What is a business cycle?
The distinction between human action and design has always seemed specious to me. Individuals are purposeful actors and a market exists only at the point of voluntary exchange between those actors. It would seem therefore that it is designed by the consenting actors.
Money arose not because of any decree or edict, but because numerous entrepreneurial actors sought to better themselves by playing their part in the various parts of the story told by Carl Menger and economists since. The result is the institution of money, an institution that nobody designed or could have foreseen but was nonetheless the result of millions of dispersed actions coordinated by the price system.
Anybody who disagrees with Giles must take a class on economics.
Recently their was a post made by some moderator about snide comments. Pretty sure this post qualifies as just that.
No, this it not at all what Hayek is arguing. He is not talking about evolution or about the way another person’s mind works. It would be more consistent with what Hayek argues to say that we are able to communicate and understand other human actors because anything we interpret as a communication from another actor we interpret through the categories of our own mind. Your alternative notion is totally foreign to what Hayek is arguing
In The Counterrevolution of Science Hayek explicitly ascribes our capacity to understand one another to a common evolutionary origin. As, I believe, Mises does in Socialism. I’m not sure how what we said was so different, except for the fact that I postulated some evolutionary reason for the fact that humans share a common structure of the mind. Indeed, according to Hayek an observer from another planet might just be able to write history that is in line with the positivist ideal.
OK I’m going to stop doing what I previously believed was social science, and begin doing what you believe is social science.
Snarky comments don’t take us away from the fact that a set of tautologies are just that, tautologies that without some sort of empirical work really don’t help us to understand the empirical world at all.
A few more important points about the implications of Hayek’s essay “The Facts of the Social Sciences.”
For the benefit of those who may not have read Hayek’s essay, I will first highlight some important passages.
Hayek writes:
“Take such things as tools, food, medicine, weapons, words, sentences, communications, and acts of production—or any one particular instance of any of these…It is easily seen that all these concepts (and the same is true of more concrete instances) refer not to some objective properties possessed by the things, or which the observer can find out about them, but to views which some other person holds about the things. These objects cannot even be defined in physical terms, because there is no single physical property which any one member of a class must possess. These concepts are also not merely abstractions of the kind we use in all physical sciences; they abstract from all the physical properties of the things themselves. They are all instances of what are sometimes called “teleological concepts,” that is, they can be defined only by indicating relations between three terms: a purpose, somebody who holds that purpose, and an object which that person thinks to be a suitable means for that purpose. If we wish, we could say that all these objects are defined not in terms of their “real” properties but in terms of opinions people hold about them. In short, in the social sciences the things are what people think they are. Money is money, a word is a word, a cosmetic is a cosmetic, if and because somebody thinks they are.”
So here, Hayek is revealing the subjective nature of social phenomena. He is arguing that social objects are not social objects because of their physical or “objective” qualities, but because of the view of an acting subject toward the object in question.
(Note: by the term “social object” is meant an object of the social sciences or the science of human action. This would include descriptive psychology. Hayek writes: “Take such things as tools, food, medicine, weapons, words, sentences, communications, and acts of production—or any one particular instance of any of these. I believe these to be fair samples of the kind of objects of human activity which constantly occur in the social sciences.”)
Next, Hayek makes another important point having to do with the Pure Logic of Choice:
“From the fact that whenever we interpret human action as in any sense purposive or meaningful, whether we do so in ordinary life or for the purposes of the social sciences, we have to define both the objects of human activity and the different kinds of actions themselves, not in physical terms but in terms of the opinions or intentions of the acting persons, there follow some very important consequences; namely, nothing less than that we can, from the concepts of the objects analytically conclude something about what the actions will be. If we define an object in terms of a person’s attitude toward it, it follows, of course, that the definition of the object implies a statement about the attitude of the person toward the thing. When we say that a person possesses food or money, or that he utters a word, we imply that he knows that the first can be eaten, that the second can be used to buy something with, and that the third can be understood—and perhaps many other things.”
