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Science, the Market and Iterative Knowledge

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Coming soon, the second paper co-authored with Dave Hardwick to appear in Studies in Emergent Order

Abstract: In a recent paper (Hardwick & Marsh, in press) we examine the recent tensions between the two broadly successful spontaneous orders, namely the Market and Science. We argued for an epistemic pluralism, the view that freedom and liberty (indeed the very concept of liberalism and civil society) exists at the nexus of a manifold of spontaneous forces, and that no single epistemic system should dominate. We also briefly introduced the concept of “iterative” knowledge to characterize the essentially dynamic nature of scientific knowledge. Herein lies a tension. The Market (and perhaps the prevailing culture at large) sees scientific knowledge in cumulative terms, that is, progressing to a conclusion in a linear fashion. This relatively static understanding of medical science as it relates to pharmaceutical studies can have a corrosive effect on the practice of medicine and ultimately, we believe, on the proper functioning of the market itself. In this paper we examine this tension in much closer detail by focusing upon the demands of the market, specifically the pharmaceutical industry, and the science upon which it is based. In other words, we expound upon a clash of epistemic value – one (science) that sees knowledge as essentially iterative (dynamic yet tentative) and the other (the Market) that harvests conclusive scientific knowledge (ostensibly as a fixed and firm commodity) functional to its own interests. Clinical Trials that are sharply focused with precisely determined deliverables often manifest this tension in the sharpest of relief. As a means of recovering drug development and testing costs, conclusive assessment is required to avoid creating serious financial problems for the companies themselves not to mention issues in the public interest.

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Getting to the Hayekian Network

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Here is Troy Camplin’s intro to his paper for Hayek in Mind.

In many ways this paper is necessarily an introduction. I want to introduce away to understand F. A. Hayek’s ideas on both spontaneous orders and the brain by understanding network structures. More, I want to distinguish between networks that emerge top-down in organizations and cellular regulatory networks and those that emerge bottom-up in self-organizing systems and spontaneous orders, whose relations to each other follow similar patterns. Socialists argue, contrary to Adam Smith’s thesis that the economy selforganizes from the bottom-up (1776), that the economy should be consciously designed and given goals. Hayek modernized Smith with spontaneous order theory. At the same time, self-organization theory emerged in physics and chemistry, complex adaptive systems (CAS) theory emerged in biology, and network theory emerged in several disciplines; these are all in the same conceptual family as spontaneous order theory. Hayek was part of the 20th century revolution of bottom-up self-organization theorizing that sees the universe emerging on its own through natural processes. If everything in the universe is self-organized, where do we get this idea, resurrected by socialists, that conscious design is the norm? Humans, like most animals, evolved to immediately, instinctively recognize the signs of others of their species. With wolves, lions, and other strongly territorial species, scent signs mark territory to warn off others. But humans are more visual, so we leave visual evidence of order. As a consequence, we associate the presence of order with an orderer or designer, and the development of creationist theories to explain nature, soul theories to explain the mind, and governments to order society. Darwinism and self-organization theories replaced creationist theories (for most people); top-down soul theories, including Descartes’ homunculus theory, evolved into CAS theories of the brain’s network structures, out of which the mind emerges; top-down social theories (where the hierarchical structure of the Catholic church was reproduced in other Western social structures, for example) gave way to Adam Smith’s bottom-up self-organizing ‘‘invisible-hand’’ theory. While life and mind have continued to evolve toward theories of self-organization, our social theories took a u-turn when socialism emerged as a respectable theory of economic ordering. The designer fallacy, increasingly abandoned in theories of life and mind, was readopted in our social theories.

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The Trouble with Scientism: Why history and the humanities are also a form of knowledge.

