I’m going to start using this space to teach some Hayek — and perhaps generate a conversation. Please feel welcome to add your own thoughts in the comments section below.
Today’s seminar topic is the empirical nature of economics science.
Hayek in many places talks about how science begins with problems in our experience. Hayek is explicit in saying that economic science is not any different — economic science begins with problems raised in our experience. Hayek repeatedly describes these problems of science as question raising patterns in our empirical experience. In the case of economics, the most central problem raising pattern in our experence according to Hayek is the pattern in which prices repeatedly tend toward costs of production. The take away point here is that the empirical and scientific nature of economics starts with the empirical and scientific nature of its problems — questions raised by problem posing patterns observed in our experience. In later seminar postings I will discuss Hayek on the fuller context in which these patterns originally give rise to questions, and the relation of these questions to the formal and mathematical constructions which these patterns inspire.
Here’s Hayek — the comments section is open:
“It should be remembered that nearly the whole of economic science is based on the empirical observation that prices ‘tend’ to correspond to costs of production, and that it was this observation which led to the construction of a hypothetical state in which this ‘tendency’ was fully realized.” (1941, p. 27)
“And expericence shows us that something of this sort does happen, since the empirical observation that prices do tend to correspond to costs was the beginning of our science.” (1937, p. 49)
“..there seems to be no possible doubt that the only justification for this [concern with the admittedly fictitious stae of equilibrium] is the supposed existence of a tendency towards equilibrium.” (1937, pp. 43-44)
“Yet the concept of equilibrium is just as indespensable a tool for the analysis of temporal differences in prices as it is for any other investigation in economic theory. Strictly speaking, its field of application is identical with that of economic theory, since only with its assistance is it possible to give a summary depiction of the very great number of different tendencies of movement which are operative in every economic system at very point in time.” (1928/1984, p. 75)