It is important to realize that Hayek argues for the subjective nature of social objects. He does not provide a method for ascertaining whether a particular object “really is” a tool, money, a word, etc… He is arguing that it is impossible to define social objects in terms of their “real” or “objective” (i.e., physical) properties.
This means that social objects, as social objects, exist as the opinions, attitudes, or intentions of the acting person(s) concerned. That is, the social aspect of the object in question—that aspect of things we study in the social sciences—is the attitude of the actor toward the thing in question, not the thing as an independent object (the subject matter of natural science). Independent of the attitudes of actors there are no social objects. That is the implication of what Hayek argues.
The social object is a function of the opinion, attitude, or intention of the individual actor. This is just another way of saying that the social object is a function of the action of the individual actor. Terms such as “opinion,” “attitude,” “intention,” etc., refer to aspects or categories of human action.
Having established the subjective nature of social objects, Hayek argues that once an actor (a subject) views the object present to him in a certain way, we can derive analytical conclusions from this fact.
The two important points are that:
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The social object is a relation of an object to an individual subject.
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From the concept an individual has of the object present to him, analysis can yield further conclusions by expounding the implications of the concept in question.
If we apply Hayek’s argument to a common social object such as a written or communicated price, this has implications which Hayek and his followers may not have realized.
By Hayek’s argument, a written or communicated price, as an “object of human activity which constantly occurs in the social sciences,” cannot be defined in terms of its physical properties. A price exists, and is a function of, an individual actor’s opinion or attitude toward the thing present to him (an uttered sound, a black figure on white paper, etc…) What is a “price” does not exist “objectively,” but exists as the opinion of the actor(s) concerned.
Further, based on the concept of the object, analysis can yield further conclusions. For example, paraphrasing Hayek, "When we say that a person displays a price, we imply that he intends to make an exchange, that he believes another actor will be party to this exchange, that the exchange can be effected in terms of a numerical ratio—and perhaps many other things…
This is Hayek’s Pure Logic of Choice applied to the object which is a written or communicated price, instead of the more mundane objects Hayek uses as illustrative examples. One assumes the same principles Hayek enunciates apply to a written or communicated price as apply to a tool, food, medicine, weapons, words, sentences, communications, and acts of production.
Thus, the first point is that the Pure Logic of Choice applies to a wider range of objects than Hayek seems to have realized, and a “price” is a social object subject to Hayek’s principles. We can, if Hayek’s argument is valid, from the concept “price,” draw further analytical conclusions.
The second point is this:
In the essay in question, Hayek employs descriptions both from the first person and the third person perspective. Sometimes he conceives of things from the point of view of a scientific observer studying the action of another person. And from this third person point of view he conceives, for example, that:
“When another person (an observed person) holds X concept about a thing, we, the observers, can analytically conclude Y from concept X which the observed person holds.”
But we have to realize that the same principle applies to the_first person_ description, and thus:
“When I hold X concept about a thing, this implies Y which can be analytically deduced from my holding concept X.”
This distinction is important, because we can see that if a scientific observer intends to conduct a study of prices, every instance of his apprehending a price will, as a matter of principle, have the same kind of analytic or logical entailments described by Hayek. The scientific observer of any social object is subject to the same principles that Hayek describes. These principles do not apply only to observed actors. The scientific observer, as an actor, does not “transcend” the aspects of human action that he claims are valid for the actors he studies.
Thus, when the scientific observer conducts his study of prices, if Hayek’s argument is valid, we have to remember that the price the scientific observer refers to, is not only a subjective phenomenon for the observed actor, but also for the observing scientist. In short, a price is a price if and because the social scientist believes it is a price. Hayek makes this point clearly.
Second, when what is present to the social scientist is a price, then according to Hayek’s theory, analytical or logical entailments are involved in the concept of the object held by the social scientist. In this sense then, the study of prices could be conducted as part of an a priori discipline. The social scientist, as an actor, is privy to the logical entailments of all social concepts, and it is these logical entailments that are the subject matter of Menger’s theoretical exact science, Mises’ praxeology, and Hayek’s Pure Logic of Choice.
