Entrepreneurship, Money and Coordination

Entrepreneurship, Money and Coordination

Hayek’s Theory of Cultural Evolution

New Horizons in Institutional and Evolutionary Economics series

Edited by Jürgen G. Backhaus

Hayek’s theory of cultural evolution has always generated controversy. Interest in Hayek’s theory, and others’ analysis and criticism of it, has been rising of late. This volume urges a reconsideration of Hayeks’ theory of evolution and aims to explore the relevance of Hayek’s theory for its own sake and for evolutionary economics more generally.

Chapter 2: Hayek’s Theory of the Mind

Brian J. Loasby

Subjects: economics and finance, austrian economics, evolutionary economics


1 Brian J. Loasby INTRODUCTION The theory of the mind presented by Hayek in The Sensory Order (1952) is an elaboration of ideas set down in a paper written in 1919, before he had committed himself to the study of economics. Hayek’s theory invites comparison with earlier attempts by Adam Smith and Alfred Marshall to explain how human minds work, which were also produced before they turned their attention to economics. Like Hayek, both were confronted as young men by the problematic status of supposedly-objective knowledge, and like Hayek both responded by developing a theory in which human beings create knowledge by forming connections within particular domains. All three recognise the impossibility of demonstrating that any such process can deliver proven truth, and envisage sequences of trial and error within particular contexts, leading to the preservation of what seems to work – until it no longer does, when a new sequence of trial and error begins. In other words, they all offer what we would now call evolutionary theories, in the broad sense of variation, selection, and the preservation – which is always provisional – of selected variants. It would not be appropriate in this chapter to undertake an extensive comparison between the three (and still less appropriate, though tempting, to explore the relationships between their psychological theories and the content and methods of their work in economics); but selective references to similarities and complementarities will be used to illustrate or extend aspects of Hayek’s theory. HAYEK’S SENSORY ORDER The problem which attracted...

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