HAYEK AND SCIENTISM

That the individualism espoused by Hayek and the Austrian School is also vital for a thorough
understanding of the Weltanschauung of neoclassical theory is utterly undeniable. We have dealt
earlier with the psychologicaldeontological foundations of this theory in discussing the concepts
of utility! capital and interest. "ut it is e#ually obvious that the notion of individualism! when
applied to economics as a discipline that understands itself as a science would draw a
philosophically$inclined theoretician like Hayek! and to a lesser e%tent Schumpeter! into an
e%amination of the epistemological underpinnings of their activity. &et! for all that! neither
theoretician comes close to a critical com$prehension of the theoretical assumptions on which
their approach to economic science is based. 'either of the two is able to elude the epoch in
which they write and the dogmas to which they fall victim. As can be easily desumed from the
title! in his (pochen der )ogmen und *ethoden$geschichte Schumpeter aimed to draw a line
between the epochs of dogmas + drawing attention to their transitoriness ,epochality- and their
ideologicaldoctrinairedogmatic assumptions +! on the one hand! and the historical distillation
,recall "ohm$"awerk.s diatribe with the Historical School- of a specifically economic scientific
analysis ,*ethodengeschichte-. &et! there are illuminating divergences in their approaches that
will assume great significance in our later e%position of Schumpeter.s work.
/nlike Schumpeter! who left many of these methodological problems unresolved! Hayek has to
0ustify his e%position of individualism through a defence of sub0ectivism. 1f we take the
approach that no single individual or group knows better than any other individual or group what
is best for society as a whole! it stands to reason that decentralisation is the best outcome or! at
the very least! the least harmful approach to the best organisation of social life. ,Hayek makes
this point e%plicitly in 1ndividualism! referring directly to classical political economy.-
2ompetition is the best form of decentralisation. "ut the #uestion left unanswered is3 even
assuming that the individuals theorised by Hayek are not 0ust self$interested! then we must ask
with Hayek how is society possible at all4 What is the glue or cement! what are the rules or
bonds that constitute a society4 ,See #uotes below (#uilibrium file at 5.-
Hayek can only take refuge in the spontaneity of individuals3 assuming and accepting that
individuals either agree or need to be in society! that society is best that conforms to their
spontaneous individual choices. The metaphysical$theological recourse here is evident3
To the accepted Christian tradition that man must be free to follow his conscience in moral matters if his
actions are to be of any merit, the economists added the further argument that he should be free to
make full use of his knowledge and skill, that he must be allowed to be guided by his concern for the
particular things of which he knows and for which he cares, if he is to make as great a contribution to the
common purposes of society as he is capable of making. Their main problem was how these limited
concerns, which did in fact determine people's actions, could be made effective inducements to cause them
voluntarily to contribute as much as possible to needs which lay outside the range of their vision. What the
economists understood for the first time was that the market as it had grown up was an effective way of
making man take part in a process more complex and extended than he could comprehend and that it was
through the market that he was made to contribute "to ends which were no part of his purpose," !"#,
pp.$%&'(.
,We should note here! as in 62ivil Society 7 8Smith and Hobbes9.! that game theory is a splendid
illustration of this *achian negative approach in that it is a 6:ure ;ogic of 2hoice.3 it serves to
eliminate alternative choices so that the mere 6mathematical schema. of an immutable reality
based on self$interested in$dividuals 8even psycho$logically9 remains. Hayek seeks to hide the
brutality of the in$dividual and to base his scientificsub0ectivist approach behind the
spontaneity of choice. "ut this fails miserably + *andeville! on whom Hayek relies! would have
laughed contemptuously! re0oicing and invoking Hobbes3$ for even altruism is the price <lattery
pays to :ride 8=aye 1ntro to 6<able.9 and the only impulseconatus is self$preservation! the only
spark of >eason left in the Heideggerian homo est brutum bestiale written at the end of
metaphysics 8#uoted in 2acciari! p.?@9. 1t is the 6)estruktion. of the ArendtianAugustinian 6Aolo ut
sis. 8Arendt! Aol B! p.B@C9 $ 8nessuna simpatia! says 2acciari! ibid.9 + indeed! an im$possible
concept in this perspective! as is SpinoDa.s conatus leading! though with (uclidean rigour! to
amor intellectualis )ei.- + :erhaps all this should be discussed separately.
,See Arendt! p.?E! but especially fn.EF on p.B@@ about the eclipse of the :olitical in the Hobbesian StateG
refer to ;owith.s comparison of Heidegger.s and Schmitt.s 6)estruktion. nihilism of )asein and (%istenD. 1t is
of paramount importance at this 0uncture to reflect on the effect of the Hobbesian status civilis on the
integrity of the individual. Arendt at p.?C sketches the dissolvingatomising effect of a similar bourgeois
order in that the eclipse of the :olitical reduces citiDens to the private sphere through the mortifying
pressure of competition until the socially$defined e%perience of the in$dividual becomes a mere 6(%istenD.!
a 6)asein. whose 6fate. is decided by 6fatality. or 6chance. ,cf Schmitt.s 6(ntscheidung(%ception.-. Arendt
refers to the world of the novel from "alDac onwards as the e%ploration of interiority as a last refuge 8recall
Hoyce and Woolf + stream of consciousness9 where human dignity has a desperate need for man to be! at
least! a consenting victim 8of the all$pervasive power of the State9 8fn.EI! p.B@@9. 2f. 'ietDsche! 6Jar..! 6Kf
>edemption. + 1t was thus!Lbut 1 willed it thus in 2acciari! =r.! p.7FE. :ursuing the bureaucratic theme
whereby the law admits of no e%ceptions and fills up the interstices of all social action to reach an
ine%orable arbitrariness! Arendt masterfully turns to =afka! at pp.BCI$F and fn.5E at p.EBI. The most
penetrating statement comes from 2acciari. The e%tension of the totalitarian tendency of the :ure ;ogic of
2hoice and game theory means that la legge raggiunge sempre il colpevole 8=risis! p.II3 on
Wittgenstein.s 6giudice inesorabile. and =afka9.-
The notion that the individual is a beginning goes back to Augustine. Hayek starts with this
initium and then proceeds to defend a historical$empirical system of e#uilibrium based on the
market as an institution capable of co$ordinating social action! of providing the social synthesis
or even the social fabric. We have seen that market e#uilibrium can do nothing of the sort in
economic life ,Schumpeter.s wirtschaftlichen ;ebens- let alone in other spheres of social life.
