THREAD. @JonahNRO asks @PeterBoettke the "Hayek versus Mises" brain-twister question. So, What _is_ the deal with the dispute between Mises & Hayek? I don't like Pete's answer at all, and this matters, and I want to explain what the right answer is and why it matters.
Here is the deal. All of these guys, the professors of whatever kind in Germany, Britain, Austria & America, were working within a picture of knowledge -- some mix of Hegel & neo-Kantianism, a paradigm of the view is Wilhelm Windelband scribd.com/document/19645…
Knowledge has to have a foundation, a method, a formula, the thing that gives it a justification as knowledge. Think Euclidean proof. All of these guys as they are doing Econ are thinking about this & they are being challenged when they fail to offer an appropriate justification
The guys in Vienna are being attacked by the German economists on just these grounds -- "Austrian" means stupid hillbilly to the Germans because they insist that Menger & Co aren't producing real science, because real science is empirical, it's about empirical relationships.
Others are saying economics isn't science because it merely reflects or rationalizes the subject perspectives of class interest and national character, rather than a universal scientific perspective.
There are _three_ Viennese economists steeped in Menger dealing with this challenge after 1900 -- Mises, Schumpeter & Hayek. The first two adopt two different avenues available in the neo-Kantian framework as it developed, Hayek ends up rejecting the neo-Kantian frame altogether.
Schumpeter's answer was to apply Mach's positivistic functionalism to Menger, plus the hand-waving promise of jury-rigging econometrics somehow to this dream of science. Schumpeter's student Paul Samuelson inherited the dream, and effectively so do Friedman & the Econ profession.
Mises believed the neo-Kantian picture of how science works as found in eg Windelband was true & accurate, but contra Schumpeter, Samuelson, Friedman et al, Mises insisted the model only applied to natural science & didn't & could apply to social science.
Let's jump ahead for a sec with a spoiler. Nobody today thinks that the neo-Kantian model of science applies to anything, science doesn't work the way folks in the neo-Kantian tradition said it would work. This is the lesson of the Kuhn revolution that Popper & Hayek helped make.
So Mises has a problem. Economics provides us with knowledge, but what is the foundation of that knowledge? What is the universal justification for claiming that he has objective _scientific_ knowledge, that he's not just spouting the conditioned interests of Vienna merchants?
Kant answers Hume by insisting that there are a priori laws supplied by our understanding that structure reality & make our experience of objects possible; similarly Mises answers the Germans by insisting that their are a priori laws of human action that structure reality.
With Kant you get the claim that the mathematical formalisms of Newton limn reality, nature has to conform to the structure of these formalisms. With Mises you get something similar: the formal structure of marginal valuation &
means-ends logic limn the structure of human action.
means-ends logic limn the structure of human action.
Kant puts the template of Newton mathematical formalisms up against reality & says: the world universally must conform to this framework, this is how we must see the world. Mises does the same with human action using the marginal valuation logic & means-ends reasoning of Menger.
Here is the weird thing that happens when Schumpeter & Mises attempt to impose a version of neo-Kantian or Kantian thought on economics -- the empirical undesigned order problems that gave rise to work of Adam Smith, the Schoolmen of Salamanca, Menger disappear and are replaced.
Suddenly we are talking about _human action_ as the explanatory object of economic science, or about the _functional relationships_ between economic qualities & aggregates across time as the explanatory object of economic science.
The story of Hayek is the story of a guy who knew science from a very young age first hand as a biologist, staining brain cells, starting his own botany collection, reading cutting edge work in genetics, evolutionary & cell biology, and in experimental & theoretical psychology.
There are 3 things Hayek is gaining from this:
• He's learning to look for bottom-up casual mechanisms that produced higher level patterns of order
• He's learning to rethink from different sides the problem to be explained
• He's learning a rival to the neo-Kantian frame
• He's learning to look for bottom-up casual mechanisms that produced higher level patterns of order
• He's learning to rethink from different sides the problem to be explained
• He's learning a rival to the neo-Kantian frame
Neo-Kantians in psychology & physiology were trying to understand human learning & categorization using the same formalisms proposed by Mises & Schumpeter for understanding the more limited domain of economics, a priori categories & math functions, Hayek was reading this stuff.
While Hayek is reading all these top-down Kantian frameworks imposes from above on the psychological phenomena, he is in a neuroscience lab staining networks of nerve cells and literally looking at the bottom-up biological causal mechanism that is responsible for mental activity.
Rejecting the top-down view, Hayek was inspired to produce a bottom up causal mechanism of nerve cell learning & a casting of the problem categorizational order that is embedded in today in the work of our most celebrated neuroscientists -- from Joaquin Fuster to Gerald Edelman.
The Hayekian revolution upends the twin avenues of the neo-Kantian approach: for example, the phenomenal givens of the Machian approach turn out not to be given but are the theory-laden products of a biological mechanism with an imperfect and evolving evolutionary history.
When Hayek turned to pursue economics, Hayek wasn't worried about how economics worked as a science, he was doing what Kuhn calls "normal science", working to fit together puzzle pieces of the marginalist revolution that he expected would fit together like pre-cut puzzle pieces.
Hayek's normal science puzzles were:
• extending the marginal valuation logic from consumption goods to the multiple production goods which combined to produce the consumption good
• cashing out the Ricardian categories of distribution theory using the marginal valuation logic
• extending the marginal valuation logic from consumption goods to the multiple production goods which combined to produce the consumption good
• cashing out the Ricardian categories of distribution theory using the marginal valuation logic
•extending the logic of marginal valuation across time, as Mises had extended it into geographical space
•developing the equilibrium construct to explain the patterns of the business cycle
•developing the equilibrium construct to explain the patterns of the business cycle
Hayek expected all of these projects to produce simple, tractable solutions. Instead they all produced intractable anomaly, the spark for what Kuhn calls revolutionary science where the problems, concepts & solutions take new forms, retaining some but not all of what came before.
Anomaly and incommensurability show up across the Ricardian categories when you attempt to cash out the physically defined aggregate of Ricardian distribution theory into the logic of marginal valuation -- interest, profit & rent become problematic & are conceptually transformed.
The anomaly which Hayek surfaced in his book *Monetary Theory & the Trade Cycle* is the one which first raised the fundamental and revolutionary logical status & explanatory strategy questions which divide Mises from Hayek, and Hayek from the economic profession at large.