This is the meaning of what Mises writes regarding the procedure of economics:
“The scope of praxeology is the explication of the category of human action. All that is needed for the deduction of all praxeological theorems is knowledge of the essence of human action.”
(Human Action, 3rd Rev. Ed. p.64)
For those interested in the issue of Mises versus Hayek on a priorism and the market, here is a one page summary of the argument I’ve been making since Spring.
Hayek argues that all social objects: “are defined not in terms of their “real” properties but in terms of opinions people hold about them. In short, in the social sciences the things are what people think they are. Money is money, a word is a word, a cosmetic is a cosmetic, if and because somebody thinks they are.”
And he argues that: “no physical properties can enter into the explicit definition of any of these classes.”
From this it follows that: “…we have to define both the objects of human activity and the different kinds of actions themselves, not in physical terms but in terms of the opinions and intentions of the acting persons.”
And from this, according to Hayek: “…there follow some very important consequences; namely, nothing less than we can, from the concepts of the objects analytically conclude something about what the actions will be. If we define an object in terms of a person’s attitude toward it, it follows, of course, that the definition of the object implies a statement about the attitude of the person toward the thing. When we say that a person possesses food, or money, or that he utters a word, we imply that he knows that the first can be eaten, that the second can be used to buy something with, and that the third can be understood—and perhaps many other things.”
All these passages are from “The Facts of the Social Sciences.”
But if money is money not because of its “real” properties (physical attributes) but only because of the opinions of the people concerned, then why isn’t a price a price not because of its “real” properties (physical attributes), but only because of the opinions of the people concerned ?
It seems obvious that Hayek simply overlooked the implications of his own ideas.
Similarly with a “market.” What makes an assemblage of people a “market” and not a sports team?
By Hayek’s argument, it cannot be due to the physical characteristics or physical attributes of the assemblage of people. Rather, it is due to the opinion of the person or people concerned that a given assemblage of people is a market and not a sports team.
But then, per Hayek: “…we can, from the concepts of the objects, analytically conclude something about what the actions will be.”
Paraphrasing Hayek: “when we say that a person is at a market, we imply that he knows he may conduct exchanges there, and perhaps many other things…”
Thus, Hayek simply overlooked the fact that the principles he enunciates in “The Facts of the Social Sciences” apply not only to the social object which is “money,” but also to the social object which is a “price” or a “market.”
Markets and prices constitute the bulk of the phenomena that Hayek held can only be approached by empirical methods. And yet he himself has provided the method or procedure for comprehending markets and prices praxeologically: by considering these objects not with respect to their “objective” or “real” properties, but instead by considering them with respect to the opinions and attitudes individuals hold about them.
Hayek failed to realize that the principles he clearly elaborates apply not only to some social objects, but to all social objects, including prices and markets.
Hayek failed to consistently apply his own principles, thus failing to see how the Pure Logic of Choice could arrive at necessary truths regarding markets and prices.
“Mises never could free himself from that fundamental philosophy, in which we have all grown up, that reason can do everything better than mere habits. From this he could never loose himself.”
I am not as well read in Hayeks methodological philosophy as most of the participants, but allow me my two cents. It seems that this little sentence is much overlooked. I believe Hayeks point can be considered partially behavioral, though not in the explicitly modern sense. He was arguing that habit had a large effect on peoples actions, their choices and decisions. This habit could not be understood a priori. For example, in Japan, there is a specific method of exchanging business cards. This custom cannot be explained a priori, but instead must involve empricisim.
I agree that Hayek contradicts himself in his attempt to differentiate his empiricism and a priorism, and I would agree that there is not a fine line distinguishing where to apply each, for example, Rothbard uses general empirical evidence to give credence to ACBT. He argues that what characterizes recessions are sudden high unemployment, and capital prices falling quicker than other prices, and puts forward these two criterion that any recession theory must satisfy. However, given Hayeks philosophy on spontaneous order and customery law, I believe my interpretation is more in line with his general philosophy.
