My chum Byron Kaldis’ big project has been brought to fruition. Bravo! My contribution: Hayek and the “Use of Knowledge in Society”. As you will see there is a terrific lineup – this is an exciting area to be in these days what with CogSci meeting social science – another project of Byron’s in the works.
Some extracts from Thierry’s paper:
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.
In the context of organizational economics, the relationships between cognition and complexity have been studied for many years through the lens of bounded rationality. However, this is outside Austrian theories, which do not define the act of knowing as the result of a deliberated choice between gain and cost but as the result of a spontaneous process. Unfortunately, the internal forces of this process remain ill-defined. Yet, much Austrian work has shown the relationships between the institutional environment and entrepreneurship. However, in spite of Kirzner’s (1985, p. 25) appeal for a psychological study of entrepreneurial qualities, the mental determinants of entrepreneurship have still not been studied. Therefore, our goal here is to use Austrian tools to define the relationship between organizational complexity and entrepreneurial discovery from a mental angle. Using the example of a protocol, we intend to establish the bases on which to experiment with the various theoretical propositions in this matter. This should allow a finer judgment of the determinants of entrepreneurial discovery and a better understanding of the effects of competition.
The intro and conclusion to Chiara’s chapter:
Humans are social creatures and they deeply rely on mentalizing, which aims at understanding other people behaviors and formulating expectations about their future actions. The existence of inner mental states has been postulated to give an explanatory account of the observed behaviors of other individuals. In particular, the activation of theory of mind in social situations has been demonstrated by neuroeconomic and behavioral experiments such as: processes of market exchange and specialization of labor (Coricelli, McCabe, & Smith, 2000), decision-making involving strategic uncertainty, detection of social cheaters and, in general, cooperative games in which subjects need to predict their opponents’ strategies; these are all situations in which theory of mind1 is activated. Historically, two different models of mental processes have been considered in the literature about folk psychology: theory-theory and simulation-theory. Theory-theory posits that subjects who are attributing to others a particular mental state are applying a tacit piece of knowledge previously acquired ‘‘about what people feel, think, want, etc in given circumstances and how they will, therefore, act’’ (Perner, Gschaider, Kuhberger, & Schrofner, 1999). They basically own ‘‘folk theories’’ about others’ mental states and implicit causal laws about how the mind works. On the contrary, simulation theory posits that, in attributing mental states, subjects are not possessing tacitly codified knowledge, but they are rather running a simulation ‘‘putting themselves in others’ shoes.’’ Simulating means using one’s own mind as a model for other people’s mental states, while being unaware of this activity. Simulation directly bridges perception and action (Decety & Grezes, 2006). Hayek had already envisioned this relationship between sensory and motor activity (Hayek, 1952, p. 92) but he dwells more on a neuronal level explanation than a mental one.
Notwithstanding this historical opposition between theory and simulation, an approach that highlights their intermingling contributions and crossfertilizations has nowadays been favored (Goldman, 2006). This is the reason why, after introducing a brief sketch of these two positions, the paper focuses then on theory of mind broadly speaking as the capacity to share psychological states with others: this is the social cognitive capacity making humans collaborative and cooperative, able to be engaged in mutual coordinated actions and plans (Tomasello, 2005). Humans, as social actors, have to possess a cognitive machinery that makes them able to coordinate. This chapter investigates whether theory of mind can provide a plausible explanation, at the mind level, of the tacitly triggered process of knowledge coordination elaborated by Hayek. More specifically, does Hayek’s concept of coordinating and self-organizing orders imply a model of the mind that can be framed as the current philosophical concept of theory of mind? In particular, we address the question whether theory of mind can give an account of that ‘‘inter-personal’’ understanding of other people’s mental states that Hayek sketches without developing it in details (Hayek, 1952, p. 23).
