Assessment and Criticism

If this study has a single unifying theme, it is that Hayek’s work is to be viewed and understood as a whole. Though his work has developed over six decades and has crossed many disciplinary boundaries, it has throughout exemplified a distinctive conception of the powers of the mind and of the character of human knowledge. As I have tried to show, this conception animates and explains many of the positions Hayek has adopted even in the areas of technical controversy within economic theory. His criticisms of macroeconomics and of policies based upon macroeconomic theories express his belief that the real economy consists of microeconomic or qualitative realtionships between individual market participants. These relationships are not captured by models whose central elements are aggregates and averages of economic activity which can never exert a causal influence on real market actors. Public policies which treat these statistical fictions as if they had a reference in the real world not only commit a fallacy of conceptual realism, they also inevitably have a self-defeating affect, for, in so far as the policies themselves become part of the environment of expectations within which market participants act, their intended affect will be discounted. In respect of Keynesian policies of deficit financing, we 113may say that they achieve their intended results only in so far as they are not expected—only in so far as market participants have pre-Keynesian expectations and habits. ¹ Friedmanite indexation policies, on the other hand, whatever role they may have in a disinflationary policy, may actually worsen the discoordination of relative prices and incomes, and may breed expectations which are in the long run unsustainable. All these macroeconomic policies embody the deep philosophical and methodological errors of ascribing causal or ontological status to heuristic fictions and, conversely, of ignoring the subjective character of the central objects of economic life (costs, opportunities, expectations and so on). Hayek’s central theory—that most social knowledge is unavoidably practical knowledge resistant to theoretical statement, while social theories are always and only conjectural models of the general conditions under which abstract patterns of activity will form—by itself disqualifies many dominant recent positions in economic theory and in public policy.