"ut it is evident that once Hayek assumes the e%istence of this in$dividuum whose spontaneity
must be the fons et origo of social institutions! then only manner in which such in$dividua can
inter$act is through the e%change of data! of information + because any reference to physical
e%change that cannot abstract from its physicality would at once remove the in$dependence of
the in$dividua involvedG their physical e%change would then presuppose a real social or even
biological inter$dependence that would undermine the individuality of the in$dividualM
:ra%eology focuses on spontaneously$originated patterns of behaviour. "ut this at best only
reflects reality yet does not and cannot e%plain it because its formal e#uilibrium framework
leaves us clueless about the real origins and purpose or goal of such behaviour. The
relegation of science to a simple means$goals role leaves us unable to com$prehend the
orientation of social behaviourinstitutions and to a passive validation of the status #uo sub
specie aeternitatis. Awareness of the Khnmacht of this science in the face of 6=risis. is what
moved Sch to distance himself from instrumentalism in the *ethodenstreit.
And for this reason Hayek has to insist on the im$personal! dis$embodied! com$petitive
e%change of the market + a market that now describes merely the e%ternal dealings between
individuals! one in which individuals e%change data about their spontaneous! free individual
choices. What the competitive market consists of! then! is a geometric$mathematical mechanism
or game of choices where these choices are based either on complete information ,in which
case it becomes a Walrasian general e#uilibrium- or an empirical process of price discovery
,then it is a petition principii of the Hayekian intertemporal e#uilibrium kind- + or else it is based
on incomplete or asymmetrical information! in which case it is analysable in a game$theoretic
framework ,'ash e#uilibrium! for instance-.
1n all of these cases! however! the scientific analysis of these e#uilibria amounts to what
Hayek called the ;ogic of :ure 2hoice. 1t is not and cannot be a science that can guide
human action e%cept in the negative form of avoiding choices that are not optimal. Any attempt
at scientific in#uiry that goes beyond the individual! beyond sub0ectivism! is improper and
invalid ab initio! because the analytical categories that it will adopt presume a knowledge of the
motivations of individuals that are known only to the individuals themselvesM The social
scientist who pretends to observe individuals from afar! telescopically as if from a Nalileian
point! is in fact part of that cosmos that he intends to theorise ,2ounter$>ev.ofScience! pp.@O$5G
for discussions of the Nreek Weltanschauung see Habermas! 6(rk.u.1nt. and ;eo Strauss! 6The
:roblem of Socrates. for Husserl and Heidegger.s historicism-.
As a result! any historical or political or sociological analysis or theory that presents itself as
science can only amount to scientism because it presumes to know what cannot be known!
because it necessarily disguises the interest of the researcher or theoretician in the sub0ect
being researched. To that e%tent! such science! because it deals with spontaneous individuals
and not with inert data! cannot be scientific in the sense of natural or physical science
because the social observer cannot generalise from individual to society. The only science
possible is the :ure ;ogic of 2hoice.
,There is an obvious parallel here with :areto.s residui! the ob0ect of his logico$e%perimental
sciences opposed to the derivaDioni of the non$logico$e%perimental ones which concerned the
study of ideologies intended in a reductionistnaturalist sense but clearly solicited 8"obbio9 by
*ar%. 1t is interesting to note that :areto reaches the same conclusions as Hayek about social
e#uilibria! e%cept that he felt that this could be the negative basis of a future positive science $
see "obbio! p.OC! where :areto even e#uates his approach to (instein.s relativity! presumably
because social e#uilibrium allows the independent point of the observer to be fi%ed by its
mathematical framework or mechanism! much as the speed of light in relativity. >ecall that
(instein re0ected #uantum theory for these reasons. Hayek obviously refuses the scientific
aspirations! but see below for the sub0ectivistcompositive method that he endorses. 2heck for
refs. To :areto in 62>S..- ,*ention of )escartes. *asterplan! also #uoted by Schmitt in Tronti re
Hobbes.-
1t is fair and appropriate to comment that! Hayek.s notion of e#uilibrium based on the division of
information removes the essentialism of marginal utility theory. Niven that the centrepiece of
neoclassical theory is not utility itself! which is a #uintessential metaphysical notion! but rather
the validation of e%change at the margin as the indifference of market individuals to additional
#uantities of goods in e%change! the focus of the e%change becomes the e#uilibrium of this
indifference rather than any substantive #uantity or essence or #uidditas that stands behind
the goods. That is why Hayek is able to label neoclassical e#uilibrium theory the :ure ;ogic of
2hoice + pure because it is insubstantial! im$material! dis$embodied3 it is a pure logic of
choice! a purely mathematical reality $ and therefore a reality that can be transformed into a
scientific event. 1n particular! the constants that are taken as given cannot be #uantified! and
Hayek also cites :areto about the irrelevance of #uantifying his ophelimites. because the
number of simultaneous e#uations to be solved even for a relatively small sample of market
participants would be so large that it would be far easier to ask political economy by simply
observing the actual behaviour of the market3
37. Pareto himself has clearly seen this. After stating the nature of the
factors determining the prices in his
system of equations, he adds (Manuel d'economic politique, 2nd ed., 1927, pp.