The chapter is then structured as follow: second section frames the concept of mentalizing as it has been historically developed in theory-theory and simulation-theory; third section presents Hayek’s philosophical psychology, identifying specific issues to integrate the latter with modern theory of mind; it explains the roles of communication between individuals and the process of knowledge formation in Hayek’s view, trying to address the question why Hayek’s philosophical psychology does not properly consider the concept of ‘‘theory of mind.’’ Fourth section concludes with further ideas of comparison, presenting the concept of ‘‘social mind’’ from a neuroscientific perspective, considering the idea of mirror neurons.
Philosophical and experimental research in psychology has been centered on the social nature of the mind for the past 20 years. Imitation is an important aspect of social learning, even at the mental level: mental mimicry (Gallese & Goldman, 1998) is based on the capacity to imitate other people’s mental states and has been defined as a process of isomorphism between states of mind of different persons, according to which two persons feel the same state of mind just seeing the other person in a particular situation or understanding the other person’s mental state. A particular case of isomorphism is represented by empathy: this is an automatic process triggered by an affective state, elicited by the observation or imagination of another individual’s affective state. Empathy has been associated with both epistemological and social roles (De Vignemont & Singer, 2006): it provides knowledge of the environment around us, connecting emotional stimuli coming from the external environment, ‘‘their situative context’’ (ibid., p. 440), and the relationship between the empathizer and the target. Empathy has therefore a vivid social dimension.
Moreover, empathy has been advocated as one of the explanatory devices of altruistic and pro-social behaviors specific of human nature: justice and cooperation (Boyd & Richerson, 2006; Hoffman, 2000; Hume, 1739).
From a neuroscientific perspective, the ‘‘empathic’’ nature of the brain has been demonstrated by the existence of mirror neurons; in the second half of the Nineties a particular scientific discovery has been made in the macaque monkeys’ brain: mirror neurons (Gallese, Fatiga, Fogassi, & Rizzolatti, 1996; Rizzolatti, Fatiga, Gallese, & Fogassi, 1996). These are visuomotors neuronal cells that fire both during the individual execution of a goal-directed action and the observation of the same action in a target individuals. They are located in the so called area F5 of the brain that belongs to the ventral premotor cortex, and they are fundamental in developing a ‘‘motor-theory of social cognition’’ (Gallese, Keysers & Rizzolatti, 2004) since they completely change the philosophical basis of actions understanding: this means that with mirror neurons a direct link between ‘‘first and third person experience’’ (ibid., p. 396) is possible. Bridging first and third person, in particular, means connecting the ‘‘I do and I feel’’ experience with ‘‘he does and he feels’’ experience. This can occur, not on the basis of the visual representation and interpretation performed by a central system, but by the ‘‘penetration’’ of information related to the target into the neural system and knowledge of the observer, who is empathizing. The fact that the action perceived and registered by the mirror system is goal-directed is fundamental. In fact, in the original experiment on macaque monkeys (Umilta` et al., 2001), the mirror system is activated only when an action is explicitly directed towards an object: for instance, mirror neurons are firing both when the monkey is grasping an object and both when the monkey is looking at the experimenter grasping the same object. This happens in both a full vision and hidden conditions, that is, when both the object is present in the spatial vision of the animal and when it has been hidden beyond a sliding screen, but after being present. In contrast, mirror neurons do not fire when the object is not present from the beginning, and the grasping movement is directed toward nothing in particular. In this case, neither the full vision nor the hidden treatments are characterized by mirror neurons activation. This occurs because the action is perceived as not being goal-oriented.
