The Social Science of Hayek's the Sensory Order

389 Pages·2010·3.374 MB·English

by  William N. Butos, William N. Butos

ADVANCES IN AUSTRIAN
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ADVANCES IN AUSTRIAN ECONOMICS VOLUME 13
THE SOCIAL SCIENCE OF
HAYEK’S ‘THE SENSORY
ORDER’
EDITED BY
WILLIAM N. BUTOS
Trinity College
United Kingdom – North America – Japan
India – Malaysia – China
LIST OF CONTRIBUTORS
Peter J. Boettke Mercatus Center, George Manson
University and Department of
Economics, George Manson University
Fairfax, VA, USA
William N. Butos Department of Economics Trinity
College, Hartford, CT, USA
Jean-Paul Carvalho Department of Economics, Oxford
University, Oxford, UK
Daniel J. D’Amico Joseph A. Butt S. J. College of Business,
Loyola University New Orleans,
New Orleans, LA, USA
Francesco Di Iorio EHESS – CREA, E´ cole Polytechnique,
Paris, France
Peter E. Earl School of Economics, University of
Queensland, St. Lucia, Brisbane,
Australia
Evelyn Gick The Master of Arts in Liberal Studies
Program, Dartmouth College, Hanover,
NH, USA
Steven Horwitz Department of Economics, St. Lawrence
University, Canton, NY, USA
Lorenzo Infantino Department of History and Political
Science, Luiss Guido Carli University,
Rome, Italy
Roger Koppl Institute for Forensic Science
Administration, Fairleigh Dickinson
University, Madison, NJ, USA
ix
x LIST OFCONTRIBUTORS
Mark Koyama Political Theory Project, Brown
University, Providence, RI, USA
Samuli Leppa¨la¨ Department of Economics, Turku School
of Economics, Turku, Finland
Leslie Marsh New England Institute for Cognitive
Science and Evolutionary Studies,
University of New England, Portland,
ME, USA
Thomas J. McQuade Department of Economics, New York
University, Brooklyn, NY, USA
Robert F. Mulligan Department of Accountancy, Finance,
Information Systems, & Economics,
College of Business, Western Carolina
University, Cullowhee, NC, USA
G. R. Steele Economics Department, Lancaster
University Management School,
Lancaster, Lancashire, UK
Nikolai G. Wenzel Wallace and Marion Reemelin Chair in
Free-Market Economics, Department of
Economics and Business Administration,
Hillsdale College, Hillsadle,
Michigan, USA
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THE UNEXPECTED FERTILITY OF
HAYEK’S COGNITIVE THEORY:
AN INTRODUCTION TO THE
SOCIAL SCIENCE OF HAYEK’S
‘‘THE SENSORY ORDER’’
William N. Butos
ABSTRACT
Purpose–OverviewofHayek’scognitivetheoryandthecontributionsof
chapters.
Methodology/approach – Perspective on significance of Hayek’s
cognitive theory for the social sciences.
Findings – Hayek’s cognitive theory provides insight into his oeuvre;
more importantly, it is relevant for social theory in its own right.
Research limitations/implications – Hayek’s cognitive theory warrants
further attention by economists and social theorists interested in
evolutionary social processes.
Originality/value of paper – To counter a widespread view that the
contribution to economics and social science of Hayek’s cognitive theory
TheSocialScienceofHayek’s‘TheSensoryOrder’
AdvancesinAustrianEconomics,Volume13,1–20
Copyrightr2010byEmeraldGroupPublishingLimited
Allrightsofreproductioninanyformreserved
ISSN:1529-2134/doi:10.1108/S1529-2134(2010)0000013003
1
2 WILLIAM N. BUTOS
islargelyconfinedtomethodology.Hayek’scognitivetheoryalsoprovides
a useful framework for furthering the understanding of evolution within
the social realm.
INTRODUCTION
Friedrich Hayek (1899–1999), one of the great intellectuals of the 20th
century, is widely known for his contributions to economics and to the
social sciences in general. For several decades, his ideas have attracted
widespread interest and have wielded a strong and enduring influence on
otherscholarsinareasthatcomfortablyfitundertherubricof‘‘economics,
politics, and philosophy.’’ Hayek was a prolific scholar (29 volumes are
plannedforhisCollectedWorksbytheUniversityofChicagoPress)andthe
secondary literature on Hayek in vast.1 His work in technical economics,
beginning in the late 1920s, and his extensive writings in broader social
theory still cast a robust and relevant light on the many issues centering on
the operation of the market economy and social institutions and processes.
