Hayek's Epistemic Theory of Industrial Fluctuations

CHOPE Working Paper No. 2013-16

Economic Research Initiatives at Duke (ERID) Working Paper

History of Economic Ideas, 2015

20 Pages Posted: 18 Sep 2013 Last revised: 19 Dec 2018

See all articles by Scott Scheall

Scott Scheall

Arizona State University, College of Integrative Sciences and Arts, Faculty of Social Science; Arizona State University (ASU) - Center for the Study of Economic Liberty

Date Written: February 6, 2014

Abstract

F.A. Hayek essentially quit economic theory and gave up the phenomena of industrial fluctuations as an explicit object of theoretical investigation following the publication of his last work in technical economics, 1941’s The Pure Theory of Capital. Nonetheless, several of Hayek’s more methodologically-oriented writings bear important implications for economic phenomena, especially those of industrial fluctuations. Decisions (usually, for Hayek, of a political nature) taken on the basis of a “pretence” of knowledge impede the operation of the price system’s belief-coordinating function and thereby contribute to episodes of economic disequilibrium. Moreover, this later account – which I call Hayek’s epistemic theory of industrial fluctuations – implies certain aspects of his earlier theory. The two accounts are connected in virtue of the role that ignorance and the limits of human knowledge play in each. Indeed, it turns out that – substantively, if not methodologically – Hayek’s early theory of the cycle is a special case of the more general epistemic account.

Keywords: Hayek, business cycle theory, spontaneous orders, economic methodology, ignorance, pretense of knowledge

JEL Classification: B2, B22, B29, B3, B31, B4, B41, E3, E31, E32

Suggested Citation

Scheall, Scott, Hayek's Epistemic Theory of Industrial Fluctuations (February 6, 2014). CHOPE Working Paper No. 2013-16; Economic Research Initiatives at Duke (ERID) Working Paper; History of Economic Ideas, 2015. Available at SSRN: https://ssrn.com/abstract=2327202 or http://dx.doi.org/10.2139/ssrn.2327202

Scott Scheall (Contact Author)

Arizona State University, College of Integrative Sciences and Arts, Faculty of Social Science ( email )

7001 E. Williams Field Rd.
Mesa, AZ 85212
United States

Arizona State University (ASU) - Center for the Study of Economic Liberty

United States

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