233-4) : "It may be mentioned here that this determination has by no means the
purpose of arriving at a numerical calculation of prices. Let us make the most
favorable assumptions for such a calculation; let us assume that we have
triumphed over all the difficulties of finding the data of the problem and that
we know the ophelimites of all the different commodities for each individual,
and all the conditions of production of all the commodities, etc. This is
already an absurd hypothesis to make. Yet it is not sufficient to make the
solution of the problem possible. We have seen that in the case of 100 persons
and 700 commodities there will be 70,699 conditions (actually a great number of
circumstances which we have so far neglected will still increase that number) ;
we shall, therefore, have to solve a system of 70,699 equations. This exceeds
practically the power of algebraic analysis, and this is even more true if one
contemplates the fabulous number of equations which one obtains for a population
of forty millions and several thousand commodities. In this case the roles would
be changed: it would not be mathematics which would assist political economy,
but political economy which would assist mathematics. In other words, if one
really could know all these equations, the only means to solve them which is
available to human powers is to observe the practical solution given by the
market." Compare also A. Cournot, Researches into the Mathematical Principles of
the Theory of Wealth (1838), trans, by N. T. Bacon, New York, 1927, p. 127,
where he says that if in our equations we took the entire economic system into
consideration "this would surpass the powers of mathematical analysis and of our
practical methods of calculation, even if the values of all the constants could
be assigned to them numerically."
,'ote the clearly ideological position taken by :areto3 though he declares that even the
attempt to calculate the 6ophelimites. is absurd! nevertheless he gives the impression that it is
possible ,M- if impractical! when we know in fact that the attempt is absurd because the
ophelimites are clearly metaphysical in nature and incapable of any form of calculation or
comparison.-
"obbio writes ,6Saggi.! pp.I5$I- that :areto.s initial aim in writing the 6Trattato di Sociologia. was
clearly to develop a theory of e#uilibres sociau% ,social e#uilibria- in tutto e per tutto
paragonabile to the economic e#uilibrium he had developed ,with Walras-. ,*achian sources4-
And his methodological approach to the ideological mascheramento ,again! p.I5- was based on
the functionality of means to ends as well as the internal logic of non$logico$e%perimental
doctrines. 1n this he reminds us of Weber.s methodology! although :areto almost never mentions
Weber. "ut Weber! much more worldly than the reclusive 1talian! was aware of marginal utility
,see first essay in Shils- and possibly used it analogously to the :areto$Hayek compositionist$
sub0ectivist method in that one can negatively abstract from human behaviour until the most
basic logico$e%perimental rules appear + which can then be e%pressed logico$mathematically.
,2f. also Weber.s notion of progress 0ust before discussing 6rationalisation.! in Shils 8first essay9.-
"ut this is evidently a positivist approach and Weber is careful to stress that only the
inconsistencies are to be e%posed scientifically but not the values disclosed. :areto would
agree only with regard to the sociological part of the Trattato + but certainly not about the social
e#uilibria part. Kf course! Weber would never have entertained the thought of a social
e#uilibrium despite his emphasis on Kb0ektivitat. "ut see Swedberg on Weber.
The link :areto$Walras with Schumpeter and instrumentalism ,)as Wesen- is discussed in
Hodgson + and references in Shinoya ,6Soul of NHS.!ch on 6HS and NHS. and ne%t-.
Hayek definitely surpasses the old *achian empiricism on which his early scientific training had
been based. The correspondence of sense$data to the real physical events that cause them is no
longer describable in a purely pictorial manner. This is what had prompted *ach to resist the
concept of the atom ,recall *ach.s visual tracing of electromagnetic waves-. "ut mathematical
physics has shown that there are comple% relations that are simply not comprehensible or
describable in an intuitive sense.
This process of re-classifying "objects" which our senses have
already classified in one way, of substituting for the "secondary"
qualities in which our senses arrange external stimuli a new classification
based on consciously established relations between classes of
events is, perhaps, the most characteristic aspect of the procedure
of the natural sciences. The whole history of modern Science proves
to be a process of progressive emancipation from our innate classification
of the external stimuli till in the end they completely disappear
so that "physical science has now reached a stage of development
that renders it impossible to express observable occurrences in language
appropriate to what is perceived by our senses. The only
appropriate language is that of mathematics," 18
i.e., the discipline developed to describe complexes of relationships between
elements
which have no attributes except these relations. While at first the
new elements into which the physical world was "analyzed" were
still endowed with "qualities," i.e., conceived as in principle visible
or touchable, neither electrons nor waves, neither the atomic structure
nor electromagnetic fields can be adequately represented by mechanical models.
(p.20)
'ote how carefully Hayek eschews all notion of causality. 1ndeed! in the *achian empiricist
epistemological framework even the word e%planation is suspect! for obvious reasons of
anthropomorphic causality or teleological purposiveness or essentialism or substantiality.
What Science achieves is the economical ordering of relationships between elements which
have no attributes e%cept these relations ,p.BC! above-. 2lear is the disavowal in this vision of
science of any substantive or essentialist notions of space and time as metaphysical notions.
Science is not the attempt to en#uire about the ultimate make$up of the cosmos but rather an
empiricalpositive attempt to order human e%perience ,see preface to (rk. /. 1rr.-.
The tendency to abandon all anthropomorphic elements in the discussion of the
external world has in its most extreme development even led to the belief that
the demand for "explanation" itself is based on an anthropomorphic
interpretation of events and that all Science ought to aim at is a complete
description of nature.10 (p.18 the footnote here refers to Mach, Erk u. Irr.,
and Kirchoff)
Footnotes: 10. This view was, I believe, first explicitly formulated by the
German physicist G. Kirchhoff in his Vorlesungen uber die mathematische Physik;
Mechanik, 1874, p. 1, and later made widely known through the philosophy of
Ernst Mach.
