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Hayekian Systems The central theme in the work of F.A. Hayek was the problem of order in society, and his focus was epistemological: he was concerned with the constraints on knowledge, the problems associated with its distribution, the structures in which it inheres, and the implications of these issues for the understanding of social phe- nomena generally. But while his work has greatly improved our understanding of market processes, application to more complex social arrangements was not an unambiguous success. In seeking to progress beyond Hayek’s difficulties in formulating a more general theory of spontaneous order, this book fleshes out an analogy between social orders and the biological order detailed in Hayek’s The Sensory Order into a theory of adaptive systems. It focuses first on those aspects of the systems which enable them to learn about their environments, and then on the entrepreneurial processes which implement their anticipatory capabilities. The inclusion of anticipatory elements, inspired by the work of Robert Rosen, results in a theory of social orders which integrates many of the disparate findings of Austrian economists into a self-consist- ent conceptual framework and has applicability to other social arrangements such as firms and governments. Of particular interest is the interaction between the systems of science and government, an issue of significant current concern which is comprehensively explored here both theoretically and empirically. This book is essential reading for anyone interested in Hayek, Austrian econom- ics, social theory, and the history of economic thought more broadly. William N. Butos is Professor Emeritus in economics at Trinity College, Hartford, CT, and deputy editor of the journal Cosmos + Taxis. His research inter- ests include the economics of science and the interaction of government and sci- ence, monetary economics, the history of economic thought, and the social science implications of the work of F.A. Hayek. Thomas J. McQuade is an independent scholar. He is a former software entre- preneur and has taught economics at Trinity College in Hartford and as a visiting scholar at New York University. His research interests include the economics, philosophy, and history of science, and the development of the concept of “antic- ipatory systems” as an approach to social theory that encompasses arrangements such as market, science, government, and firm. Routledge Foundations of the Market Economy Edited by Mario J. Rizzo, New York University and Lawrence H. White, George Mason University A central theme in this series is the importance of understanding and assessing the market economy from a perspective broader than the static economics of perfect competition and Pareto optimality. Such a perspective sees markets as causal pro- cesses generated by the preferences, expectations and beliefs of economic agents. The creative acts of entrepreneurship that uncover new information about prefer- ences, prices and technology are central to these processes with respect to their ability to promote the discovery and use of knowledge in society. The market economy consists of a set of institutions that facilitate voluntary cooperation and exchange among individuals. These institutions include the legal and ethical framework as well as more narrowly “economic” patterns of social interaction. Thus the law, legal institutions and cultural and ethical norms, as well as ordinary business practices and monetary phenomena, fall within the analytical domain of the economist. Economic and Political Change after Crisis Prospects for government, liberty, and the rule of law Edited by Stephen H. Balch and Benjamin Powell Competition and Free Trade Pascal Salin Economic Freedom and Prosperity The Origins and Maintenance of Liberalization Edited by Benjamin Powell Capitalism and Inequality The Role of State and Market Edited by G.P. Manish and Stephen C. Miller Hayekian Systems Research into the Structure of Social Interaction William N. Butos and Thomas J. McQuade For more information about this series, please visit www.routledge.com/series/ SE0104 Hayekian Systems Research into the Structure of Social Interaction William N. Butos and Thomas J. McQuade First published 2023 by Routledge 4 Park Square, Milton Park, Abingdon, Oxon OX14 4RN and by Routledge 605 Third Avenue, New York, NY 10158 Routledge is an imprint of the Taylor & Francis Group, an informa business © 2023 William N. Butos and Thomas