More recent studies have shown that mirror neurons are present in human brain as well and that, moreover, they fire in response to a wider range of actions than the monkey system (Gallese et al., 2004). In particular, mirror neurons fire in humans in the case of facial expression recognition, because the observer tends to share the emotional and affective state of the target, demonstrating its understanding. Recognizing the powerful implications that the discovery of a mirror system in humans triggers, Gallese et al. (2004) propose a ‘‘unifying theory of social cognition’’ that is able to make sense of both first-person and third-person recognition and understanding of emotions and actions, both individually performed and observed in others: the understanding of social cognition implies a bridge ‘‘between others and ourselves’’ (Gallese et al., 2004, p. 400). Hayek himself highlights the relationship between perception and action developed by the mental order: in his opinion, the sensory representations of the environment are associated with a possible goal to be pursued in that environment through a movement pattern that will make the achievement of that goal possible. This process determines particular responses, suggesting possible corrections to be taken in the movement patterns if the first ones are not particularly successful. Hayek describes motor responses as directly belonging to the act of perception since they ‘‘serve for the proper evaluation of the stimulus’’ (Hayek, 1952, p. 92). The interaction between exteroceptive and proprioceptive impulses and the consequent feedbacks generate the processes of adaptation of the organism to the external environment, which are of particular significance for the elaboration of subjective knowledge. Hayek develops therefore a fundamental and modern theory about the mental order and its relationships with the physical and neuronal order, presenting in his ‘‘central thesis’’ the role of subjective knowledge created through a process of internal reconstruction and classification of external stimuli. It is precisely in connection with this specific point that the role of folk psychology may find its fruitful application in Hayek’s theory: folk psychology is the conceptual common sense framework that socialized subjects employ to interpret, understand and predict other subjects’ mental states and behaviors. Hayek believes that the fundamental operation that human mind can accomplish is classification. Beyond classification, we believe that mentalizing should be taken into consideration in order to give an account of the interpersonal and social dimensions of human life and human mind. In particular, of special interest for us, was to present an overview of current approaches in philosophy of mind, so to understand how the idea of folk psychology can be used as a tool to bridge Hayek’s theory of mental order toward an inter-personal conception of the mind, which Hayek himself seems to support, although never developing it in details.
Here are a couple of extracts from Giandomenica Becchio’s paper:
In the Preface of The Sensory Order, Hayek stated that this book was based on his readings in psychology during 1919–1920, when he was still a young student in Vienna interested in both psychology and economics. Among many others, Hayek explicitly cited Mach’s influence on him. Hayek’s contacts with the lively Viennese milieu during the 1920s and 1930s had a fundamental role in the story of the use of Mach in Hayek’s book. As Hayek himself explained, Mach had a great influence on Viennese students and scholars until the 1930s, because he represented ‘‘the only source of arguments against a metaphysical and nebulous attitude’’ that was spreading among scientists (Blackmore, Itagaki, & Tanaka, 2001, p. 124). The use of Mach’s philosophy as a tool against any metaphysical attitude was particularly strong inside the Vienna Circle, where scholars like Otto Neurath and Rudolph Carnap had founded the Ernst Mach Society (Verein Ernst Mach, 1927) to support their movement and to link Mach’s empiricism to their philosophical approach,which they later named ‘‘logical positivism’’ (Blumberg & Feigl, 1931). Hayek strongly criticized the Vienna Circle’s philosophical approach: he mainly rejected Neurath’s physicalism (the belief that all science ultimately reduces to the laws of physics, Neurath, 1931; Caldwell, 2004), even if he showed some interest in Carnap’s logical system (Carnap, 1928). When Hayek introduced the system of multiple classification in The Sensory Order, he cited Carnap as the one who provided ‘‘a somewhat similar statement of the problems of the order of sensory qualities’’ (Hayek, 1952, p. 51). Nevertheless, in the mid-1930s, when Carnap officially subscribed to Neurath’s physicalism, it culminated in the project of the unification of science (Stadler, 2001).1 Hayek’s aversion arose: From the fact that we shall never be able to achieve more than an ‘explanation of the principle’ by which the order of mental events is determined, it also follows that we shall never achieve a complete ‘unification’ of all sciences in the sense that all phenomena of which it treats can be described in physical term. (Hayek, 1952, p. 191)
And in the following footnote he specifically named both Carnap and Neurath: their physical language, since it refers to the phenomenal or sensory qualities of the objects, is not ‘‘physical’’ at all. Their use of this term rather implies a metaphysical belief in the ‘‘ultimate reality’’ and constancy of the phenomenal world for which there is little justification. (ibid.) In this passage Hayek accused them of having dropped their original antimetaphysical attitude – mediated through Mach – to propose a new form a metaphysical belief, based on the reduction of any reality to the empirical realm. Hayek’s j’accuse is significant: for 30 years the philosophers of the Vienna Circle claimed Mach’s philosophy as one of the main sources of their aversion to metaphysics and a pillar of their philosophical approach based on a new form of positivism.2 In the International Encyclopedia of Unified Science, Joergensen explained the three common traits between ‘‘Mach’s positivism’’ and the Vienna Circle philosophy: the idea that ‘‘human knowledge is a biological phenomenon’’; the rejection of any form of ‘‘thing-in-itself’’ (and for that matter, of any form of Kantianism) and the overlap between physical reality and physical elements (Joergensen, 1951, p. 853). To explain the link between Mach and Hayek on the one hand and Hayek’s aversion to the logical positivism (apparently and ‘‘officially’’ rooted in Mach’s philosophy) on the other hand, we need to consider what Hayek meant when he mentioned Mach’s influence in The Sensory Order.