11. The word "explain" is only one of many important instances where the natural
sciences were forced to use concepts originally formed to describe human
phenomena. "Law" and "cause," "function" and "order," "organism" and
"organization" are others of similar importance where Science has more or
less succeeded in freeing them from their anthropomorphic connotations, while in
other instances, particularly, as we shall see, in the case of "purpose,"
though it cannot entirely dispense with them, it has not yet succeeded in doing
so and is therefore with some justification afraid of using these terms.
Hayek still relies on an empirical identification of the physical$mathematical description of real
events with the relationship between the ob0ects of observation themselves and the mathematical
formulae that supply the key to their translation into sense$data. This is possible even after
natural events are described and ordered in a mathematical form and their further physical
observation is dispensable in that it becomes mathematically deductible + without the need of
empirical e%perimentation.
The new world which man thus creates in his mind, and which consists entirely of
entities which cannot be perceived by our senses, is yet in a definite way
related to the world of our senses. It serves, indeed, to explain the world of
our senses. The world of Science might in fact be described as no more than a
set of rules which enables us to trace the connections between different
complexes of sense perceptions. But the point is that the attempts to establish
such uniform rules which the perceptible phenomena obey have been
THE PROBLEM AND THE METHOD OF THE NATURAL SCIENCES 21
unsuccessful so long as we accepted as natural units, given entities, such
constant complexes of sense qualities as we can simultaneously perceive. In
their place new entities, "constructs," are created which can be defined only in
terms of sense perceptions obtained of the "same" thing in different
circumstances and at different times a procedure which implies the postulate
that the thing has in some sense remained the same although all its perceptible
attributes may have changed.
In other words, although the theories of physical science at the stage which has
now been reached can no longer be stated in terms of sense qualities, their
significance is due to the fact that we possess rules, a "key," which enables us
to translate them into statements about perceptible phenomena.(pp.20-1)
1t is evident that to Hayek the physical world is com$prehensible! not in a teleological manner!
and certainly not in a metaphysical perspective! but rather in a phenomenological form that
makes it empirically knowable.
Again Hayek draws a clear impenetrable barrier between the natural and the social sciences.
Whereas the former have ob0ective validity in that the scientific observer can remove or
abstract himself from the properties of the ob0ects or events that he theorises! no such
telescopic abstraction or ob0ectivity is possible in the social sciences because the ob0ects
and events observed are human constructs that emanate from the sub0ectivity of the
individuals involved.
In fact the elimination of qualities from our picture of the external world does
not mean that these qualities do not "exist," but that when we study qualities
we study not the physical world but the mind of man. In some connections, for
instance when we distinguish between the "objective" properties of things which
manifest themselves in their relations to each other, and the properties merely
attributed to them by men, it might be preferable to contrast "objective" with
"attributed," instead of using the ambiguous term "subjective." The word
"attributed" is, however, only of limited usefulness. The main reasons why it is
expedient to retain the terms "subjective" and "objective" for the contrast with
which we are concerned, although they
inevitably carry with them some misleading connotations, are not only that most
of the other available terms, such as "mental" and "material," carry with them
an even worse burden of metaphysical associations, and that at least in
economics 22 the term "subjective" has long been used precisely in the sense in
which we use it here.
What is more important is that the term "subjective" stresses another important
fact to which we shall yet have to refer: that the knowledge and beliefs of
different people, while possessing that common structure which makes
communication possible, will yet be different and often conflicting in many
respects. If we could assume that all the knowledge and beliefs of different
people were identical, or if we were concerned with a single mind, it would not
matter whether we described it as an "objective" fact or as a subjective
phenomenon.
But the concrete knowledge which guides the action of any group of
people never exists as a consistent and coherent body. It only exists
30 THE COUNTER-REVOLUTION OF SCIENCE
in the dispersed, incomplete, and inconsistent form in which it appears in many
individual minds, and this dispersion and imperfection of all knowledge is one
of the basic facts from which the social sciences have to start. What
philosophers and logicians often contemptuously dismiss as "mere" imperfections
of the human mind becomes in the social sciences a basic fact of crucial
importance. We shall later see how the opposite "absolutist" view, as if
knowledge, and particularly the concrete knowledge of particular circumstances,
were given "objectively," i.e., as if it were the same for all people, is a
source of constant errors in the social sciences.(pp.29-30)
What is supremely evident here is Hayek.s inability to see beyond the mere world of
observation. He never poses himself the problem of the metaphysical relation between human
observation and phenomena observed and! over and beyond! the thing that lies beyond
observation! let alone the ground of grounds! the "eing that things might share.
The scientificity of economic theory! then! if it wishes to avoid the scientism of the social
sciences + comprising positivism! collectivism and historicism + must start with the
individual through a negative procedure! as it were! similar to that adopted by Wittgenstein in
the Tractatus vis$P$vis philosophical in#uiry! that clarifies analytically or renders visible
,sichtbar machen- or makes useful ,dienstbar machen- the options available in economic life
from a compositional approach that brings into sharper focus the institutional arrangements
emanating from the spontaneous sub0ectivities of individuals.
! am certain that there are many who regard with impatience and distrust the whole tendency, which is
inherent in all modern e)uilibrium analysis, to turn economics into a branch of pure logic, a set of
self&evident propositions which, like mathematics or geometry, are sub*ect to no other test but internal
consistency. +ut it seems that, if only this process is carried far enough, it carries its own remedy with
it. !n distilling from our reasoning about the facts of economic life those parts .,which are truly a priori, we
not only isolate one element of our reasoning as a sort of -ure .ogic of Choice in all its purity but
we also isolate, and emphasi/e the importance of, another element which has been too much neglected. 0y
criticism of the recent tendencies to make economic theory more and more formal is not that
they have gone too far but that they have not yet been carried far enough to complete the isolation of this
branch of logic and to restore to its rightful place the investigation of causal processes, using formal
economic theory as a tool in the same way as mathematics, !1"#, p.%2(.
3ayek returns to this theme in 4The Counter 5evolution6,
The number of separate variables which in any particular social phenomenon will
determine the result of a given change will as a rule be far too large for any
human mind to master and manipulate them effectively.