It is especially useful for the purpose at hand to reaffirm that much of
Hayek’sworkinthesocialsciencestypicallyaddresses,directlyorindirectly,
questions and problems of the nature, transmission, and use of knowledge.
Curiously, Hayek’s work in cognitive psychology, which falls within the
province of such questions, has not been as widely studied by Hayek
scholars.Theaimofthisvolumeistoexplorepossibleconnectionsbetween
Hayek’s cognitive psychology and social theories, hence thetitle The Social
ScienceofHayek’s‘‘TheSensoryOrder.’’ItwillshowthatHayek’scognitive
theory has, unexpectedly and despite its being virtually ignored for many
years, begun to inspire a wide range of endeavors to mine its insights to
better understand social phenomena.
HISTORICAL COMMENTS ON
THE SENSORY ORDER
Publishedin1952(butbasedonanexploratoryessaywrittenasastudentin
1920), The Sensory Order remained generally unnoticed by psychologists,
philosophers,socialscientists,andHayekscholarsforthenextfewdecades.
Hayek’s Nobel Prize in 1974 helped induce a resurgence of interest around
the world in his economics and broader social theory, but it was chiefly
The UnexpectedFertility of Hayek’s CognitiveTheory 3
cognitive psychologist Walter B. Weimer who should be credited for
bringing Hayek’s cognitive work before a larger audience and making the
case for its wider significance for economics and social theories generally.
Beginning in the mid-1970s, Weimer (1979) started using and developing
the ideas in The Sensory Order for his work in cognitive science and the
methodology of scientific research. Coming from a background in the
philosophy of science, he was especially influenced by the late W.W.
Bartley’s The Retreat to Commitment (1962) and Kuhn’s The Structure of
Scientific Revolutions (1970) in seeing Hayek’s work in cognitive science,
constraints on knowledge, and spontaneous order, as compatible to
Bartley’s epistemological stance on ‘‘comprehensively critical rationalism’’
and Kuhn’s evolutionary theory of science. In 1981, Weimer organized a
cognitivescienceconferenceatPennStateUniversitythatfeaturedHayekas
the principal speaker (Hayek, 1982), while Weimer’s own address (Weimer,
1982)presentedthecaseforthesignificanceofHayek’scognitivepsychology
for the social sciences; this paper became the preeminent, and for several
years the only useful entre´e to The Sensory Order.
Interest in Hayek’s cognitive theory, however, was not completely
moribund in the period after 1980. Aside from Weimer’s continued work,2
we can take note that several notable neurophysiologists such as Gerald
Edelman (1985) and Joaquin Fuster (1995) specifically highlighted the
prescientideasputforthbyHayek,particularlywithrespecttoevolutionary
neuromechanisms. In the social sciences, Yeager (1984) seems to have been
the first economist to seriously apply Hayek’s writings on cognitive
psychology to economics. In his short paper, Yeager sought to establish
thepropositionthat‘‘appreciatingHayek’sworkineconomicsandpolitical
science requires knowing of his interest in psychology’’ (p. 2). To make his
point, Yeager centered his attention on The Road to Serfdom. The
connections Yeager forged are based on the ‘‘insights of ‘literary’
psychology’’ exhibited in The Road to Serfdom regarding ‘‘the influence of
beliefs and attitudes’’ as opposed to the more technical treatment of
cognitive processes found in The Sensory Order (p. 3).
While Yeager’s discussion of the The Sensory Order is an excellent
introductiontoHayek’scognitivetheoryandallthemoreremarkablegiven
its brevity, the overall cast of the paper illustrates an especially vexing
questiondoggingtheliteratureonTheSensoryOrderbysocialscientists:Do
we need The Sensory Order at all to do our social science and how does it
make a difference in providing insight toward understanding the social
realm? Yeager’s paper, which sadly made no identifiable impact on other
economists until about 2003,3 plus three other papers to be noted
4 WILLIAM N. BUTOS
immediately below, illustrate the several directions researchers subsequent
to Weimer have pursued in attempting to understand and develop the
implications of The Sensory Order.
First,ManfredStreit(1993)4brokenewgroundinaregrettablyneglected
paper by giving an extended overview of Hayek’s work in epistemology as
presented in The Sensory Order and an argument for its foundational
significance for his economic and social theories. The relevant connections
Streit suggested include cognitively grounded subjectivity, limitations on
individual knowledge, and the significance of tacit (or unconscious)
knowledge. These elements from Hayek’s cognitive theory, Streit main-
tained, provide central ideas upon which it is possible to construct a
theoretically coherent Hayekian social theory.
