Quotation of the Day…

by Don Boudreaux on September 5, 2016

in Economics, Hayek, Myths and Fallacies, Science

… is from pages 354-355 of the 2014 collection, The Market and Other Orders (Bruce Caldwell, ed.), of some of F.A. Hayek‘s essays on spontaneous-ordering forces; this particular quotation – which conveys one of the most profound insights that you’ll ever encounter at Cafe Hayek – is from Hayek’s important January 1970 lecture at the University of Salzburg, “The Errors of Constructivism” (emphasis and grammatical awkwardness are both original):

If scientists are so little aware of the responsibility that they have incurred by failing to comprehend the rôle of values for the preservation of the social order, this is largely due to the notion that science as such has nothing to say about the validity of values.  The true statement that, from our understanding of causal connections between facts alone, we can derive no conclusions about the validity of values, has been extended into the false belief that science has nothing to do with values.

This attitude should change immediately: scientific analysis shows that the existing factual order of society exists only because people accept certain values….  It is therefore incorrect if, from the postulate that science ought to be free of values, the conclusion is drawn that within a given system problems of value cannot be rationally decided.

(To be clear: in the last quoted sentence, Hayek should have written, in place of “problems of value”, “problems of values”, for here Hayek is clearly not using the word “value” to mean monetary prices in particular or market values in general; rather, Hayek is here speaking of personal values that people hold about their own and others’ behaviors and about how society should best be ordered.)

Here’s an example of Hayek’s insight: an economy that features a deep division of labor and innovation of the sort that is necessary to regularly improve the material standard of living of the masses is not possible if the bulk of the denizens of that economy do not hold values of the sort that Deirdre McCloskey identifies as the source of what she calls “the Great Enrichment.”  The growth and continuing success of the global economy of which you, Dear Reader of this blog, are a part are not the results of social engineering.  These outcomes – processes, really – cannot be correctly understood by assuming them to be the solutions to maximization or optimization problems.

The existing pattern of use (“allocation”) of existing resources can be described as if it is the solution to a grand maximization or optimization problem – and there might be some limited intellectual insight to be gained by such an ‘as-if’ description.  But it is a grave error, one committed by too many economists who fail to adequately account for the on-going and creative process of market competition, to suppose that the economic ‘problem’ is how to maximize utility by ‘correctly’ allocating given resources among given and competing ends.


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