As Hayek himself stated in the Preface of The Sensory Order, psychology is essentially ‘‘dealing with the problems of the methods of the social sciences [a] concern with the logical character of social theory’’ (Hayek, 1952, p. v). From a broader perspective, Hayek’s aversion to reductionism can be seen as the reverse side of the struggle for individualism he started in the late 1930s with the publication of ‘‘Economics and Knowledge’’ and culminated in Individualism and Economic Order (1949), which was published just few years before his decision to revise and finally publish The Sensory Order. During the early 1950s while working on The Sensory Order, Hayek composed ‘‘Within Systems and About Systems,’’ which dealt with the possible knowledge of our mental processes and with the relationship between knowledge and the external environment.
In the early 1930s, Hayek edited Carl Menger’s Collected Works (in German): he also wrote a well-known presentation of Menger’s thought and work. It was published in Economica, and it represented the introduction of Menger to the English-speaking world (Hayek, 1934). In this essay, Hayek stressed the centrality of individualism in Menger’s approach when he had described how markets work and how economic agents behave when they make an economic decision. In the same period Hayek started to work on the link between economic choice and individual knowledge, which culminated in his well-known paper Economics and Knowledge.
From Economics and Knowledge onward, Hayek introduced psychology into economics to explain the dynamics of a society in an individualistic perspective. In this view, Hayek’s decision to work back on revise and publish The Sensory Order can be regarded as the final step of his research project on the nature of individual choice.
After having described the role of knowledge in individual plans and the following mechanism of the market, as well as the use of knowledge in a competition as a discovery process, Hayek described the nature of human mind. The Sensory Order can be seen as Hayek’s tool to show how people know the internal and external reality, how they form their knowledge and how they can share it to make their own plans and coordinate them.
From Hayek’s presentation of Menger’s thought as a stronghold of individualism (1934) to the publication of The Sensory Order (1952), Hayek’s work can be regarded as a tentative to investigate how society works from an individualistic point of view and how the human mind knows from an antireductionist perspective; in opposition to a new kind of holistic and reductionist approach, supported by the predominant position inside the Vienna Circle, mainly by Neurath and Carnap.
The role of Mach in this story is important. Both Hayek and Neurath/Carnap considered Mach the most influential anti-metaphysical thinker. Nevertheless, Neurath/Carnap accepted Mach’s reductionism in psychology as well as his final philosophical approach as a direct development of his psychology. Furthermore, the unity between physics and psychology (between physical and sensorial orders) in Mach’s thought also opened the way to the Vienna Circle’s ideal of a unified science (from physics to social sciences), never accepted by Hayek.
Mach’s influence on Hayek is more complex, though.
