, e.g. feeding the last remaining apple to your horse as a treat versus earlier,
more preferred uses on direct consumption eating up individual apples yourself.
The task Hayek set before himself was the problem of laying out the logic of ordering the preferred alternative
uses of production goods used in the making of consumption goods, e.g. the shovels, fertilizer, land, seeds, water,
trees, ladders, buckets, insecticide, etc. which go into the production of consumable apples.
We can think of a simpler example to isolate some of the issues at hand. If we own two barrels, we can lay out
before our mind alternative preferred uses for the barrels with different consumable outcomes, we can use it to
store water or we can use it to make wine, if one of our barrels burns up, the value of that barrel is the preferred
use would would choose to give up, e.g. give up the wine and use the remaining barrel to store water. In the
language made famous by Weiser, the opportunity cost of losing one of a number of barrels is the benefit lost
made possible by the barrel in its least preferred production use.
So that it the paradigm case of the logic of imputation, we impute value to the barrel by the consumption uses that
the barrel at the margin of choice makes possible for us.
The pure logic of valuation is about the ordering of preferences and uses in one’s own head involving a private
closed personal economy of goods and alternative uses. In the old economics of Smith, Ricardo and others,
valuation theory was used to explain changing patterns in the public money economy, things like changing prices
relations and changing incomes and changing stores of saved wealth.
“In seeking to determine the value of a given quantity of consumer goods, although the answer overcame the
spurious contraction between value and utility and simultaneously laid the groundwork for all value theory, the
problem thus solved constituted only a part of the problems of theoretical economics. The foundations for
answering the question of the structure of the economy as a whole and hence the problem of distribution are only
addressed by the theory of imputation.” (Hayek, 1926/2015, p. 3.)
“A satisfactory solution of the imputation problem is thus a precondition for a distribution theory based on the
theory of subjective value.” (Hayek, 1926/2015, p. 2)
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“According to the modern theory of subjective value, the determination of prices is basically explained by
individual valuation. At the same time, since Ricardo, it has been widely agreed that the objective of economic
theory is to discover the determinants of income, primarily by investigation what determines the prices of factors
of production.” (Hayek, 1926/2015, p. 2)
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Logic versus empirical problems and causal processes — Hayek’s revolution
Posted on May 16, 2016 by Greg Ransom
Economists do not understand Hayek.
They simply don’t.
I want here to explain in simple terms what economists don’t get, and what they would grasp if they were to ever
understood what Hayek is doing.
Thomas Kuhn explains how roadblocks to explanatory success, and conceptual novelties inspired by explanatory
failure, providing new avenues to understanding, open the way to new explanatory strategies and success.
Here is what Hayek does. Hayek identifies roadblocks to explanatory success in economic science, and then he
recasts the explanatory problem and explanatory strategy of economics to overcome these roadblocks. He
achieves a new understanding of the science of economics which solves old problems and puts is on a secure
logical foundation.
If we think about how economist have locked themselves into a titanium box inherited from an old tradition of
what “knowledge” demands and what “science” must look like, then we can grasp why economists haven’t yet
begun to see what Hayek has achieved.
To get from the current state of non-understanding to a position of understanding, we need to sketch out a few
things, and then show how they are related to one another. We need to sketch out the old picture of what
“knowledge” and “science” must be, and how that formed into a powerful central dogma. We need to identify the
roadblocks to explanatory coherence and success which economics faced over the last century, and how those
problems came to a head in the work of Friedrich Hayek on prices, production goods, trade cycle dis-coordination,
and in the economics of socialism. We need to talk about how the false dogma of what “knowledge” and “science”
demand has shaped economics, and how that dogma contributed roadblocks to explanatory coherence and
success in economics. Finally, we need to show how Hayek overcame these roadblocks to explanatory success my
recasting the explanatory problem and explanatory solution set in economic science, braking away from old
fallacies and dogmas once set in concrete among economists and philosophers.
Here is what we are going to learn.
We are going to learn that Hayek’s research project was dominated by a closely related set of conceptual problems,
all of which had been running into conceptual roadblocks. Among other thinks, Hayek was working on extending
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the pure logic of choice, also known as the pure calculus of marginalist valuation, from the case of multiple
consumption goods to the case go multiple production goods. Hayek was also working on the problem of using the
pure logic of choice to understand what is happening when the economy cycles from boom phases to bust phases.
Closely related to both problems, Hayek was working on the problem of using the calculus of marginalize
valuation to rethink what classical economists had said about the distribution of income and the nature of money
and interest, problems which were interrelated through pre-marginalist theories of profit, interest, and capital.
We are going to learn that the a false image of “knowledge” and “science” dominates the imagination of
economists, a false image derived from 19th century German economists and philosophers, ultimately grounded
in false ideas derived from the Greeks. Hayek challenges and smashes this false image, combining his
revolutionary work in neuroscience and epistemology with insights derived from David Hume, Carl Menger, Karl
Popper, and Ludwig Wittgenstein, among others. Hayek marshals his new thinking in a process of re-casting the
explanatory problem and explanatory mechanisms of economics, making use of a constellation of new ideas and
forgotten explanatory achievements from the past.
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My Reply to David Wilson on Hayek & the Use of Mathematical Population Biology Models in
the Social Sciences (draft)
Posted on February 23, 2016 by Greg Ransom
David Wilson has asked me to read his discussion of Hayek and the growing literature on multilevel selection
modeling and the wider literature of human cultural evolution. This is my reply which I hope he will welcome in
the spirit of filling the gap in the literature on “the sphere of economic thought centered on Hayek and the modern
study of cultural multilevel selection.” My discussion will also engage his lecture (listen here) on Hayek and
multi-level selection delivers before Peter Boettke’s F.A. Hayek Center for Advanced Study in Philosophy, Politics,
and Economics at George Mason University.