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Philip Kitcher, prominent philosopher of science in The New Republic:

The problem with scientism—which is of course not the same thing as science—is owed to a number of sources, and they deserve critical scrutiny. The enthusiasm for natural scientific imperialism rests on five observations. First, there is the sense that the humanities and social sciences are doomed to deliver a seemingly directionless sequence of theories and explanations, with no promise of additive progress. Second, there is the contrasting record of extraordinary success in some areas of natural science. Third, there is the explicit articulation of technique and method in the natural sciences, which fosters the conviction that natural scientists are able to acquire and combine evidence in particularly rigorous ways. Fourth, there is the perception that humanists and social scientists are only able to reason cogently when they confine themselves to conclusions of limited generality: insofar as they aim at significant—general—conclusions, their methods and their evidence are unrigorous. Finally, there is the commonplace perception that the humanities and social sciences have been dominated, for long periods of their histories, by spectacularly false theories, grand doctrines that enjoy enormous popularity until fashion changes, as their glaring shortcomings are disclosed.

Human social behavior arises, in a complex social context, from the psychological dispositions of individuals. Those psychological dispositions are themselves shaped not only by underlying genotypes, but also by the social and cultural environments in which people develop. Cultural transmission occurs in many animal species, but never to the extent or to the degree to which it is found in Homo sapiens. Human culture, moreover, is not obviously reducible to a complex system of processes in which single individuals affect others. Rigorous mathematical studies of gene-cultural coevolution reveal that when natural selection combines with cultural transmission, the outcomes reached may differ from those that would have been produced by natural selection acting alone, and that the cultural processes involved can be sustained under natural selection. Whether this happens in a wide variety of areas of human culture and domains or is relatively rare is something nobody can yet determine. But culture appears to be at some level autonomous and in some sense irreducible, and this is what scientism cannot grasp.

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Clash of the Titans: When the Market and Science Collide

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Coming soon the first of three papers I’ve co-authored with Dave Hardwick, this one due in Advances in Austrian Economics, Vol. 17

ABSTRACT

Purpose/problem statement – The two most successful complex adaptive systems are the Market and Science, each with an inherent tendency toward epistemic imperialism. Of late, science, notably medical science, seems to have become functional or subservient to market imperatives. We offer a two-fold Hayekian analysis: a justification of the multiplicity view of spontaneous orders and a critique of the libertarian justification of market prioricity.

Methodology/approach – This paper brings to light Hayekian continuities between diverse literatures – philosophical, epistemological, cognitive and scientific.

Findings – The very precondition of knowledge is the exploitation of the epistemic virtues accorded by society’s manifold of spontaneous forces, a manifold that gives context and definition, to intimate, regulate, and inform action. The free-flow of information is the life-blood of civil (liberal) society. The commoditization of medical knowledge promotes a dysfunctional free-flow of information that compromises notions of expertise and ultimately has implications for the greater good.

Research limitations/implications – While we accept that there are irresolvable tensions between these epistemic magisteria we are troubled by the overt tampering with the spontaneous order mechanism of medical science. The lessons of Hayek are not being assimilated by many who would go by the adjective Hayekian.

Originality/value of paper – On offer is a Hayekian restatement (contra the libertarian view typically attributed to Hayek) cautioning that no one spontaneous order should dominate over another neither should they be made conversable. Indeed, we argue that the healthy functioning of a market presupposes institutions that should not answer to market imperatives.

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Hayek: born on this day

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Cognitive Opening and Closing: Toward an Exploration of the Mental World of Entrepreneurship

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Here is Thierry Aimar’s intro to his paper for Hayek in Mind.

