Friedrich A. Hayek has proven to be one of the most exceptional classical liberal political economists. His research incorporates the fusion between Politics, Philosophy, and Economics. As a philosopher he sought answers relating to the nature of the mind. While as an economist he sought to integrate technical economics and philosophy in order to explore the political behavior of free people.
# '''BACKGROUND'''
#* Born on May 8, 1899 in Vienna
#* Earned doctorates from University of Vienna
#* Shares a Nobel Prize with Gunnar Myrdal
# '''CONTRIBUTIONS'''
#* '''Monetary Theory and the Trade Cycle:''' Reevaluated the capital structure of an economy and how it can be affected by credit policy and expansion.
#* '''Hayek-Keynes Debate:''' Monetary economics debate where Hayek expressed that understanding interest rates and capital structure play a key role in the market economy. He argues that Keynes focuses on how the economist examines the industrial structure rather than how free individuals would examine the structure.
#* '''Collectivist Economic Planning:''' Series of essays focused on the issues of socialism.
#* '''The Road to Serfdom:''' Redefining Liberal Society and the problems of socialism through observations of Nazi Germany.
#* '''The Counter-Revolution of Science:''' Collection of essays that explores philosophical trends, which prejudices individuals from efficiently analyzing systematic economy issues.
#* '''The Constitution of Liberty:''' Work in Classical liberal political philosophy that went against constructivist rationalism.
He argues that '''[[rationalism]]''' can be both constructive and evolutionary and that there are two kinds of order: one that is rationally designed and one that is spontaneous. While constructive rationalism has proved efficient in less complex situations (i.e. deciding on a factory's production level or deciding on how many houses to build) it is a mistake, Hayek argues, to consider that institutions should solely be the product of human rationale, as human beings are unable to have a complete understanding of the intricacies of social institutions. Rather, Hayek advocates the importance of evolutionary rationalsim and that of spontaneous order, which are significantly more efficient that the rational design, in that they evolved over the course oh human history and allow one to better understand the society in which we live. While both types of orders are employed in everyday life, it if the spontaneous order that takes precedence, as it can transmit information to players in a non-centrlized way, and thus overcome the constraints of rational planning. In addition, spontaneous orders have the ability to evolve and thus overcome any inaccuracies they might have:
''"What the age of rationalism - and modern positivism - has taught us to regard as senseless and meaningless formations due to accident or human caprice, turn out in many instances to be the foundations on which our capacity for rational thought rests. Man is not and never will be the master of his fate: his very reason always progresses by leading him into the unknown and unforeseen where he learns new things"'' '''[[cite 2]]'''
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[[Hayek & The Socialist Calculation Debate]] || [[Friedrich A. Hayek]] || [[Ludwig Von Mises]] || [[What is Socialist Calculation Debate?]] || [[Critiques of the Socialist Calculation Debate]] || [[Knowledge Problem]] || [[The impact of Hayek's 1945 paper]] || [[Authors' View]] || [[Questions to Ask]] || [[Sources Cited]]
It is not important for human beings to always rationalize and perfectly understand the rules they follow. Many of human behaviors are inherited and followed for what they are-- humans adapt to rules not because they always understand them but because they fain benefits for doing so. For example, a very small percentage of the population actually understands how the language they speak came into being (i.e. grammar, vocabulary, linguistic influences, etc). However, they all adopted the rule of speaking the same language as it brings them benefits.
Hayek argues that people interpret the events they experience through the light of a preexisting system of classification, which is built through a process of cultural evolution and individual learning. The experiences people pass through have a crucial influence in them building a “growth of knowledge” process, which will define their future responses to various situations they will be facing. It is thus misleading to believe that humans can simply design a set of rules and impose it upon their environment, as is it the environment in which they live that shapes their behavior. Hayek considers that humans did not adopt laws and institutions because they were able to foresee the benefits these would bring. Rather, their adoption was due to spontaneous order, as they evolved through a process of the logic of choice. People’s behavior follows patterns that have previously been accepted by their society; this allows them to not only pursue their own means but the means of others as well.
Hayek considers that the market economy is a clear example of spontaneous order. The market is not simply a guide or a communication tool, but a complex mechanism which allows participants to spontaneously adopt their actions to circumstances and events they previously had no knowledge of. The market is not a social institution but a “value-free result of the Logic of Choice” (Hayek Revisited), which not only makes use of the existing knowledge market participants have but continuously generates new knowledge. Thus, although market players might employ rationalism to plan their actions, they cannot coordinate their actions solely on previously planned strategies; rather, they have to adapt to the actions of the other players in order to gain the highest payoffs. The market operates as a mode of coordination and information is being transmitted through a series of general mechanisms (i.e. the price mechanism).
Hayek agues that the role of the government and other legal institution has to be limited solely to implementing legislation that allows the market to work efficiently (i.e. laws of property, contract and tort). Any other intervention might result in '''[[unfavourable outcomes]]'''. Hayek thus strongly advocates the fact that rules constructed through the process of spontaneous order are significantly more effective than those constructed through a rational process:
''“It is unlikely that any individual would succeed in rationally constructing rules which would be more effective for their purpose than those which have been gradually evolved”'' (The Constitution of Liberty, 66).
Hayek argues that spontaneous rules are a result of human action but not human design and evolve through a process of cultural evolution, whose outgrowths lie between instinct and reason (Bouckaret 34).
''“I want to call attention to what does indeed lie between instinct and reason, and which on that account is often overlooked just because it is assumed that there is nothing between the two. That is, I am chiefly concerned with cultural and moral evolution, evolution of the extended order, which is on the one hand…beyond instinct and often opposed to it, and which is, on the other hand…, incapable of being created or designed by reason.......Just as instinct is older then custom and tradition, so then are the latter older than reason: custon and tradition stand between instinct and reason – logically, psychologically, temporally"'' (The Fatal Conceit: The Errors of Socialism, 23).
Latest revision as of 16:42, 5 December 2007
Biography
Friedrich A. Hayek has proven to be one of the most exceptional classical liberal political economists. His research incorporates the fusion between Politics, Philosophy, and Economics. As a philosopher he sought answers relating to the nature of the mind. While as an economist he sought to integrate technical economics and philosophy in order to explore the political behavior of free people.
BACKGROUND
Born on May 8, 1899 in Vienna
Earned doctorates from University of Vienna
Shares a Nobel Prize with Gunnar Myrdal
CONTRIBUTIONS
Monetary Theory and the Trade Cycle: Reevaluated the capital structure of an economy and how it can be affected by credit policy and expansion.
Hayek-Keynes Debate: Monetary economics debate where Hayek expressed that understanding interest rates and capital structure play a key role in the market economy. He argues that Keynes focuses on how the economist examines the industrial structure rather than how free individuals would examine the structure.
Collectivist Economic Planning: Series of essays focused on the issues of socialism.
The Road to Serfdom: Redefining Liberal Society and the problems of socialism through observations of Nazi Germany.
The Counter-Revolution of Science: Collection of essays that explores philosophical trends, which prejudices individuals from efficiently analyzing systematic economy issues.
The Constitution of Liberty: Work in Classical liberal political philosophy that went against constructivist rationalism.