Tuesday, September 1, 2015

Did Hayek Really Reject the Deductive Method and Become an Empiricist?

By Robert Wenzel

The following question was posed in an email to Dr. Walter Block, which was posted here at EPJ:

[I]sn't it true that Hayek rejected the entire methodology and became an empiricist?

Professor Block answered the question this way:
 Yes, Hayek did reject the praxeological method; thus, he was an empiricist.  See this on that: Knott, Adam. 2012. "Hayek and Praxeology." November 13http://www.mises.org/daily/6248/Hayek-and-Praxeology
I believe this answer needs some amplification. While there was a sense that F.A. Hayek was an empiricist in a way that Ludwig von Mises was not, one should not get the impression that Hayek was in any way advancing empiricism in the way it is generally thought of today, that is, empirical tests must be run to determine any and all economic truths. Hayek's journey into empiricism was extremely limited and odd. It was far from a complete rejection of the logical deductive method for the social sciences. It seems it was more a flirtation with the evil black magic woman of empirical social science methodology, that has seduced many other lesser men.

Indeed, the Knott paper that Block cites makes a lead off reference to a Hayek paper, The Facts of the Social Sciences (Chapter 3 in Individualism and Economic Order). Hayek wrote  in that paper:
[T]he theories of the social sciences do not consist of "laws" in the sense of empirical rules about behavior of objects definable in physical terms. All that the theory of 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. It can, therefore. and this is the second point, never be verified or falsified by reference.
To be sure, Hayek's 'pure theory of logic' has subtle differences with Mises' praxeology, but at the foundation they both start out with deductive reasoning and reject the empirical methodology of the physical sciences as the starting point for the social sciences.

Knott then brings to the forefront another paper by Hayek Economics and Knowledge, (Chapter 2 in Individualism and Economic Order). In this paper, Hayek does introduce a bit of empiricism but also adds, so that no one does think he is a full-fledged empiricist:
I do not mean to suggest that there opens here and now a wide field of empirical research. I very much doubt whether such investigation would teach us anything new. 
The fundamental topic of Hayek's K&E paper is equilibrium. He argues, in essence, that an individual has to be in equilibrium with himself and that we know this by our own introspection into ourselves and how we value things. It is easy to understand why Mises would never make such an odd statement about self equilibrium. But then Hayek goes on to say this type equilibrium can not be known beyond the individual, for instance about markets. But it is important to note he is not making the argument that we can't know from deduction, in a big picture manner, how markets work given certain conditions, but merely that we can't know, for example, that markets have a tendency to move toward equilibrium---and in one sense Hayek is correct here. At any given point in time, depending on what the  future holds, entrepreneurs and other actors may be acting in a matter that will prove to move resources away from equilibrium, say for example, an entrepreneur producing millions of umbrellas in anticipation of El Nino caused rainy season that doesn't develop. In hindsight, these resources would have been much better used in a different fashion.

What Hayek seems to be doing here is putting limitations on what deductive reasoning can tells us about the real world, for example, tendencies. If by this Hayek means that it is impossible to know ex ante if the world at a given time is moving toward equilibrium, when we eventually look back in retrospect and truly judge, then it is doubtful Mises would disagree, Mises' argument is more along the lines of: given the knowledge at hand, i.e, ex ante, markets move toward equilibrium.

If Hayek thinks he can somehow discern empirically that markets always do move towards equilibrium. or do not, then that view would be difficult to understand. It would have to be declared at that point that the magic bitch of faulty social science methodology has corralled him It would suggest confusion on Hayek's part about the nature of knowledge, of what the logic of the social sciences is and its ex ante limitations, especially when it comes to tendencies.

 Robert Wenzel is Editor & Publisher at EconomicPolicyJournal.com and at Target Liberty. He is also author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics


  1. Good post. I suspect Mises idea about methodological dualism invites these kinds of flirtations.

  2. Hayek and Rothbard both rejected Mises in different ways and unfortunately their followers dominate the liberty movement. Here's Hoppe explaining why Mises > Hayek
    Mises vs Rothbard is an another important debate for the future of liberty. We can't go off the rails that Mises laid down.

  3. Rothbard's two letters critiquing Hayek in Rothbard vs The Philosophers are also must-read.

    1. Those are interesting letters, but have nothing to do with the topic of this post.

    2. They do, because Hayek's methodology leads to his policy conclusions.