How economists have blinded themselves with their math constructions

Hayek’s multi-dimensional normal science research project, tackling the relation between the new marginal valuation logic and the old problem 0f distribution theory  (among several other problems) opened Hayek’s eyes to how the math construction of economics had blinded economists to the central problems, structures and causal processes of the market economy.  What I will do here is explicate where and how economists, according to Hayek, have been blinded to the problems, structures and causal processes of the market economy by the formal constructions and the false philosophical pictures which mandate the particular ways that economists feel compelled to think about these constructions.

“there can be no doubt that for the understanding of the dynamic processes [the discussion of ‘capital’ in terms of some single magnitude] was disastrous.” (Hayek, 1941/2007, p. 33)

“the doubtful meaning of equilibrium analysis .. if applied to the conditions of a competitive society.” (Hayek, 1937/2014, p. 61)

“My criticism of the recent tendencies to make economic theory more and more formal is not that they have gone too far but they have not yet been carried far enough to complete the isolation of this branch of logic and to restore to its rightful place the investigation of causal processes.” (Hayek, 1937/2014, p. 59)

“the sense in which we use the concept of equilibrium to describe the interdependence of the different actions of one person does not immediately admit of application to the relations between the actions of different people.” (Hayek, 1937/2014, p. 61)

“What seems so far to have escaped notice is that this whole procedure involves a confusion of a much more general character .. which is due to an equivocation of the term ‘datum.” The data which here are suppose to be objective facts and the same for all people ware evidently no longer transformations of the Pure Logic of Choice. There ‘data’ meant those facts and only those facts, which were present in the mind of the acting person, and only this subjective interpretation of the term ‘datum’ made those propositions necessary truths.” (Hayek, 1937/2014, p. 62)

“‘Datum’ [in the Pure Logic of Choice] meant given, known, to the person under consideration. But in the transition from the analysis of the action of an individual to the analysis of the situation in a society the concept has undergone an insidious change of meaning.” (Hayek, 1937/2014, p. 62)

“in the usual presentations of equilibrium analysis it is generally made to appear as if these questions of how the equilibrium comes about were solved. But, if we look closer, it soon becomes evident that these apparent demonstrations amount to no more than the apparent proof of what is already assumed.”  (Hayek, 1937.2014, p. 68)

“The assumption of a perfect market [in the sense that if people know everything they are in equilibrium] is just another way of saying that equilibrium exists but does not get us any nearer an explanation of when and how such a state will come about.” (Hayek, 1937/2014, p. 69)

“The statement that, if people know everything, they are in equilibrium is simply true because that is how we define equilibrium.” (Hayek, 1937,2014, p. 68-69)

Blinded by math theories of the “monetary economy”

“Monetary theory should .. study those phenomena which distinguish the money economy from the equilibrium inter-relationships of barter economic which must always be assumed by ‘pure economics’.” (Hayek, 1929/1931/2012, p. 102)

“All these theories .. are based on the idea — quite groundless but hitherto virtually unchallenged,

“In complete contrast to those economics changes conditioned by ‘real’ forces, influencing simultaneously total supply and total demand, changes in the volume of many have, so to speak, a one-sided influence which elicits no reciprocal adjustment in the economic activity of different individuals.” (Hayek, 1929/1931/2012, p. 104)

“As a theory of these one-sided influences, the theory of monetary economy should .. be able to explain the occurrence of phenomena which would be inconceivable in the barter economy, and notably the disproportional developments which give rise to crises.” (Hayek, 1929/1931/2012, p. 104)





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