Let me begin by saying that I admire his work, and I have read the literature in which he works for over 35 years
with great interest, stretching back to the pioneering work of Richard Alexander, which I encountered almost
concurrently with my encounter with the work of Hayek. My own background is in the philosophy of biology and
scientific explanation, working with Alex Rosenberg and Larry Wright, which has involved studying most of the
foundational work in the history and philosophy of biology, including that of Wilson’s colleague Elliott Sober. I
have also constructed a functioning selection model of cultural evolution in which individual behaviors creating
group-exhibited properties give selective advantage both to the individual vis-a-vis individuals not displaying the
behavior and vis-a-vis species which do not display the group property, as in the case of schooling behavior by
individual fish and the fish species to which they belong.
Let me suggest that the crucial first step in “bridging the gap between Hayek and cultural multilevel selection” is
simply this: o identify and remove a host of false conceptions and mythologies found in Wilson’s discussion
concerning both (1) the domain of Hayek’s work and (2) the domain of evolutionary and selection explanations.
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Let me go through a list of these false conceptions and unhelpful mythologies.
1. “Hayek Crossed a Continental Divide in the Landscape of Economic Thought”
Hayek actually did TWO things. Hayek (1) resurrect the pre-20th century world of the enlightenment where
thinking about social institutions involved combinations of both evolutionary thinking and economic thinking.
And Hayek (2) showed how these elements made sense only in light of an empirical undesigned order problem
seen already in the 18th century, fleshed out and put into an powerful explanatory frame involving the causal
mechanisms of learning in the context of changing individual understandings of local conditions and prices
relations, following negative rules of conduct like “no stealing”, and using the pure logic of choice as a window on
global economic plan coordination.
David Wilson suggests that there existed a “continental divide” between two elements (1) The Age of Reason / The
Physics of Social Behavior; and (2) Evolutionary Biology, which Hayek “crossed”.
In fact, Hayek developed as a scholar steeped in the work of Carl Menger, Friedrich Wieser, Ernst Mach, and a
number of other continental thinkers, all of whom never bought into many elements of “The Age of Reason / The
Physics of Social Behavior,” and all of whom combined economic and evolutionary elements in their explanatory
paradigms, accounting for the growth of knowledge, institutions, and human flourishing.
So the “continental divide” identified by Wilson didn’t exist for Hayek as a budding scientist. What is more, Hayek
went back and showed that many important enlightenment thinkers working in social theory rejected modern
conceptions of “The Age of Reason / The Physics of Social Behavior” as became prominent especially in the 20th
century, and these thinkers combined economic, competitive and evolutionary conceptions in their explanatory
paradigms matched with undesigned order problems fully compatible with the later Darwinian vision, a vision
which Hayek shows was itself derived and inspired in large measure from economic, competitive and evolutionary
conceptions from social theory.
Hayek points out, for example, that John Locke had a socially evolutionary conception of “reason” and rejected
what Hayek often referred to as a “French” conception of reason. Hayek points out that Darwin’s branching tree
conception of historical evolution by descent derives from the linguistic work of William Jones. Hayek points out
that Adam Ferguson, Bernard Mandeville, Rene Descartes, David Hume, and Edmund Burke identified social
institutions and structures which were the product of a multitude of human behaviors across time but were not
the result of any one man’s intentional design.
And of course the work of Thomas Malthus on scarce resources, declining marginal utility and competition for
goods was the direct inspiration for the Darwinian paradigm itself.
Hayek also does something very similar to what Ernst Mayr does in his book The Growth of Biological Thought,
Hayek shows how conceptual roadblocks fixed in the very terminology of Greek thought block space for a domain
of ordered phenomena between the intentionally designed and the physically regular. Hayek shows how Greek
conceptions block room for undersigned order thinking in social theory and Mayr showed how Greek conceptions
of types, kinds and concepts blocked the notion of change across time in biological categories like species and
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adaptive features.
So right here we identify a meaty, fruitful and substantive “gap” area significant for exploring the character of
economic, selective and evolutionary undesigned order explanations — and how those have been blocked by the
intellectual traditions stretching back to Greek thought. There is a great deal on the plate here in Hayek’s work,
from his rejecting of justificationalism in epistemology to his Wittgensteinian rejection of rationalistic Platonic or
Fregean pictures of conceptual significance, work that could be enriched with connection to David Hull’s work on
concepts as historical individuals. This work could also be connected to Hayek discussion of the problematic and
misleading nature of God’s Eye View models of social phenomena, work directly linked to Ludwig Wittgenstein’s
work on this same topic. David Hull’s discussion of the problematic man-many relation between phenotype and
genotype would also be of significance here, directly related to Hayek’s account of the many-many problem of
brain classification and perceptual categories. There is a lot to think about here. Anyone wanting to “fill the gap”
needs to do so. And the issues involved only get started with these topics.
There is massively more to be said about how Hayek never began within a “continental divide”, how Hayek
established that no such “continental divide” existed in much of the best of enlightenment social theory, and about
how Hayek replaced the mistakes of “Age of Reason / The Physics of Social Behavior” social science as it came to
dominate 20th century economic thought, even as Hayek provided crucial new components to the formalization
and mathematization of the pure theory of choice and the equilibrium construct. More importantly, their is the
central story of how Hayek managed to recast economics as a science originating in an empirical undesigned order
problem, and the role of the pure logical of choice and equilibrium constructs in our conception of that problem,
and the relation of these to the central causal mechanisms accounting for plan-like social coordination (1) changes
in individual understanding in the context of changing local conditions and relative prices; and (2) inherited
negative rules of just like rules against lying, stealing, and breaking contracts.
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Taking Hayek Seriously
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