Hayekian psychological economics: a preliminary look

Abstract

Recently, there has been a lively discussion of “Hayekian Behavioral Economics” in Behavioral Public Policy). We aim to contribute to this debate by identifying the main building blocks of a Hayekian psychology. We highlight that the starting point for Hayek was the quest to understand why humans are typically quite successful in navigating the world. In Hayek's framework, the individual mind is conceptualized as a “system within a system”, i.e., the mind is a complex adaptive system that is continuously interacting with the wider socio-cultural system. Three core ideas are central to a Hayekian psychology: subjectivity, learning and adaptation. We argue that these ideas are quite different from the still dominant heuristics-and-biases perspective and lead to different emphases in economic and social science explanations. One, economists should be cautious in their interpretation of experimental findings since subjective meaning is central to agents' behavior. Two, static and isolated models of individuals' biases might underestimate people's capacity to learn with and from others. And three, despite complex processes of adaptation of the mind and the market, a Hayekian framework is consistent with economists' “explanations of the principle” and “pattern predictions.”