Hayek started from Mach’s psychological inquiry, which was influenced by Kant’s research on the nature of knowledge; but, as Mach had refused the final stage of Kantism (the Dich an sich as a metaphysical residuals), Hayek refused the final stage of Machian philosophy (the isomorphism between physical and mental realm as a form of reductionism). Hayek refused Mach’s destruction of ‘‘the conception of elementary and constant sensations as ultimate constituents of the world’’ and he restored ‘‘the necessity of a belief in an objective physical world which is different from that presented to us by our senses’’ (Hayek, 1952, p. 176, 8.37). In a certain sense, Hayek went back to a sort of Kantian dualism, without introducing a negative concept, like Ding an sich. Hayek wrote: The conclusion towhich our theory leads is thus that to us not onlymind as a whole but also all individual mental processes must forever remain phenomena of a special kind, which. Although produced by the same principles which we know to operate in the physical world, we shall never be able fully to explain in terms of physical laws. (Hayek, 1952, p. 191)
It will derive its statements about some mental processes from its knowledge about other mental process, but it will never be able to bridge the gap between the realm of the mental and the realm of the physical. Such a verstehende psychology, which starts from our given knowledge of mental processes, will, however, never be able to explain why we must think thus and not otherwise, why we arrive at particular conclusions (Hayek, 1952, p. 192).
Here are some extracts from Jim Wibble’s fascinating paper, the full version available here.
When exploring ideas on philosophy of science and economic methodology, one of the most unusual articles that one can encounter is Hayek’s well-known piece, “The Primacy of the Abstract”. In a note in the article, Hayek tells us that he had thought of another title but it would not have had the shock effect which is the merit of the phrase chosen. What Hayek wanted to convey with the title was the intellectual novelty of the positions argued. Without getting into the details of his position, Hayek maintains that all sensation is preceded by mental operations of abstraction. He had expressed his views on the subject nearly two decades earlier in a much larger work. His views on the primacy of the abstract had already appeared in The Sensory Order (1952). In that book, Hayek had taken the position that the abstract nature of sensation and cognition was supported by what we would now call the neuroscience of his time. In other words, Hayek thought that the neurophysiological evidence concerning how human sensation and cognition function provided an empirical basis for questioning prevailing empiricist theories and philosophies of how those functions worked. Various versions of empiricism dominated much of science at that time. Also the empiricist psychology of abstract ideas from the British associationist school was widely known in both early 20th century philosophy and psychology. Among other things, Hayek was conveying his sharp disagreement with the prevailing empiricist conceptions of how abstract ideas were created and how science was understood. Such a different view of how human knowing functions also has profound implications for understanding how society can be governed, for how the economy works, and for understanding the evolutionary limits on human knowing in economic processes.
Since Hayek’s title, “The Primacy of the Abstract”, had its intended shock effect on this author, it created an intellectual sensitivity for like ideas. As it turns out, another intellect had come to a similar position on cognition and abstraction decades earlier than Hayek. The purpose here is not to identify a precursor as such, but rather to acknowledge both the similarities and the differences in their views. The other figure is the American scientist, mathematician, and philosopher Charles Sanders Peirce. From a couple of references that Hayek has made to Peirce’s writings and the fact that Hayek’s good friend, Karl Popper, also knew of Peirce’s writings, it appears that Hayek must have read some of the volumes of Peirce’s Collected Papers. As quoted at the beginning of the paper, Popper called Peirce “one of the greatest philosophers of all time.” Peirce and Hayek were inquiring minds whose interests seem to range over many of the same disciplines but with varying degrees of intensity. Peirce may have had a greater knowledge of astronomy, mathematics, and philosophy while Hayek had a deeper awareness of economics, linguistics, psychology, and political philosophy. Peirce like his well-known father Benjamin, also had a keen interest in economics, especially mathematical economics. Peirce the son kept in touch with economics through his life-long acquaintance Simon Newcomb whose second discipline of interest after astronomy was economics. Newcomb was a prominent antagonist of the founders of the American Economics Association in the late 1880s. Newcomb, who eventually joined the AEA, opposed the expansive view of government proposed by AEA founders such as Richard Ely and Edmund James. Peirce was also kept aware of developments in psychology by his lifelong friend William James. Hayek certainly seems to have been greatly aware of James’s contributions to cognitive psychology. So here is another avenue of connection between Peirce and Hayek.