Contemporary analysis usually divides games of chance into three dimensions. In Machina and Schmeidler’s (1992) terms, this division can be viewed based on the example of an urn containing 90 balls of different colors, out of which an agent pulls a ball, of which he must ex ante guess its color to achieve a predetermined gain. If the agent knows that the number of red, white, and black balls is the same (30), he finds himself in a situation of risk: He knows the possible consequences and the probability distributions, that is, he has one in three chances of getting a ball of any particular color. However, if he knows that these balls are red, white, and black, but in indefinite proportions, he is confronted with situations qualified as uncertainty: The consequences are known, but the probability distributions are not. Yet again, if the agent knows there are 90 balls of different colors in the urn but does not know how many of these colors there are, he is in a state of incomplete information: The agent is unable to define the list of possible outcomes (situation of ambiguity) and can expect some surprises identifiable ex ante, as states of nature are identifiable. An extra dimension may be added to this distinction: If the agent has himself placed 30 red balls in the box, but he does not know what other elements of indefinite character and number there are in the box, nor the structure of gains or losses associated with various results, then we can consider that the agent is in a position of ignorance. Not only is he unable to define the list of consequences of the game, but he also does not know the distribution of events. The agent is able to define what he knows, but unlike the three previous cases, he cannot determine the scope and nature of what he ignores. The surprise is necessarily unexpected in the sense that the agent is unable to identify ex ante the possible states of nature. It is in this latter perspective that Kirzner (1973, 1979, 1982) argues that market actors face a phenomenon of ‘‘genuine ignorance,’’ reflecting their inability to know all the opportunities for exchange or profit available in an economy. At any point in time, each individual perceives only fragmentary aspects of social reality in which he participates, and not its other facets. Each exchange is made in ignorance of other exchanges performed at the same time; thus, there is no common knowledge of prices and no actor can perceive the whole. In a monetary economy, the consequences of these independent exchanges are mutually dependent. The implications of this genuine ignorance on the coordination of activities are thus considerable. Using the example of Schmeidler and Machina’s urn (1992) from the time when the consequences of a draw for each individual depend on the (unknown) number of elements (of unknown character) deposited in the ballot box by an (unknown) number of (unknown) people, the ability of such a game to produce a balance is at least questionable. The stakes of this phenomenon of ignorance compel us to identify its sources. These are not found in any complexity of information, neither in the cost of its acquisition nor in its treatment (deliberation) from a perspective of bounded rationality. They come from a more fundamental phenomenon of dynamic subjectivism. According to authors such as Kinder (1973, 1979, 1997) and Lachmann (1977, 1986), agents’ preferences, endowments, knowledge, and strategies should be defined as personal, unique. Therefore, each individual is a priori ignorant of how others evaluate goods and services. Economic analysis is not therefore based on a perfect, or even sufficient knowledge of actors to coordinate their activities. The diversity of actors’ preferences, interpretations, and expectations would certainly not be a problem if they were constants. A process of trial and error would lead to new learning, opening onto a price structure that would allow coordination. But this is in fact not the case because the individual performances would change continuously, according to an endogenous process, ultimately explained by ignorance or internal self-ignorance (Aimar, 2008a). As Hayek (1951a, 1951b) explained, the actor can only partially perceive the existing opportunities for satisfaction, for reasons related to the organization of the human brain and the tacit characteristic of knowledge. His conscious choices being ignorant of a portion of his subjectivity, he makes mistakes, expressed by disappointment with satisfaction. He undergoes a de facto internal discoordination, forcing him to change his representations to make his beliefs conform to the reality of his interior environment. But changing choices results in transforming his internal environment and de facto creates new unknown areas. The mind, constantly evading the consciousness’s desire to fully absorb it, makes the process of self-discovery never-ending. Thus, market discoordination, the result of genuine ignorance, is finally but an internal discoordination, consequence of a phenomenon of self-ignorance. It was around this phenomenon of genuine ignorance and its perverse effects on coordination between individuals that Kirzner introduced the theme of entrepreneurship. The entrepreneurial function, driven by the incentive of profit, is to discover unperceived opportunities. Mobilizing qualities of alertness, reflected in cognitive openness, it reveals previously hidden information. Through his discoveries being translated into new money transactions, the entrepreneur socializes his knowledge and contributes to pulling market activities toward coordination. He goes beyond reducing ignorance; he transforms ignorance into uncertainty. But according to Kirzner, a parallel mission of the entrepreneur is to organize already discovered opportunities in the form of firms’ production plans, in order to protect them from risk of obsolescence resulting from the volatility of data. In a dynamic world, discovery and exploitation of opportunity are then the two faces of entrepreneurship. The author argues that these two dimensions may be contradictory in the entrepreneurial mind. As much as discovery implies a cognitive opening to the outside, all exploitation of discovered opportunities is accompanied by elements of mental rigidity. These take the form of cognitive closure, thus opposing the entrepreneur’s perception of new opportunities. The aim of this contribution is to illuminate by the structure of this contradiction by economic analysis, to provide the means to verify it through experimental economics and to consider its extensions in terms of neuroeconomics. Our plan is this: After explaining the basics of the theory of entrepreneurship and the elements that determine its duality, we will define the bases for an experimental protocol likely to support our thesis of an opposition in the cognitive field between the relative strengths of discovery and the exploitation of opportunities in the entrepreneurial mind. The last section forms the conclusion.