38 In consequence our knowledge of the principle by which these phenomena are
produced will rarely if ever enable us to predict the precise result of any
concrete situation. While we can explain the principle on which certain
phenomena are produced and can from this knowledge exclude the possibility of
certain results, e.g. of certain events occurring together, our knowledge will
in a sense be only negative, i.e. it will merely enable us to preclude certain
results but not enable us to narrow the range of possibilities sufficiently so
that only one remains.(CRS, p.42)
,Again we cross that word + distilling and economic life. Here the parallel with :areto is
irresistible.- And note the emphasis on negative reminiscent of *ach. Hayek re0ects positivism
,as did :areto with regard to 2omte-. (ven historicism is castigated to the e%tent that it purports
to guide human action! even deontologically.
TH( SK21A; S21('2(S
'ote Hayek.s frontispiece #uote3
Systems which have universally owed their origin to the lucubrations of those
who were acquainted with one art, but ignorant of the other; who therefore
explained to themselves the phenomena, in that which was strange to them, by
those in that which was familiar; and with whom, upon that account, the analogy,
which in other writers gives occasion to a few ingenious similitudes, became the
great hinge on which every thing turned (Adam Smith, Essay on the History of
Astronomy).
Adam Smith.s review of 'ewton.s :rincipia and laws of astronomy had led him to describe his
scientific description of the underlying reality as a useful deception! a human invention! to secure
our 6tran#uillity in dealing and coping with the world. And Schumpeter was happy to #uote him on
this. The fact that Hayek should epigraph his review of the philosophy of science with a citation
from Smith.s obscure and dated 6(ssay. serves to show how deeply$ingrained were the *achian
notions embedded therein. "ut Hayek! unlike Schumpeter! ob0ects even to the application of the
laws of Science to the reality described by the social sciences. 1n passing from the natural or
physical sciences to the social sciences! we pass from the observation of regularities of relations
between things or events that cannot reflect on their activities! to individuals who! even as
they participate in collective activities! are capable of reflecting on this participation. The result
is that the observer must be sure that upon observing the activities of groups of individuals or in
describing and categorising them! the observer does not include pre$emptively value
0udgements in those analytical categories that pre$0udge the outcome of the observation by
assigning teleological or normative values to its analytical categories.
What the social scientist must do is! like the economist! to start from the sub0ective and
unintended ,we would say spontaneous- actions of individuals so as to draw conclusions
from any regularities or patterns in the behaviour of these individuals! taking special care to
limit himself to conclusions drawn from that pattern or regularity.
It is only by the systematic and patient following up of the implications of
many people holding certain views that we can understand, and often even only
learn to see, the unintended and often uncomprehended results of the separate
and yet interrelated actions of men in society. That in this effort to
reconstruct these dif THE SUBJECTIVE CHARACTER OF THE SOCIAL SCIENCES 35
ferent patterns of social relations we must relate the individual's action not
to the objective qualities of the persons and things towards which he acts, but
that our data must be man and the physical world as they appear to the men whose
actions we try to explain, follows from the fact that only what people know or
believe can enter as a motive into their conscious action.
There is therefore a double character in the observation of social facts. Kne is provided by the
sub0ectivespontaneous actions of individuals! giving rise to unintendedunplanned social
conse#uences + this Hayek calls the constitutive ideas + and the other are the product of
individuals reflecting or forming ideas about the nature of their sub0ective actions. This latter
aspect or character of social behaviour is the part we must eschew because it is here that the
fallacy of scientism lies.
It is very important that we should carefully distinguish between the motivating
or constitutive opinions on the one hand and the speculative or explanatory
views which people have formed about the wholes; confusion between the two is a
source of constant danger. Is it the ideas which the popular mind has formed
about such collectives as "society" or the "economic system," "capitalism" or
"imperialism," and other such collective entities, which the social scientist
must regard as no more than provisional theories, popular
38 THE COUNTER-REVOLUTION OF SCIENCE
abstractions, and which he must not mistake for facts. That he consistently
refrains from treating these pseudo-entities as "facts," and that he
systematically starts from the concepts which guide individuals in their actions
and not from the results of their theorizing about their actions, is the
characteristic feature of that methodological individualism which is closely
connected with the subjectivism of the social sciences. The scientistic
approach, on the other hand, because it is afraid of starting from the
subjective concepts determining individual actions, is, as we shall presently
see, regularly led into the very mistake it attempts to avoid, namely of
treating as facts those collectives which are no more than popular
generalizations.
What Hayek.s individualistic and 6compositive. method ,origins of term is *enger who corrected
Schmoller.s deductive description + Hayek! 2>S! fnEE- is ultimately aimed at! therefore! is the
emargination of all conscious collective behaviour from the sphere of social science. Knly
those conclusions based on e%isting and unintended regularities in the behaviour of human
groups are capable of scientific investigation + the rest is the bitter and confounded fruit of
scientism or! with Whitehead! the fallacy of misplaced concreteness ,a bourgeois version
perhaps of the *ar%ian reification-.