Unlike Hayek, most modern economists have always kept their distance from psychology. Both disciplines separated from philosophy as autonomous social sciences in the late 19th century. Even though classical economics is dated from Adam Smith and political economy became a separate subject in its own right late in the 18th century, political economy was most often taught as a branch of moral philosophy until the late 19th century. It wasn’t until the neoclassical revolution and the creation of marginalist ideas that the name of the discipline changed from political economy to economics and it became a separate autonomous discipline. Whether economists agree or disagree with psychologists, it is important to understand the conceptions of psychology that previous generations of economists encountered. In the 19th and early 20th century, higher education was much more general than now and economists would have been much more exposed to the general ideas of psychology and philosophy than they are today. In our present time, it is possible, that someone could now get a doctorate in economics without ever having had any formal exposure to psychology or philosophy in terms of an organized university class. For those so narrowly educated, the intellectual breadth of earlier figures like Hayek and Peirce may be difficult to grasp. And the most important things they have to say could simply be beyond the appreciation of even those who have won Nobel Prizes in economics. With regard to very general psychological ideas, there is a distinction that pertains to cognition that is important to recognize in understanding both Hayek and Peirce. It permeates the outlook of The Sensory Order. That distinction seems to have been forgotten or is very unclear in modern economics. The distinction I have in mind is the difference between higher and lower mental processes. This is an evolutionary distinction that is still widely shared by those in many contemporary disciplines that are concerned with human intelligence and learning. It can be taken as part of the broad conceptual background of previous generations of economists especially those from around 1859 until 1950.
Decades before Hayek authored The Sensory Order and its reprise, ‘‘The Primacy of the Abstract’’, Charles Sanders Peirce created a similar view of sensation, perception, and cognition. Like Hayek, Peirce emphasized the general, abstract, and relational nature of sensation, perception, and cognition. In the late 19th century, Peirce helped create the new field of mathematical logic and emphasized the logic of relations as one of the key notions of that new discipline. Peirce went on to develop conceptions of logical relations for economics, for metaphysics, for his conception of evolution, and for human perception, sensation, and cognition. Like Hayek, Peirce held that perception, sensation, and cognition were much more abstract than empiricists had ever held. They both criticized the associationistic empiricism of abstract ideas of J. S. Mill. For Hayek and Peirce the processes of human knowing are due to the active application of human cognitive capacities in apprehending relational distinctions picked up through our physiological capacities usually called our senses. The contents of conscious awareness are constructed by these capacities even though this is the opposite of what our common sense seems to imply. Hayek’s views are more physiologically grounded while Peirce’s ideas benefit more from his knowledge of mathematics and logic. Both view human knowing as dealing with the relational properties of their subjects of inquiry. Both criticize the Mills associationistic empirical psychology. Both appeal to topology as a vehicle for understanding the relational logical properties of things, processes, and events as they are apprehended in sensation and cognition. And both view sensation as active relational construction. Thus sensation is predominantly abstract and general. Human cognition, sensation, and perception function like topological relations operators in conveying the most important relational details regarding our subjects of inquiry. For both Hayek and Peirce, the abstract nature of cognition and sensation has important economic dimensions. Other views of sensation and cognition essentially assume the equivalent of much less efficient processes of information search and knowledge acquisition. Humans continually construct abstract ideas making relational comparisons and inferences regarding the phenomena of their current and future circumstances. Humans do not readily waste the relational information regarding their environment.
Readers may want to know that the author was one of two economics graduate students that attended the Penn State conference on cognitive psychology in May of 1977 where Hayek’s The Sensory Order was given a central place in the sessions and the discussions. William Butos was the other student. We heard Walter Weimer (1982) deliver his long keynote address and appraisal of The Sensory Order and Hayek’s (1982) response. Weimer thought that Hayek’s views were more psychological and thus closer to Thomas Kuhn’s view of science than those of Popper or Lakatos. In the discussion which followed, I asked Hayek whether that was so. His response was I am still a Popperian (Weimer and Hayek, 1982, p. 323). Weimer was a member of the dissertation committees for both Butos and the author.