HurplePazed:
Thank you for your comments.
Here is a brief passage that appears before the one you quote, on page 72 of Hayek on Hayek:
“Capitalism presumes that apart from our rational insight we possess a traditional endowment of moral, which has been tested by evolution but not designed by our intelligence. We have never invented private property because we understood these consequences, nor have we ever invented the family.” (bold and italics added)
So here, the two social objects mentioned by Hayek as he levels his critique of Mises are private property and the family.
Hayek has already clearly established that with respect to social objects, we cannot define them in terms of their physical properties or attributes, but must define them in terms of the intentions, opinions, or attitudes of the people concerned:
“If we wish, we could say that all these objects are defined not in terms of their “real” properties but in terms of the opinions people hold about them. In short, in the social sciences the things are what people think they are. Money is money, a word is a word, a cosmetic is a cosmetic, if and because somebody thinks they are.”
“What I am arguing is that no physical properties can enter into the explicit definition of any of these classes…”
“The common attributes which the elements of any of these classes possess are not physical attributes but must be something else.”
“…we have to define both the objects of human activity and the different kinds of actions themselves, not in physical terms but in terms of the opinions or intentions of the acting persons.” (all quotes from “The Facts of the Social Sciences”)
Hayek’s point is straightforward. We must define social objects in terms of the intentions of the acting persons. And without an articulated principle that distinguishes between those social objects to which this principle applies, and those social objects to which this principle does not apply, we must interpret Hayek to mean that this principle applies to all social objects, not merely an arbitrarily limited number of social objects. And thus we must assume that this principle applies to the social objects which are “private property” and “the family.”
Then, according to Hayek:
“From the fact that whenever we interpret human action as in any sense purposive or meaningful…we have to define both the objects of human activity and the different kinds of actions themselves, not in physical terms but in terms of the opinions or intentions of the acting persons, there follow some very important consequences; namely, nothing less than that we can, from the concepts of the objects analytically conclude something about what the actions will be. If we define an object in terms of a person’s attitude toward it, it follows, of course, that the definition of the object implies a statement about the attitude of the person toward the thing. When we say that a person possesses food, or money, or that he utters a word, we imply that he knows that the first can be eaten, that the second can be used to buy something with, and that the third can be understood—and perhaps many other things.” (“The Facts of the Social Sciences”)
Here, Hayek is elaborating his conception of the Pure Logic of Choice (what Mises calls praxeology, and Menger calls theoretical exact science).
The Pure Logic of Choice is “the system of tautologies—those series of propositions which are necessarily true because they are merely transformations of the assumptions from which we start” (“Economics and Knowledge”)
In the Pure Logic of Choice, we take as our data “those facts, and only those facts, which [are] present in the mind of the acting person, and only this subjective interpretation of the term “datum” [makes] those propositions necessary truths.” These data (the intentions, opinions, or attitudes of the acting persons) “[form] the starting point for the tautological transformations of the Pure Logic of Choice.” ("Economics and Knowledge)
Thus, we can see clearly Hayek’s conception of the Pure Logic of Choice. Social objects cannot be defined with respect to their physical attributes, but are to be defined in terms of the intentions of the acting persons. From the concept of the object thus defined, we can analytically conclude something else. The concept of the object (A), taken together with that which it implies and which we deduce by tautological transformation (B), constitutes the “necessary truth” (Hayek), “a priori proposition” (Mises), and “exact law” (Menger).
By the terms of what Hayek has established, we must assume that this view of things applies to the social objects which are “private property” and “the family,” and not only to the social objects which are “food,” “money,” or “a word.” (we must assume this until or unless we have a principle for distinguishing those social objects to which Hayek’s principles do not apply)
As Hayek levels his critique of Mises, implying that Mises holds a quaint and antiquated conception of social theory, he fails to realize that the social objects he refers to as proof that Mises is wrong, are themselves objects subject to the principles he clearly enunciates in “The Facts of the Social Sciences.” Moreover, these principles will apply to the social objects which are “prices” and “markets,” two objects of study that Hayek claims are only accessible to empirical study.
