Another Side of Hayek

The name of Friedrich Hayek comes up on this blog from time to time; and, by my count, I have invoked it in three contexts:

1. Most recently has been his role as a "founding father" of "Chicago School" economics, known best for its mathematical models of "efficient" markets in support of the ideology of "free" (as in maximally deregulated) markets. Ironically, when he joined the University of Chicago in October of 1950, he was a Professor of Social and Moral Science. According to John Nef, "the economists had opposed his appointment in Economics four years before largely because they regarded his Road to Serfdom as too popular a work for a respectable scholar to perpetrate."
2. The Road to Serfdom is the second of my own contexts. One can understand why the University of Chicago viewed this book with a jaundiced eye. Ideologically, it opposed the economic philosophy that had extricated the United States from the Great Depression and then provided the foundations for economic recovery after the Second World War. If that were not enough to make the book questionable, if not heretical, it had also been published in condensed from by the Readers' Digest, hardly a suitable entry for an academic resume! Ironically, Hayek wrote the book to confront the spread of socialism across the world, viewing Joseph Stalin as a worst-case-scenario of consequences. Here is what I wrote about the book last year:

   Hayek's Road to Serfdom addressed the question of how, through subtle manipulations in social context, a free society could prepare itself for fascist domination. His target was the rigid controls of economic planning; but, were he alive today, he might view technocentrism through the same lens, since, at the end of the day, it, too, is all about control.

   Thus, the very arguments that have fomented the knee-jerk alarmist fears of socialism that now contaminate serious efforts to deliberate our way out of the current economic crisis may just as easily explain why we are in the mess that now confronts us. Hayek may have made some good points about the danger of ceding control to fascist domination; but in the early Forties he could hardly have anticipated that a society could end up dominated by sophisticated technologies they did not understand, technologies that could enable and facilitate social disorders far beyond the abuses of deregulated markets (the broader view I was taking in writing about Hayek a year ago).

3. Finally, there is the Hayek who wrote "Economics and Knowledge," based on his 1936 presidential address to the London Economic Club. This was the Hayek who learned his economics from Carl Menger's Grundsätze der Volkswirtschaftslehre, perhaps the first serious text to question the premise of intrinsic value in favor of value that "can only be determined in relation to other possible uses," as Stephen Kresge put it in his introduction to Hayek on Hayek. This use-based context enabled Hayek to develop a corollary to Menger's premise to the effect that, as I put it last year, "economic behavior may ultimately depend more on the exchange of knowledge than on the exchange of value." I suppose that the neglect of this paper can be attributed to our cultural ignorance of history, just as the fundamentalist reading of The Road to Serfdom is a product of our faith-based ideologies.

My interest in Hayek has been revived because, having finally slogged my way to the end of The World in Six Songs here in the pastoral setting of Tomales, California, I turned to Hayek on Hayek for a bit more substance in my reading. I particularly enjoyed Kresge's biographical introduction, whose "Chicago School" ideological asides were kept to a tolerable minimum. More important was my first exposure to one of Hayek's final works, The Sensory Order. I suppose that the theme that unites the three items on my list is Hayek's recognition that any attempt to model the social world mathematically would require what we now call a "complex system," based on nonlinear equations whose interactive behavior cannot be reduced to the better-understood principle of linear systems and that, from a statistical point of view, may easily be perceived as chaotic. This is probably why my sometime-colleague Brian Arthur, whose research now specializes in complexity theory, holds Hayek in such high regard. Hayek's personal philosophy emerged from his own understanding of complexity through the principle that you need to be very careful in trying to control mathematical systems that you do not understand very well (if at all), which is the philosophy behind The Road to Serfdom and explains why the book is as much about technocentrism as it is about socialism.

In The Sensory Order Hayek became bold enough to take on the mother of all complex systems, human consciousness. The result was a book that was "largely unread" (as Kresge politely put it); but that neglect probably had to do with it being too early for its own good. Professionally, Hayek was always interested in patterns; so it should not surprise anyone that the mental capacity for dealing with patterns should have served as the foundation for his approach to consciousness. Consider this summary that Kresge provides in Hayek on Hayek:

The classifications which the mind acquires to sort out undifferentiated sensations stem from prior experience. "Every sensation, even the 'purest' must therefore be regarded as an interpretation of an event in the light of the past experience of the individual or the species." The use of a prior classification to determine the 'sense' of a sensation differs from Kant's use of an a priori category in that Hayek's classifications emerge within the process of perception itself and do not remain fixed. They are not equivalent to a principle or axiom. And therein lies the link—or "linkage," in his terminology—with the development of spontaneous orders.

"The reclassification which is thus performed by the mind is a process similar to that through which we pass in learning to read aloud a language which is not spelled phonetically. We learn to give identical symbols different values according as they appear in combination with different other symbols, and to recognize different groups of symbols as being equivalent without even noticing the individual symbols" (The Sensory Order, p. 169).

The "family resemblance" of these ideas to Gerald Edelman's biologically-based model of consciousness, which, as I have observed, "involves not only our capacity for forming perceptual categories but also the interplay of those categories that arise from 'sensation of the world' with categories based on 'sensation of self,'" is almost uncanny. To some extent it may have been based on intuitions arising from Hayek's early interest in biology combined with his mathematical insights into complexity. Unfortunately, Hayek's speculations arose at a time when he could not have anticipated someone like Edelman discovering biological processes that would reinforce those speculations with substantive observations. Edelman himself does not appear to have acknowledged Hayek's work, but this is entirely understandable. The book was languishing in obscurity almost from the moment of its publication in the early Fifties, but those of us with more respect for history might now prefer it to much of the far more shallow writing that now seems to fill too many bookshelves.