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Hayek’s Post-Positivist Empiricism: Experience Beyond Sensation

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The intro from Jan Willem Lindemans’ paper:

The philosophical foundations of Hayek’s works are not beyond dispute (Gray, 1984, Kukathas, 1989, Caldwell, 1992, Hutchison, 1992): was Hayek a rationalist or an empiricist; did he follow Kant or Hume, Mises or Popper? Difficulties arise because these questions touch upon social theory, political philosophy, methodology and epistemology. Moreover, on different occasions, Hayek (intentionally) gave different definitions and evaluations of already complicated views such as ‘rationalism’ and ‘empiricism’. In this paper, I try to shed some light on the rationalism/empiricism issue by focusing on epistemology, where this issue really belongs. The debate there is mainly about the sources of knowledge (e.g., Markie, 2008). Empiricists argue that experience is the source of all our knowledge. This view was held by John Locke (1632-1704) and David Hume (1711-1776) but its roots go back to Francis Bacon (1561-1626) and even further to the ancient Greek Empiricist school in medicine (founded in the third century B.C. by Philinos of Kos or Serapion of Alexandria) and Aristotle (384-322 B.C.). In contrast with his teacher Plato, Aristotle believed in the ‘induction’ (epagōgē) of general knowledge from particular observations. I will not have the space here to relate Hayek’s ideas to this long history of empiricism. But I will try to refer to David Hume now and then, because Hayek was a great admirer of Hume’s social and political philosophy and Hayek’s ‘Humeanism’ is extensively discussed. I will also get back to the less well known Empiricist school in medicine, because it has a very special conception of ‘experience’ which I believe to be useful to the discussion. In contrast with empiricism, rationalism or ‘apriorism’ is the idea that some knowledge is independent of experience or ‘a priori’. Traditionally, this meant that knowledge is based on rational intuition, or embedded in our rational nature or the structure of the mind. If knowledge is embedded in our mind or nature, it is ‘innate’, which is why philosophers speak of ‘innatism’ or ‘nativism’. Since this was Immanuel Kant’s (1724-1804) view, it is often called ‘Kantianism’. I will also use the term ‘Kantianism’ rather than ‘rationalism’ because Hayek most often defines the latter as the false view that social phenomena are rationally designed, which is a completely different issue. Kantianism goes back to the ‘innate ideas’ of René Descartes (1596-1650) and the anamnesis of ideas in Plato’s philosophy (429-347 B.C.). Many scholars have tried to position Hayek in the Kantianism/empiricism debate. Most scholars would probably agree with Connin (1990, p. 301) that “Hayek’s theory of knowledge is undoubtedly Kantian” (see also Feser, 2006, p. 300). However, many also understand that there is more to it (Caldwell, 2004, p. 273). Since ‘experience’ is undeniably a basic concept in Hayek’s epistemology, some believe that his epistemology is a kind of synthesis between Kantianism and Humean empiricism (Horwitz, 2000, p. 25). De Vecchi (2003, p. 152) is less optimistic and says that “there is an unresolved tension between empiricism and anti-empiricism within the theory of the process of the formation of knowledge set out in The Sensory Order”. Moreover, some have made the link with ‘evolutionary epistemology’ (Bartley, 1987, p. 21; Gray, 1984; Kukathas, 1989; Dempsey, 1996; Vanberg, 2002). However, scholars have rarely wondered how Kantianism, empiricism and evolutionism can be reconciled, and, more importantly, what ‘empiricism’ and ‘experience’ mean in such a context. Just as there are as many ‘rationalisms’ as there are interpretations of the term ‘reason’, there are as many ‘empiricisms’ as there are interpretations of the term ‘experience’. In this paper, I will reconstruct Hayek’s epistemology based on a careful reading of The Sensory Order and some related writings. I will argue that Hayek’s epistemology is best characterized as a type of ‘post-positivist empiricism’. In the first paragraph, I review Hayek’s neurophysiological explanation of the mind in The Sensory Order. Hayek shows how the nervous system can perform the acts of classification characteristic of the working of the mind. Because the synaptic connections embody a kind of knowledge independent of ‘sense experience’, Hayek is not a ‘sensationalist empiricist’. The second paragraph discusses Hayek’s theory of the formation of synaptic connections. Connections are formed on the basis of what I will call ‘Hayek’s learning rule’, which boils down to the familiar idea that neurons that fire together wire together. Since this means that the knowledge embodied in the synaptic connections is in a sense the result of ‘experience’, be it ‘pre-sensory experience’ rather than ‘sense experience’, Hayek is an empiricist after all, but one of the ‘post-positivist’ kind. In the third paragraph, I analyze Hayek’s views on the evolution of the nervous system and the behavior it generates. There appear to be two kinds of ‘experience’ at the basis of the synaptic connections: ‘experience of the individual’ and ‘experience of the race’. Because Hayek denies that all knowledge is due to ‘experience of the individual’, he is not an ‘individualist empiricist’. However, since ‘experience of the race’ is also ‘experience’, he is again an empiricist in the wider sense. What Hayek failed to notice is that experience of the race is ‘post-sensory’ rather than ‘pre-sensory’ and also in other aspects very different from individual experience. I will call it a kind of ‘selective experience’, which I contrast with ‘inductive experience’. Some links with Donald Campbell’s ‘evolutionary epistemology’ are explored. In the last paragraph, I consider Campbell’s idea that all increases in knowledge are due to selection and make some suggestions for future research.

