Hayek's Economics Research Articles

F.A. Hayek on the political economy of endogenous preferences: An historical overview and contemporary assessment

In this paper, we analyse Hayek's views on endogenous preferences. Perhaps surprisingly in the light of his remarks that economists ought to take people's preferences as given, there are several places in Hayek's economics and political economy where preference endogeneity plays a significant role. We begin by documenting those cases, providing an historical overview of Hayek's views on preference endogeneity. We then go on to argue that in his work on theoretical psychology Hayek provides an account of the causal mechanisms through which people's preferences can change in response to their social context. Finally, we assess Hayek's views on preference endogeneity in the light of more recent work on the topic in behavioural economics, before going on to consider what Hayek's analysis can add to contemporary debates in political economy.

On fallibility and perfection: Boettke’s Hayek vs. mainline economics

Peter Boettke’s F.A. Hayek Economics, Political Economy, and Social Philosophy (Palgrave 2019) is a nuanced treatment that examines the historical context of Hayek’s work as well as its contemporary context. Boettke’s major argument is worth emphasizing at the outset: Hayek, he argues, is an epistemic institutionalist. To Boettke, I would add that economists moved away from a preoccupation with institutions earlier than Boettke allows. For Hayek, people are fallible but they learn within the context of various institutional arrangements. For the early neoclassical economists, by contrast, the theorists who know better have the authority to ensure that the inferiors optimize.

Retrospectives: Friedrich Hayek and the Market Algorithm

Friedrich A. Hayek (1899–1992) is known for his vision of the market economy as an information processing system characterized by spontaneous order: the emergence of coherence through the independent actions of large numbers of individuals, each with limited and local knowledge, coordinated by prices that arise from decentralized processes of competition. Hayek is also known for his advocacy of a broad range of free market policies and, indeed, considered the substantially unregulated market system to be superior to competing alternatives precisely because it made the best use of dispersed knowledge. Our purpose in writing this paper is twofold: First, we believe that Hayek's economic vision and critique of equilibrium theory not only remain relevant, but apply with greater force as information has become ever more central to economic activity and the complexity of the information aggregation process has become increasingly apparent. Second, we wish to call into question Hayek's belief that his advocacy of free market policies follows as a matter of logic from his economic vision. The very usefulness of prices (and other economic variables) as informative messages—which is the centerpiece of Hayek's economics—creates incentives to extract information from signals in ways that can be destabilizing. Markets can promote prosperity but can also generate crises. We will argue, accordingly, that a Hayekian understanding of the economy as an information-processing system does not support the type of policy positions that he favored. Thus, we find considerable lasting value in Hayek's economic analysis while nonetheless questioning the connection of this analysis to his political philosophy.

The Emergence of “Emergence” In the Work of F. A. Hayek: A Historical Analysis

This article identifies the sources on which Friedrich Hayek drew in order to develop his understanding of the notion of emergence. It is widely acknowledged that the notion of emergence plays a significant role in Hayek's analyses of both the mind and the market. In Hayek's account, the key capacities of the human mind—such as its capacity to enable people to perceive the world around them and to form plans about how to act—are emergent properties of the structured array of neurons found in the human brain. Analogously, Hayek's analysis of the market portrays the coordinative powers of the price mechanism as an emergent property of the social system that is formed when people's (inter)actions are governed by a set of norms that includes both the formal rules of property and tort and contract law, and also informal norms of honesty and promise keeping. However, while several scholars have identified the importance of the notion of emergence in Hayek's thought, none have explored systematically and in detail the sources from which he acquired his knowledge of the concept. This article remedies that omission by examining the history of Hayek's use of the concept of emergence and identifying the sources through which notions of emergence and “emergent properties” entered his thinking. It is argued that the three main sources of influence are as follows: the ideas of the German psychologist Wilhelm Wundt; the work of members of the gestalt school of psychology; and the writings of the organicist biologists Joseph Woodger and Ludwig von Bertalanffy. The significance of the article's findings for those interested in the development of Hayek's economics is also discussed.

Hayek's economics

The dispersal of information in the economy is the key to Hayek's analysis of economic planning, the trade cycle and entrepreneurship. Gerald Steele, a lecturer at Lancaster University, explores Hayek's analysis. The function of the market is to coordinate this dispersed information.