Here are excerpts from Ed Feser’s essay.
In late 1952, F. A. Hayek sent his friend Karl Popper a copy of his recently published book The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology. In a letter dated December 2, 1952, Popper acknowledged receipt of the book and responded as follows to what he had read in it:
I am not sure whether one could describe your theory as a causal theory of the sensory order. I think, indeed, that one can. But then, it would be also the sketch of a causal theory of the mind. But I think I can show that a causal theory of the mind cannot be true (although I cannot show this of the sensory order; more precisely, I think I can show the impossibility of a causal theory of the human language (although I cannot show the impossibility of a causal theory of perception). I am writing a paper on the impossibility of a causal theory of the human language, and its bearing upon the body-mind problem, which must be finished in ten days. I shall send you a copy as soon as it is & typed.
In a later letter dated January 19, 1953, Popper added, As to my comments on your book, they are, as far as criticism is concerned, implicit in my paper. I think you have made a splendid effort towards a theory of the sub-linguistic (¼ sub-human ((¼descriptive)) language) level of mind; but I believe that no physiological approach (although most important) can be sufficient to explain the descriptive and argumentative functions of language. Or in other words, there can be no causal or physiological theory of reason. The paper Popper was referring to is his short article ‘‘Language and the body-mind problem.’’ Hayek began a draft of a paper entitled ‘‘Within systems and about systems: A statement of some problems of a theory of communication,’’ which, as Jack Birner has suggested, appears to have been intended at least in part as a response to Popper’s criticisms. But it was never completed, and Hayek never addressed Popper’s arguments in any of his published work. The Sensory Order has, however unjustly, largely been forgotten outside the circles of Hayek specialists. Popper’s brief paper is perhaps even less well known. Neither Popper’s letters to Hayek nor Hayek’s unfinished draft have yet been published. So, this episode might seem rather insignificant in the history of thought and indeed of little significance even to our understanding of either Hayek’s thought or Popper’s. But, as I hope to show in what follows, nothing could be further from the truth. With respect both to its general themes and to some of the specific philosophical moves made by each side, the brief, private dispute between Hayek and Popper foreshadowed a more prominent debate within twentieth-century analytic philosophy that began in the 1970s and continues to this day. Moreover, both the dispute between Hayek and Popper and the later debate reflect a deep tension that has lain at the heart of Western thought since the time of the scientific revolution. On the one hand, there is the ‘‘mechanical world picture’’ according to which all natural phenomena can be explained entirely in terms of the mathematically describable behavior of matter in motion. On the other hand, there are rational human thought processes, including the philosophical and scientific theorizing that led to the mechanical world picture itself. It is far from obvious that the latter can be fitted comfortably into the former – that human rationality can be explained in terms of purely material processes – and from the time of Descartes until relatively recently, the dominant view was that it could not be. Hayek and Popper were writing at a time when this view began to give way to a new materialist orthodoxy. Hayek, though arguably more sensitive to the tension in question than most contemporary materialists, nevertheless thought it could be resolved in a way favorable to a broadly materialist or ‘‘naturalistic’’ understanding of the mind. Popper disagreed and believed the older, dualistic conception of the mind to be essentially correct, and as we will see, his reasons for doing so have in more recent years been regarded even by some non-dualist philosophers as posing a serious difficulty for materialism. In the next section, I will set the stage for the discussion of Hayek and Popper with a brief account of the nature and origins of the mind-body problem (or ‘‘body-mind problem,’’ as Popper preferred to call it). We will see that there are really at least three mind-body problems, and that while Hayek and most contemporary philosophers focus on the first of these, Popper was more concerned with the other two and believed that they pose a more serious difficulty for materialism than the former does. The third section will explain what a ‘‘causal theory of the mind’’ is and the respects in which Hayek’s account can be regarded as a causal theory. The fourth section will examine Popper’s main criticism of causal theories, which will be elucidated by comparison with the views of contemporary philosopher Hilary Putnam, who (apparently independently) developed a line of argument that parallels and extends the one presented by Popper. Finally, in the fifth section, I will consider the possible response to Popper suggested both by Hayek’s unpublished draft and by things Hayek had to say in some of his published work, relating it to the responses contemporary philosophers have given to arguments like those presented by Popper and Putnam. I will argue that none of these replies succeeds and that the Popperian critique remains a powerful and as yet unanswered challenge not only to dogmatic materialism but even to the more modest and critical form of materialism or naturalism defended by Hayek.
