November 4, 2015

Hayek: mad, bad, or just another incompetent economist?

Comment on David S. Wilson on ‘The Road to Ideology. How Friedrich Hayek Became a Monster’


You say “Science is necessary to solve the problems of modern existence but it is not sufficient on its own. There must also be compelling narratives capable of reaching and animating large audiences.” (See intro)

This is a huge misunderstanding. Science is about knowledge and not about animating large audiences. Genuine scientists are as happy as can be when the large audience goes to the Circus Maximus and makes a thumb up when the gladiator kills the lion or vice versa. Remember what Plato wrote above the entrance of the first academy about non-scientists?: "Let None But Geometers Enter Here."

Your second misunderstanding is that Hayek was an economist and that economics is a science. This is downright ridiculous.

First of all, it is of the utmost importance to distinguish between political and theoretical economics. The main differences are
(i) The goal of political economics is to push an agenda, the goal of theoretical economics is to explain how the actual economy works.
(ii) In political economics anything goes; in theoretical economics, scientific standards are observed.

Theoretical economics has to be judged according to the criteria true/false and nothing else. The history of political economics since Adam Smith can be summarized as a perpetual violation of well-defined scientific standards.

The fact of the matter is that theoretical economics has been hijacked by the agenda pushers of political economics. Smith and Ricardo fought against the precapitalistic order, Marx and Keynes were agenda pushers, so were Hayek and Friedman, and so are Krugman and Varoufakis.

Hayek, of course, had the right to write political pamphlets, defend capitalism, support Thatcher, and found a political club like Mont Pelerin. One thing, though, should be perfectly clear: the moment an economist starts with politics he leaves economics, understood as a science, for good. It is the mixture that is toxic.

Ask yourself: when Krugman supports the Democrats, Wren-Lewis and Keen support Corbyn, and Varoufakis fights for democratizing the Eurozone, has this anything to do with scientific research? What have they and Hayek in common? Neither has a scientifically valid theory about how the economy works. Hayekian economics never satisfied the criteria of material and formal consistency. His economics was not good enough for science but good enough for politics.

Political economics is for animating large audiences, theoretical economics is not and never will be. Politics has to be separated from science and thrown out of economics — the sooner, the better. Let’s start with Hayek!

Egmont Kakarot-Handtke

Related 'Free academia from economics' and 'The Science-of-Man fallacy and 'How to be a good scientist' and 'The case for pure economics' and 'Separation of politics and economics'

For more about Hayek see AXECquery.

Twitter Aug 21 From the official history of the Mont Pelerin Soc