In the second paper, Butos and Koppl (1993) used The Sensory Order to
generate a theory of ‘‘Hayekian economic expectations’’ that are coherent,
competitive, and self-correcting, and which are the result of cognitive
processes that embody learning and the capacity to formulate conjectures
andself-correctiveroutinesthatallowtheindividualtoadapttotheexternal
environment. The thrust of this and related subsequent research (see, e.g.,
Butos & Koppl, 1997) was to demonstrate that a judicious application of
insightsgleanedfromHayek’scognitivetheorycouldbeusefulinaddressing
questions and issues in economics.
A third and related direction is reflected in the attempt to explore the
systemicimplicationsofHayek’swork,incorporatingtheideasofevolution
and self-organization. McQuade (2007), for example, saw The Sensory
Order as providing a ‘‘prototypical description of an adaptive classifying
system’’ (p. 58) useful for understanding the social orders of science and
market. The key point of intersection is that both the brain and other
emergent (or spontaneous) orders, such as science and the market,
‘‘implement a classifying process’’ as a byproduct of the ‘‘interactions
betweentheircomponents’’thatinduce‘‘adaptivereactionsofthesystemas
a whole’’ (p. 59).
ThesepapersofYeager,Streit,ButosandKoppl,andMcQuadeillustrate
the breadth and variety of the secondary literature on Hayek’s cognitive
theory in economics and broader social theory. This literature, which has
nowgrownquitelarge,canbesortedintotwodistinctyetoftenoverlapping
paths. One path has followed the work of Yeager and Streit in the sense of
using The Sensory Order to better understand Hayek’s oeuvre. This
approach, amply demonstrated by scholarship through Caldwell (2004),
provides an assessment and appreciation of the deep and wide-ranging
insightsofoneofthe20thcentury’sintellectualgiants.Animportantpartof
The UnexpectedFertility of Hayek’s CognitiveTheory 5
this literature, as evidenced, for example, in Streit’s paper, may be seen as
reflecting the broader interests of political economy in which connections
are drawn for Hayek’s own thinking across various domains of inquiry in
someratherfundamentalways.Animportantcontributionofthisliterature
hasbeentoestablishthecontinuityinHayek’sownthinking(see,e.g.,Gray,
1984;Birner,1994;Butos&McQuade,2002;Steele,2007).Butasignificant
aspectofactuallyestablishingthecoherenceofHayek’sideashasquiteoften
involved the relevance of his cognitive work for methodological concerns
(see Birner, 1999; Caldwell, 2004). In this area, there is little disagreement
among researchers of the significance for social science methodology of
Hayek’s cognitive work regarding subjectivism (or at least some variant of
it), constraints on knowledge, and the nature and limits of prediction.
The second, and as yet less traveled, path, illustrated by the work of
Butos, Koppl, and McQuade, seeks to stand on Hayek’s shoulders in
applying insight gleaning from The Sensory Order to push forward the
understanding of social phenomena.
These two paths of inquiry, both emanating from ideas in The Sensory
Order, have, since the early 1990s, generated a small but nonetheless fairly
regular stream of papers and books by economists and others who have
beenatpainstoexplainHayek’sideasinthisareaandinseveralcaseshave
pursued the application of those ideas to significant questions in social
science.Slowly,Hayek’sideashavebeenmademorefamiliarandaccessible
to a wider audience. Although I will briefly highlight the basic gist of
Hayek’s cognitive theory below, I will do so in a way that gears the
discussion to the application of those ideas from the standpoint of social
theory and economics. Hopefully, this will direct the reader’s attention
toward questions inspired by The Sensory Order that bear on both the
theory of agency (at the individual level) and market and, more generally,
social theory (at the level of the emergent phenomena generated by groups
of individuals).
AN OVERVIEW OF HAYEK’S COGNITIVE THEORY
The objective of this volume is not to rehash or assess Hayek’s cognitive
theory but to provide some insight into whether and in what ways that
theory may be of value to social scientists. This approach, it is hoped, will
redirectattentiontowardquestionsthatmatterforsocialscientistsandaway
fromquestionsthatconcerntheneurophysiologyofthebrain.Theaimisto
address the question posed above – to show that Hayek’s cognitive theory