What Hayek debellates and defenestrates is the very ability of scientific reflection to give a
purpose or conatus to human collective action. <or once the actions of individuals are
regarded only in their sub0ectiveunintended moment! it follows that it will be impossible to
compose ,M- these actions into any meaningful structure that is not purely mathematical! deprived
of any #ualities and aimgoalpurposeconatus because these are metaphysical + and this is
precisely what neoclassical theory achieves with general e#uilibriumM Walrasian and :areto
e#uilibria now become the mathematical social synthesis bound together by a carefully$hidden
notion of utility3 with neoclassical e#uilibrium! the form has swallowed up the substanceG the
mechanism! the aim or goal of human activity. "ravoM
It is a mistake, to which careless expressions by social scientists often give
countenance, to believe that their aim is to explain conscious action. This, if
it can be done at all, is a different task, the task of psychology. For the
social sciences the types of conscious action are data 84 and all they have to
do with regard to these data is to arrange them in such orderly fashion that
they can be effectively used for their task.85 The problems which they try to
answer arise only in so far as the conscious action of many men produce
undesigned results, in so far as regularities are observed which are not the
result of anybody's design. If social phenomena showed no order except in so far
as they were consciously designed, there would indeed be no room for theoretical
sciences of society and there would be, as is often argued, only problems of
psychology. It is only in so far as some sort of order arises as a result of
individual action but without being designed by any individual that a
problem is raised which demands a theoretical explanation. But although people
dominated by the scientistic prejudice are often inclined to deny the existence
of any such order (and thereby the existence of an object for theoretical
sciences of society), few if any would be prepared to do so consistently: that
at least language shows 40 THE COUNTER-REVOLUTION OF SCIENCE
a definite order which is not the result of any conscious design can scarcely be
questioned. The reason of the difficulty which the natural scientist experiences
in admitting the existence of such an order in social phenomena is
that these orders cannot be stated in physical terms, that if we define the
elements in physical terms no such order is visible, and that the
units which show an orderly arrangement do not (or at least need not) have any
physical properties in common (except that men react to them in the "same" way
although the "sameness" of different people's reaction will again, as a rule,
not be definable in physical terms).
"y removing the need or the ability to look into the inter$esse or purposefulness or the
conatus of human activity! Hayek and neoclassical theory can purport to e%amine human activity
as a composite of individual actions that have empirical significance only and that! like
Science! can be observed and reconciled only through the automatic! e#uilibrated
mechanism of the market + that is! contemplatively through the regular! predictable
effectiveness of observed individual actions. This is why labour can be effectively removed from
economic analysis in the neoclassical paradigm where the removal of all
metaphysicalpurposive theorising leaves labour to compete with all other endowments as a
means of e%change. This is what "ohm$"awerk achieved with his attack on *ar%3 isolate labour
as a disutility in that its use is e#uivalent to immediate consumption and therefore as a use of
capital which! instead! represents roundabout and therefore delayed consumption. After such
an operation whereby labour as conatus as Schopenhauer.s will to life is sublimated or
renounced ,(ntsagung-! the reconciliation of socially$constitutive individual self$interests can
be achieved only through e#uilibrium analysis.
And this is where we return to Adam Smith! but this time we can draw the contrast with
teleological approaches3
Hegel and Comte both singularly fail to make intelligible how the interaction of
the efforts of individuals can create something greater than they know. While
Adam Smith and the other great Scottish individualists of the eighteenth century
even though they spoke of the "invisible hand" provided such an explanation,59
all that Hegel and Comte give us is a mysterious teleological force.(Counter
Rev.ofSc., p.203)
The best illustration in the field of the social sciences is probably the
general theory of prices as represented, e.g., by the Walrasian or Paretian
systems of equations. These systems show merely the principle of coherence
between the prices of the various types of commodities of which the system is
composed; but without knowledge of the numerical values of all the constants
which occur in it and which we never do know, this does not enable us to predict
the precise results which any particular change will have.87
Apart from this particular case, a set of equations which shows merely the form
of a system of relationships but does not give the values of the constants
contained in it, is perhaps the best general illustration of an explanation
merely of the principle on which any phenomenon is produced.(p.43)
<inally! a #uote from Andrew Namble in The 2ambridge 2ompanion to Hayek3
This hermeneutic argument in Hayek, which privileges Verstehen over erklaren,
leads to the uniform minds hypothesis the Hayek on knowledge,
economics, and society
119
through the knowledge of our own mind. Social scientists use the analogy of their own mind in
order to understand social phenomena: We all constantly act on the assumption that we can
interpret other peoples actions on the analogy of our own mind (Hayek [7@?E]7@?F, p.5?).
Hayek maintains that understanding human action is quite unlike understanding natural
processes, since for human actions it is impossible to enumerate the physical attributes which
would allow the actions to be classifed in an objective manner without any resort to the attitudes
and intentions of the agent. Hayek was a frm opponent of behaviorism and all forms of positive
social science which tried to develop what he regarded as a false objectivism. The core of social
science for him has to be subjectivism, and this stems directly from his conception of human
knowledge and human action. It follows that the business of social science is not to engage in
prediction, or seek to explain individual behavior, or devise ways of measuring human attitudes as
though they were physical phenomena. Rather it is to classify types of individual behavior, to
uncover patterns and principles:

All that the theory of the social sciences attempts is to provide a technique of reasoning
which assists us in connecting individual facts, but which, like logic or mathematics, is
not about the facts. (Hayek [7@?E]7@?F, p.IE)
It follows according to Hayek that no social science theory can be verifed or refuted by facts. He
later modifed this position, con- vincedby Poppers arguments. But in his ownpractice he found
little use for falsifability:
While it is certainly desirable to make our theories as falsifable as possible, we must also push
forward into felds where, as we advance, the degree of falsifability necessarily decreases.
(Hayek7@5Ic, p.B@)
Also in this volume! the description of Hayek.s liberalism and its two ma0or assumptions by
2handran =ukathan ,2h.7C-3
First, order is possible without design or central command. Hayek, more than any other thinker in
this century (with the possible exception of Ludwig von Mises), attempted to show the feasibility of
a social order understood as a means-connected systemwithout a common hierarchy of ultimate
ends.4Indeed, Hayek has gone further, arguing that demands for conscious control or
direction of social processes can never be met and that attempts to gain control or to direct social
development can only result in the loss of liberty and, ultimately, in the destruction of civilizations.