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Beyond Complexity: Can The Sensory Order Defend the Liberal Self?

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My chum Chor-yung Cheung who like myself is both an Oakeshottian and a Hayekian introduces his paper below:

Friedrich Hayek’s social philosophy is one of the most systematic and sophisticated among the contributions made by 20th-century liberal thinkers. His defense of the free market and individual freedom and his critique of collectivism of various kinds are mainly based on his epistemological theses, which in turn are derived from his social philosophy. Hayek once famously said, ‘‘the differences between socialists and nonsocialists ultimately rest on purely intellectual issues capable of a scientific resolution and not on different judgments of value,’’ and he believes that the doctrines advocated by the socialists ‘‘can be shown to be based on factually false assumptions,’’ and the whole family of socialist thought can be ‘‘proved erroneous’’ (1973, p. 6). One important area contributing to the development of Hayek’s epistemological theses is his works on theoretical psychology, and his book The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology (1952a) plays a crucial role in this since it helped Hayek spell out the logical character of his social philosophy (1952a, p. v). It can be said that The Sensory Order enables Hayek to develop a conception of mind (which is essentially a classificatory and rule constituting complex order of a mental kind) that, on its own, enhances our understanding of cognitive psychology, and, when linked with Hayek’s social and political thought, helps strengthen Hayek’s epistemological defense of the free market and limited government. Although The Sensory Order did not attract the kind of scholarly attention it deserves for decades after its first publication in 1952, the path-breaking quality of the book and the integral part it plays in Hayek’s social philosophy are now widely recognized (see, e.g., Butos & Koppl, 2006; Caldwell, 2004; Feser, 2006; Gaus, 2006; Horwitz, 2000; Marsh, 2010; Rizzello, 1999; Smith, 1997; Weimer, 1982). Admittedly, The Sensory Order is a difficult book since it deals with questions of the most fundamental kind (such as the nature of mind and the limits of explanation). When one tries to relate The Sensory Order to Hayek’s broader defense of liberalism, the task becomes doubly difficult, and different interpretations of Hayek’s position in The Sensory Order may lead to diametrically opposite assessment of his contribution. Scholars who are unsympathetic to Hayek’s social philosophy tend to characterize his explanation of the mental order in The Sensory Order as ‘‘materialistic and naturalistic’’ and wonder how his brand of materialism with its implied physicalist notion of human agency can sit well with the defense of individual liberty. Contrariwise, defenders of Hayek like to stress his idea that the inherent nature of the mind as a classification apparatus sets limits to its capacity for self-explanation. They argue that social interaction in any developed society must involve so great a degree of complexity that no single mind or central planning unit can fully take into account all the respective preferences of, or the dispersed information possessed by, individual actors, making synoptic planning untenable. This chapter is an attempt to offer an interpretation of The Sensory Order in line with Hayek’s supporters. But it would like to go a step further by arguing that a liberal conception of human agency, in which the individual is characterized as distinct, free, evolutionary, creative yet culturally embedded, can be derived from Hayek’s theoretical psychology. In what follows, I outline my interpretation of The Sensory Order and defend Hayek against some major criticisms, including the criticism that his psychological works express or imply a physicalist conception of the mind. Furthermore, I identify some problems with Hayek’s conception of the self: in particular its ‘‘instrumental’’ tendency and corresponding lack of appreciation of the unique value of individual style and imagination.

