Policy Innovation as a Discovery Procedure: Exploring the Tacit Fringes of the Policy Formulation Process

Abstract

Following up on the suggestions of Adolph Lowe, the paper investigates the potential contribution of pragmaticist philosopher Charles Sanders Peirce's concept of "retroduction" (and especially Norwood Hanson's elaborations of that concept), mathematician George Polya's work on heuristics, physical chemist and philosopher of science Michael Polanyi's explorations of "tacit knowledge," and sociologist C. Wright Mills' notion of "The Sociological Imagination," to the elaboration of a methodology of economic policy innovation. Lowe's "instrumental inference" is thus reinterpreted as a policy discovery procedure, and the view is put forward that such an elaboration may contribute to the formulation of effective practical policies. It is also argued in the paper that this interpretation throws light on some issues concerning markets and planning that relate to the debate on "socialist calculation" that has been revived in the name of the "knowledge problem" by contemporary Austrian economists. In particular, it is argued that Lowe's Instrumentalism brings to the fore the role of discovery and creativity--which play a central role in Austrian conceptions of entrepreneurial activity in the market--in policy formulation. In this sense Lowe's work may be seen as an antecedent to more recent work in planning that critiques--and promotes nonessentialist alternatives to--"optimal" or "rational" planning.

JEL Classification: B20