seminar: Ransom on Hayek 2

What I’m probing right now is Hayek on the spurs to inquiry in economics. One insight I’d like to suggest is the fact that over time the human race loses track of the problems which originally provoked inquiry — and the loss of this original sprur to inquiry can have detrimental and even pathological effects on the evolution of a discipline. I’d point to some of the pathologies of mathematical Darwianian biology highlighted by Alex Roseberg, Ernst Mayr and others, where the mathematicians have seemed to have forgotten the original gross teleological adaptations which originally provided part of the patterns in our experience which demand explanation.

In economics many mathematical economists seem to have become so focused on their math constructions that they have completely lost sight of the empirical patterns and spurs to inquiry which gave rise and justification to their mathematical endevours.

“Explanation by elimination” is typically a fallacy in both science and philosophy, and one of the mistakes characteristic of this fallacy is the error of presuming that the phenomena and the questions generating the problems to be explain are done away with by the constructs developed to explain them.

To recover the empirical and conceptual richness of the science of economics, it is necessary to bring the tacit and unspoken elements of both the explanadum and the explanans in economics out into the open — the full empirical and conceptual nature of the science of economics is hidden by the fact that much of what needs to be explained is unspoken and hidden in the shadows.

Hayek implicitly suggests that to get our grips on the empirical problem that the science of economics provides explanations for it helps to dig back to a time when human ignorance of the economic sphere was much more extensive, an effort that can help us re-imagine our ignorance, and thereby articulate explanatory problems we no longer even recognize or think about due to hard won achievements of understanding.

In the last seminar posting I quoted Hayek on the empirical pattern in which prices tend toward costs of production, a pattern which Hayek suggests both justifies and helped inspire the equilibrium construct in economics.

But what provoked men to take notice of this pattern and most especially what provoked people to worry about it enough to bother transforming patterns of this kind into theoretical constructs and eventually equilibrium constucts?

In part, Hayek suggests, people were inspired to worry about such things and grapple with such problems because of their desire to empirically control the world as a means of making the world better fit to their moral convictions and desires. In particular, the effort to intervene in the world in order to make the world fit an image of a just order — and the continual failure to succeed in that effort, gave rise to theoretical efforts to achieve what had yet to be achieved, and ultimately to theoretical efforts to explain why what hadn’t been achieved perhaps couldn’t be achieved.

Here’s Hayek:

“.. a thousand years of vain efforts to discover substantively just prices or wages ..” (1976, p. 73)

“The futile medieval search for the just price and just wage .. was not the end of the search for that philosopher’s stone. It was revived in modern times, not only by the general demand for ‘social justice’, but also by the long and equally abortive efforts to discover criteria of justice in connection with the the procedures for reconciliation of arbitration in wage disputes. Nearly a century of endeavors by public spirited men and women in many parts of the world to discover principles by which just wage rates could be determined .. ” ” (1976, p. 75)

“.. the general problem of remuneration according to merit .. “ (1976, p. 179)

“.. the late schoolmen recognized [just prices and wages] to be empty formulae ..” (1976, p. 73)

“.. man’s inability to determine beforehand what a just price would be .. “ (1976, p. 178)

1 comment to seminar: Ransom on Hayek 2

  • Roger McKinney

    Hayek’s take on the Scholastic search for the just price seems misplaced. Based on Rothbard and others, it seems to me that the Scholastics provided the first justification of free markets because they found the just price to exist only in free markets. They had some good monetary and trade theories, too.

    Also, it seems to me that the impetus for studying economics as a means to greater welfare instead of to determine the just price was the success of the Dutch Republic. The Dutch had few natural resources, yet they became wealthy and powerful while Spain declined in spite of the enormous amount of gold stolen from the Americas. That experience contradicted what everyone thought about wealth and power at the time. I seem to me that the desire to explain what appeared to be an anomoly inspired philosophers to look into what caused some nations to become wealthy and others to become poor.

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