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Rationalism in Politics

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In anticipation of a talk I’m giving later on in the week on Oakeshott’s so-called “dispositional conservatism”, here is a nice little piece by my chum Gene Callahan serving as a good introduction to RIP.

The British philosopher and historian Michael Oakeshott is a curious figure in twentieth-century intellectual history. He is known mostly as a “conservative political theorist,” although he rejected ideology and his conservatism was primarily temperamental. Furthermore, his work on politics was only a fraction of his output, which comprised idealist philosophy, aesthetics, religion, education, the philosophy of history, and even horse racing. His popularity reached its zenith in the 1950s and early 1960s, when he was well known on both sides of the Atlantic, appearing on the BBC and becoming the favorite philosopher at National Review. But he never seemed to seek popularity, and did little or nothing to boost his own when it subsequently faded. Today, despite the growing interest in Oakeshott since his death in 1990, even his best-recognized work, his essay “Rationalism in Politics,” is, I contend, not appreciated widely enough—thus, this article.

Lovers of liberty should keep Oakeshott’s work on rationalism in mind for at least two reasons. First, it offers a complementary but still significantly different critique of planning to those of Mises and Hayek. However, at the same time, it provides a warning to the advocates of freedom not to fall into the rationalist quagmire themselves. The relevance of the latter point is demonstrated by, for example, the tendency of many development economists, even those who are “market oriented,” to attempt to impose their theoretical schemes for taking a shortcut to westernization on some Third World country, while running roughshod over all the traditions, customs, and morals native to the place, which, whatever their short-comings, at least managed to sustain the society in question over previous centuries. Freedom cannot be “imposed” on a people according to some preconceived scheme. We all need to watch out for “the rationalist within.”

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The Emergence of the Mind: Hayek’s Account of Mental Phenomena as a Product of Spontaneous Physical and Social Orders

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Gloria Zúñiga y Postigo’s intro from her excellent paper.

Friedrich Hayek’s social theory is well known for his articulation of the paradigm of spontaneous orders that challenges the traditional distinction between what is natural and what is artificial. The problem that Hayek saw is that language and other social objects do not fall under either heading completely. Language is, for example, seen as natural since it was not designed by man. At the same time, man has imposed rules of grammar on natural languages as these became formalized and documented. From this perspective, language falls under the category of artificial too. This distinction thus fails in its application not only to language, but also to any other object that is, as Hayek puts it, the result of human action, but not of human design.  The paradigm of spontaneous orders, which applies to all social objects, has thus become the hallmark of Hayek’s social theory.

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