Hayek’s unfinished draft ‘‘Within Systems and About Systems’’ is a study of this problem and, as noted earlier, seems intended at least in part as a response to the difficulties raised by Popper. While he does not explicitly present it as such, he does say that he intends to reply to those who regard it as ‘‘futile’’ or ‘‘absurd’’ to analyze mental processes in terms of ‘‘causal systems,’’ and that of the various mental phenomena his focus will be on ‘‘communication and particularly description’’ – the latter being precisely one of the phenomena Popper said could not be explained causally.26 Moreover, he explicitly cites Buhler’s distinction between functions of language, which Popper had borrowed and adapted for the purposes of his own argument. Hayek’s central claim is that: [F]or any causal system there is a limit to the complexity of other systems for which the former can provide the analogon of a description or explanation, and that this limit necessarily excludes the possibility of a system ever describing or explaining itself. This means that, if the human mind were a causal system, we would necessarily experience in discussing it precisely those obstacles and difficulties which we do encounter and which are often regarded as proof that the human mind is not a causal system. The impossibility of the mind’s fully explaining itself is a recurring theme in Hayek’s writings on our subject. He takes it to follow from the complexity of any system capable of exhibiting mental properties, and in particular from the potentially infinite regress entailed by the mind’s reflection on its own operations. For when one group of mental operations becomes an object of thought for another, understanding the latter will in turn require that it be made an object of thought for yet another, and so on ad infinitum, as each meta-level of thought becomes an object-level for another meta-level. The parallel with Godel’s incompleteness theorems, Cantor’s set theory, and Russell’s theory of types is obvious, and Hayek took puzzles of self-referentiality of the sort studied by such thinkers to provide the key to understanding why a material mind should seem to us to be inexplicable in material terms. The trouble with this sort of move, considered as a reply to Popper, is that it assumes that it is the ‘‘self’’ in self-referentiality that is the problem, when in fact it is the ‘‘referentiality’’ that is. Once we have a system capable of referring at all – capable, that is, of intentionality or representation – then yes, puzzles of self-referentiality are going to arise if the system becomes sufficiently complex. But the question Popper is addressing is not whether a complex system already capable of intentionality can understand itself. The question he is addressing is whether a purely material system could exhibit intentionality of even a rudimentary, non-self-referential sort merely by virtue of bearing certain causal relations to other objects and events. Systems of the sort studied by Godel, Cantor, and Russell are completely irrelevant to this question, as should be obvious when we consider that these systems already presuppose the existence of intentionality insofar as they presuppose minds capable of interpreting otherwise meaningless physical marks as symbols of logic and set theory. What we need to know is how such intentionality enters the picture in the first place. That Hayek does not clearly understand what is at issue is evident from what he says in ‘‘Within Systems and About Systems.’’ Much of the draft recapitulates the theory of The Sensory Order, and like the book makes free use of terms like ‘‘classification,’’ ‘‘representation,’’ ‘‘models,’’ and ‘‘map’’ – terms the intentional connotations of which are precisely what need to be grounded. To be sure, Hayek says that he intends to explain ‘‘the property to which we refer by such terms as ‘intention,’ ‘purpose,’ ‘aim,’ ‘need,’ or ‘desire’’’ and acknowledges that ‘‘we must not use any of these ‘mental’ terms until we have succeeded in adequately defining them in terms of our causal system.’’