In some respects, Hayeks theory here is not especially novel: he ofers an account of invisible-
hand processes which Mandeville, Hume, and Adam Smith had identifed as crucial to the
understanding of social order as the undesigned product of human interaction. Hayeks distinctive
contribution is his account of social institutions and rules of conduct as bearers of
knowledge !ociety may pro"ta#ly #e viewed as a network of practi$
ces and traditions of behavior that convey information guiding indi- vidual conduct. These
institutions not only facilitate the matching of means with established ends, but also stimulate the
discovery of human ends. Hayeks argument is that it is vital that society not be brought under the
governance of a single conception of the ends of life which is held to subsume all the various
purposes human beings pursue, for this can only stife the transmission and growth of knowledge.
The second assumption underlying Hayeks political philosophy is that individual freedom is
not to be understood in terms of mans capacity to control his circumstances, nor in terms of
collective self- government. Rather, freedom obtains when the individual enjoys a protected
sphere or domain within which others may not interfere, and he may engage in his separate
pursuits in accordance with his own purposes.
This liberalism stands in clear contrast to the socialism of Karl Marx. (p.184).
*(THK)K;KN&3 1nstrumentalism and :ra%eology + cf. also Schumpeter.s )as Wesen u.
Hauptinhalt.
The aim of economic analysis for Schumpeter! what allows it to ac#uire scientific status! is the
fact that it can develop a bo% of tools ,Hoan >obinson- that are effective! thatLwork. The aim
of Schumpeter.s /ntersuchungen is to discover analytical tools or mechanisms that e%plain
why and how the capitalist economy develops! that is trans$forms its characteristics and
displaces its e#uilibrium centre ,of gravity- ,NravitationsDentrum-. This is the aim of the new
)ynamik theory as against the traditional Statik theory.
,'ote discussion in Santo *aDDarino! Aol E! p.BOE! discussion of 6metabole. and 6stasis. with the
first resembling Sch..s 6=reislauf..Statik. and the other the civil war$insurrection or 6=risis. that
gives way to 6)ynamik. + this 6transition. due to 6corruptio.! that is! decadence from an earlier
golden age or purity of the 6body politic.! this time intended as 6body economic. by Schumpeter.
Hodgson 86*arshall! SchL.9 traces 6)ynamik. past *ill to the sphere of Doology 8#v9 which again
echoes 6metabole. and 6stasis. 8stagnation in economics! which may deteriorate into crisis9 and
6crisis.! all medical terms.
*aDDarino notes the absence of the concept of 6revolutio. in Ancient historiography. "ut his
discussion of the ;ate (mpire historians and their awareness of the death of states is
instructive. This is the original sin of Sch..s analysis that it purports to distil the tools of
scientific analysis so that (conomics is seen 6sub specie aeternitatis. + which is aporetic with his
6)ynamik. approach. 1t is conclusivedeterminant here that Sch. changed his attitude to *ar% in
62SQ). to such an e%tent that he praised *ar%.s unifying method 8intiereDDa in 2olletti! p.7I9
whereby historical and economic facts are ine%tricably considered resulting in an histoire
raisonnee 8#uoted in 2olletti! p.?F9. And note also Sch..s later mollified attitude to Schmoller.s
School.-
Hayek acknowledges the eventual e%it of Sch. from the Austrian School ,1ntro. to Sch.s
*eth1nd.-.
,Kn the bo% of tools ,>obinson-! cf. (. *ach.s ;a science peut etre consideree comme une
sorte de collection dinstruments nous permettant de completer par la pensee des faitsLou de
limiter le plus possible notre attente 8=irchoff.s 6description.9L;es faits ne sont pas forces de
suivre nos penseesL ,pp.EI5$I- + here *achian sub0ectivism gives the game away in that it
cannot understand science as a positive process of discovery! as an enterprise. 1nnovation is
epistemologically aporetic for *ach. His negative procedure is homologated in Walras! :areto
and Hayek.- See also above #uotation from Andrew Namble.s summary.
,We should note here! as in 61nnovation.! that game theory is a splendid illustration of this
*achian negative approach in that it is a 6:ure ;ogic of 2hoice.3 it serves to eliminate
alternative choices so that the mere 6mathematical schema. of an immutable reality based on
self$interested in$dividuals 8even psycho$logically9 remains. Hayek seeks to hide the brutality of
the in$dividual and to base his scientificsub0ectivist approach behind the spontaneity of
choice. 1n 2ou>evSc! fn.5?! he is at pains to distinguish individual from in$dividuum in that the
former is the active spontaneous sub0ect that animates *ises. pra%eology. 1n footnote @F!
p.BBC! he decries the social engineeringplanning of socialist methodology precisely for the
reason that it would turn the whole of society into a factoryM 1n other words! economics and social
science can analyse the capitalist economy so long as they focus on its spontaneity or
pra%eology. "ut any attempt consciously to transform it will reduce society ,with its
pra%eological dimensions! of which economics is only one- to the mechanism of the factory.
Again here pra%eology is distanced from society because it is only one aspect of social life.
Those who make it the centralessential aspect of it 8like Nary "ecker and game$theoreticians
recently49 reduce social life to ugly Stakhanovism.
Similarly! Hayek cites *enger in fn.I5 to attack the American institutionalists.
"ut this fails miserably + *andeville! on whom Hayek relies! would have laughed contemptuously!
re0oicing and invoking Hobbes and welding his rigourism with utility ,otium cannot! like
labour pay for the utility of consuming goods! which is paid for with the disutility of labour +
2olletti! p.BFC-. <or even altruism is the price <lattery pays to :ride 8=aye 1ntro to 6<able.9 and
the only impulseconatus is self$preservation! the only spark of >eason left in the Heideggerian
homo est brutum bestiale written at the end of metaphysics 8#uoted in 2acciari! p.?@9. 1t is the
6)estruktion. of the ArendtianAugustinian 6Aolo ut sis. 8Arendt! Aol B! p.B@C9 $ 8nessuna simpatia!
says 2acciari! ibid.9 + indeed! an im$possible concept in this perspective! as is SpinoDa.s
conatus leading with (uclidean rigour to amor intellectualis )ei.- + :erhaps all this should be
discussed separately.