What Hayek has failed to realize is that if social objects cannot be defined in physical terms, and can only be defined in terms of the intentions or opinions of the acting persons, that this principle applies to all acting beings, including the observing scientist himself. The social scientist is not privy to secret information about the “real” or “physical properties” of the social objects in question. The social objects in question, by Hayek’s principle, are to be defined in terms of the intentions, opinions, or attitudes of the actor or the social scientist. Hayek provides no method for ascertaining the “real properties” or “physical attributes” of social objects, which the social scientist is privy to, and which other actors are not.
From the concept of the social object thus defined (the concept of the object held by the social scientist, or any other actor), we can analytically conclude something else. By Hayek’s own principles then, there must be analytical implications “present” to any and all social objects “intended,” “conceived,” or “defined” by the actor. And this applies to actors that are social scientists. That is, for any given social object present to an actor, there will be analytical co-presences also “present” (at least by implication). There must be, by Hayek’s own principles, an implied “B” to any conceived social object “A”.
And thus, there must be a certain “order” to any and all social objects present to the actor, whether the actor is a scientist or not.
The “order” derives from the fact, as explained and demonstrated by Hayek, that social objects, defined in terms of the intentions or opinions of the actor, have analytical co-presences. Thus, all social objects conform to “spontaneous order” in the sense that all social objects appear with “spontaneous analytical co-presences” that we can learn about by analysis.
When Hayek criticizes Mises’s views as antiquated, and refers to spontaneous social phenomenon such as the market, the family, and private property, he seems to imply that those objects are somehow “empirically given” to us as physically obvious objects. He implies that we can recognize or define these things objectively, and apparently in terms of their “real” properties.
He seems to overlook the principle he previously established that “Money is money, a word is a word, a cosmetic is a cosmetic, if and because somebody thinks they are.” And thus, when he turns to critique Mises, he does so from a point of view in which the conception of the social objects he refers to (markets, family, private property, etc.) has been subtly changed----from something that is a function of the intentions or opinions of the acting persons, to something that is physically and objectively given for our empirical study.
He overlooks the implications of his own ideas; that the spontaneous order which he conceives to arise in such social objects as the family, the market, and private property, may not be a real property or physical attribute of these things, but instead may be a function of the analytical implications of the intentions, opinions, or attitudes of the actors concerned.
He overlooks the possibility that what he considers spontaneous order may be more consistently conceived as the conformance to praxeological law of all social phenomena appearing to or for the individual actor.
“He was arguing that habit had a large effect on peoples actions, their choices and decisions. This habit could not be understood a priori. For example, in Japan, there is a specific method of exchanging business cards. This custom cannot be explained a priori, but instead must involve empiricism.”
Assuming what I’m arguing above, any habit, to the extent this is a social object, phenomenon, or process, is to be defined (per Hayek), not in terms of its “real” or physical properties or attributes, but in terms of the intentions, opinions, or attitudes of the acting persons.
It will follow then, by Hayek’s reasoning, that from the concept of the object (habit) we can analytically conclude something. This will constitute an a priori understanding of the object in question.
Paraphrasing Hayek in “The Facts of the Social Sciences”:
When we say that a person performs a habit, we imply that he has done this activity before, or that he will do it again, etc…
This is the point I’m trying to get across. Hayek’s principles apply to all social objects, not just the circumscribed and limited number of social objects that Hayek uses as examples in his essay (food, money, words, etc.). His principle applies to all social objects qua social objects. This means his priniciples apply to social objects such as prices, markets, habits, families, and private property. These are all objects of the social sciences.
If a habit is an object of the social sciences, which we are saying it is, then Hayek’s principles apply.
If we’re saying that there are some social objects to which Hayek’s principles do not apply, then we have to provide a method of distinguishing between two classes of social objects: those to which Hayek’s principles apply, and those to which Hayek’s principles do not apply.