J. McQuade The right of William N. Butos and Thomas J. McQuade to be identified as authors of this work has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Butos, William N., author. | McQuade, Thomas J., author. Title: Hayekian systems : research into the structure of social interaction / William N. Butos and Thomas J. McQuade. Description: Abingdon, Oxon ; New York, NY : Routledge, 2023. | Series: Foundations of the market economy | Includes bibliographical references and index. | Identifiers: LCCN 2022043875 (print) | LCCN 2022043876 (ebook) | ISBN 9781032372730 (hardback) | ISBN 9781032372747 (paperback) | ISBN 9781003336150 (ebook) Subjects: LCSH: Hayek, Friedrich A. von (Friedrich August), 1899-1992. | Economics--Philosophy. | System theory. | Economics--Sociological aspects. Classification: LCC HB101.H39 B88 2023 (print) | LCC HB101.H39 (ebook) | DDC 330.092--dc23/eng/20221103 LC record available at https://lccn.loc.gov/2022043875 LC ebook record available at https://lccn.loc.gov/2022043876 ISBN: 978-1-032-37273-0 (hbk) ISBN: 978-1-032-37274-7 (pbk) ISBN: 978-1-003-33615-0 (ebk) DOI: 10.4324/9781003336150 Typeset in Bembo by SPi Technologies India Pvt Ltd (Straive) For Cindy, John, and Donna It would be no exaggeration to say that social theory begins with – and has an object only because of – the discovery that there exist orderly structures which are the product of the action of many men but are not the result of human design. (F.A. Hayek 1973, p. 37) It was … the great contributions of Bernard Mandeville and David Hume, of Adam Ferguson and Adam Smith, which have opened the way for an under- standing, both in biological and social theory, of that interaction between the regularity of the conduct of the elements and the regularity of the resulting structure. (1967, p. 77) [Social theories] are not about the social wholes as wholes; they do not pretend to discover by empirical observation laws of behavior or change of these wholes. Their task is rather … to constitute these wholes, to provide schemes of structural relationships … (1948, p. 72) The economic problem of society … is a problem of the utilization of knowl- edge not given to anyone in its totality. (1945, pp. 519–520) I have said on another occasion, and it seems to me important enough to repeat it here, that he who is only an economist cannot be a good economist. Much more than in the natural sciences, it is true in the social sciences that there is hardly a concrete problem which can be adequately answered on the basis of a single special discipline. (1967, p. 267) Contents List of figures x Preface xi 1 Introduction 1 Notes 4 Bibliography 4 2 Background 7 Notes 12 Bibliography 12 3 Spontaneous order and its discontents 14 Polanyi and Hayek in context 15 Polanyi and the order of science 16 Hayek and the order of market 18 Prescriptivism and interventionism in Polanyi and Hayek 20 The way forward in spontaneous order theory 23 Notes 24 Bibliography 27 4 Inspiration from The Sensory Order 30 Hayek’s theory of the sensory order 31 The sensory order and social orders 33 Notes 35 Bibliography 36 viii Contents 5 Inspiration from biological systems theory 38 Process closure and systemic anticipation 39 Process organization 40 Back to The Sensory Order 41 Biological analogies in social theory 42 Notes 44 Bibliography 47 6 Economic systems 50 The structure of market systems 51 Firms and markets 54 Entrepreneurship in firms and markets 58 Money and banking 59 Notes 62 Bibliography 66 7 Science systems 69 The emergence of modern science 71 The structure of science systems 74 Empirical considerations 78 Issues in the philosophy of science 84 Notes 90 Bibliography 93 8 Government systems 96 Legislatures 97 Government bureaucracies 103 Notes 108 Bibliography 113 9 Interactions with government 116 Categories of effect 116 Effects on markets 118 Effects on money and banking 119 Effects on science: boom and bust 124 Effects on science: distortion 127 Notes 131 Bibliography 132 Contents ix 10 State-sponsored science 135 The history of US government science funding 135 Rationales for government funding 140 Funding-induced destabilization 147 Central planning in science 148 Distortion in nutritional science 149 The boom in climate science: background 152 The boom in climate science: funding 155 The boom in climate science: distortion 157 The boom in climate science: effects on markets 159 Notes 161 Bibliography 169 11 Hayekian systems 174 Notes 177 Bibliography 178 Index 179
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