Transition to Civil Society 3
+ut the 4self&understanding6 of ")uilibrium can only lead to 4renunciation67-olitical as
8unversohnendes9 return to 4status naturae67status civilis 3obbesian dichotomy bellum
omnium contra omnes. Cf. :chmitt vs. .eo :trauss interpretation of 3obbes. 5efer to
.owith9s e)uiparation of :chmitt and 3eidegger.(
,2an include here Schopenhauer.s political theory. 2ontrast with Hegel.s dialectic.-
2>1S1S3 Niven that scientific activity is approached in a non$essentialist manner but in! yes a
phenomenological sense but one that remains profoundly *achian$empiricist! Hayek fails to see
here that natural sciences too are afflicted with the indeterminacy principle. And he also
neglects the crisis of all scientific knowledge brought about by #uantum theory + the dis$
continuity of the electron.s movement between different energy orbitals. ,Husserl will capture this
with far greater sophistication and acumen + and indeed make this crisis of science the starting
point of his phenomenology.- The point to emphasise is that for Hayek there is no crisisG he
certainly perceives none! let alone confront one. The same is valid for Schumpeter who!
nonetheless! is the first to confront the criticalpolitical factors involved in the transformation of
Science ,Hayek- into an instrumentalrationalised activity in need of practicalpolitical activity
directionguidance.
'ote Hayek.s reference to *achian influence on Schumpeter and later 6eloignement. from
Austrian School in S.s *eth.1ndiv..
*ach + 2arnap + Heidegger and Schmitt.
!0-#5T;<T= > <ote that .oasby refers to :chumpeter9s approbative discussion of
;dam :mith9s review of <ewton9s 4;stronomy6 and .aws of 0echanics?.as a
4scientific paradigm6 similar to that discussed by Thomas @uhn. :ee ;. :mith9s 83istory
of ;stronomy9 in Essays on Philosophical Subjects )uoted by : $A2', p.$BC > in
.oasby9s Knowledge, Insttns.&Evltn.inEcnmcs, p.B(. : notes :mith9s emphasis on human
beings9 need to connect otherwise dis&connected facts through theories to
achieve?6tran)uillity6.
This is applied to :mith9s own understanding of his 8Wealth of <ations6 and specifically
of the 4!nvisible 3and6 the deus otiosus( of the 4self&regulating market6, that is
of?.6e)uilibrium6 Dleichgewichtlichkeit(.
+ut 5"0"0+"5 that the capitalist( economy Welt des Wirtschaftlichens( has a
4tendency6 Dlgwcts& tenden/ in 8Theorie9( to return or 4D5;E!T;T"6=( toward
4e)uilibrium6= This Tenden/ is also in 3ayek, it is the empirical solution to the 4co&
ordination problem6= (
:chumpeter calls this Dravita/ions/entrum and even refers to different7separate
4e)uilibrium C"<T5":6 before and after the 4transformation6 and 4displacement6
Eeranderung und Eerschiedigung( operated by the Fnternehmer and his !nnovation.
:o here once again re&appear the <ewtonian mechanics notions of 4force6 and 4energy6
abound in :9s Gapanese intro > 4force which incessantly transforms it...a source of energy
within the economic system which would of itself disrupt any e)uilibrium that might be
attained6, in 5osenberg, 8"ndogeneity9, p. H(.
;nd <ewtonian mechanics bring us right back to?3obbes= Cf. ;.-ia//i9s discussion of
3obbes9s relation to "uclid and Thucydydes9 4-elopp.Wars6, experience of civil wars.(
5ecall Colletti, 43obbes to whom 0andeville owed so much6 in !1:(I and ;rendt
draws 83obbes & self&interest > political economy link9 in 8#rigins9 > see my 4Civil
:ociety $6.
:o, for : the "ntrepreneur upsets the laws of <ewtonian physics, much as "instein did.
4Crisis6 is also the crisis of 0achian epistemology with rise of relativity and )uantum
theory & for there is also a 4)uantum leap6 between 4e)uilibrium centres6 or 4energy
levels6=
+ut Cacciari rightly insists on the 4lingering6 0achian bases of :chumpeter9s 8Theorie9
also 3ayek9s preface to 80eth.!ndiv.9(, specifically around retaining <eoclassical Theory
and 4")uilibrium6 as foundations of his 4analysis6 whilst ignoring, on one side, 0arx9s
4criti)ue6 and on the other, Weber9s superior 4positioning6 of 8so/ialwissenschaftlicher9
categories in a 3usserl&3eideggerian sense cf. 3usserl9s 4@risis6(.
.oasby recalls that unlike 0arx, Jarwin had no 8telos9I evolution is 8open&ended9 against
the 4closed system6 of e)uilibrium analysis p.$%(. :ame goes for :.
Hayek seeks historical institutional continuity! benignly and blithely unaware of the paradigmatic
dis$continuity of social and political institutions. He completely ignores the crisis of capitalism.
And there is no crisis without something that is in crisis! without the concept of capitalism
that Hayek seeks to denounce as a creature of scientism. This notion of crisis is the orbital
#uantum leap between e#uilibria as 6gravitational centres. that will become central to
Schumpeter.s 6Theorie..
We should now turn to the historical origins of 'eoclassical Theory! from which the Austrian
School derived! and then to Schumpeter. ,2heck also S.s coefficients of choice in (ssays.-
Hayek.s approach was surely shared by Schumpeter3 indeed! Hayek.s intertemporal e#uilibrium
is what allowed Schumpeter to embark on his studies of evolutionary or developmental
economics + the launching pad for his 6Theorie der wirthschaftlichen (ntwicklung.! where
(ntwicklung stands for both evolution and development. 'ote Hayek.s reference to *achian
influence on Schumpeter and later 6eloignement. from Austrian School in S.s *eth.1ndiv..
'egative Thought! "ohm$"awerk and ,State- *onetary :olicy in 6:rices and :roduction..