The unsolved Hayekian knowledge problem in behavioral economics

Rizzo, Mario J.; Whitman, Glen

doi:10.1017/bpp.2021.18

Cited by 9 publications

(5 citation statements)

References 32 publications

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“…the deliberations of individual planners, or perhaps the social and power relations within the governing body. It is difficult to conceive how this kind of mechanism could create proxies of similar quality as a market, given the goal of aggregate welfare [ 119 , 142 ].…”

Section: Future Directionsmentioning

confidence: 99%

Proxyeconomics, a theory and model of proxy-based competition and cultural evolution

Braganza

2022

R. Soc. open sci.

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Competitive societal systems by necessity rely on imperfect proxy measures. For instance, profit is used to measure value to consumers, patient volumes to measure hospital performance, or the journal impact factor to measure scientific value. While there are numerous reasons why proxies will deviate from the underlying societal goals, they will nevertheless determine the selection of cultural practices and guide individual decisions. These considerations suggest that the study of proxy-based competition requires the integration of cultural evolution theory and economics or decision theory. Here, we attempt such an integration in two ways. First, we describe an agent-based simulation model, combining methods and insights from these disciplines. The model suggests that an individual intrinsic incentive can constrain a cultural evolutionary pressure, which would otherwise enforce fully proxy-oriented practices. The emergent outcome is distinct from that with either the isolated economic or evolutionary mechanism. It reflects what we term lock-in , where competitive pressure can undermine the ability of agents to pursue the shared social goal. Second, we elaborate the broader context, outlining the system-theoretic foundations as well as some philosophical and practical implications, towards a broader theory. Overall, we suggest such a theory may offer an explanatory and predictive framework for diverse subjects, ranging from scientific replicability to climate inaction, and outlining strategies for diagnosis and mitigation.

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Section: Future Directionsmentioning

confidence: 99%

Proxyeconomics, a theory and model of proxy-based competition and cultural evolution

Braganza

2022

R. Soc. open sci.

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“…While differences in policy outlooks have caused some to frame the discussion in terms of a new socialist calculation debate (Devereaux, 2019), many others have recognized this overlap and the potential for an alliance. This recognition has sparked a lively interchange over the potential gains from trade between these two approaches (Dold and Rizzo, 2023; Rizzo and Whitman, 2023; Sugden, 2023; Sunstein, 2023a, 2023b; Whitman, 2022). The resulting debate is best understood as an attempt to answer the question, ‘how Hayek, or a Hayekian, might respond to behavioural findings about individual error’ (Sunstein, 2023a: 217).…”

Section: Introductionmentioning

confidence: 99%

Hayek's extended mind: on the (im)possibility of Austrian behavioural economics

Dekker,

Remic

2024

Journal of Institutional Economics

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Recent work has argued for a Hayekian behavioural economics, which combines Austrian economics with behavioural economics as developed by Kahneman, Thaler, Sunstein, and others. We suggest that this hybrid is misguided because it relies on individual cognitivism. This view of cognition is incompatible with the Hayekian view of cognition which treats rationality as an emergent phenomenon of social interaction in an institutional environment. This Hayekian view, which we call epistemic institutionalism, is compatible with an alternative prominent perspective in psychology, that of the extended mind, sometimes known as 4E cognition. We demonstrate how the Hayekian perspective on individualism, the price system, and the evolution of rules can be connected to the extended mind programme, through concepts such as the coupling of the individual and their environment, cognitive off-loading, and affordances. We suggest that this alternative combination of Austrian economics and psychology provides a more fruitful way forward, especially because it foregrounds the processes of learning, error-correction, and institutional orders, rather than choice, bias, and individual rationality. To explain why Austrian economists have been receptive to behavioural economics, we distinguish epistemic institutionalism from the (radical) subjectivist approach, which shares key assumptions of individual cognitivism.

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“…Recently in this journal, there has been a discussion of "Hayekian Behavioral Economics" and its implications for behavioral public policy (Rizzo and Whitman, 2023;Sugden, 2023;Sunstein, 2023). In particular, Sunstein has argued that regulatory interventions based on behavioral insight on people's biases would be consistent with a Hayekian worldview.…”

Section: Introductionmentioning

confidence: 99%

“…This has implications for the methodology of psychological economics: it requires a more careful analysis of the role of subjective perception in economic experiments and the way rules and norms that operate in the background have differently shaped people's purpose-seeking tendencies (Hargreaves Heap, 2022;Kimbrough, 2022). It also has implications for regulatory efforts in that planners must take the subjectivity of welfare and the heterogeneity of agents and biases as a serious side constraint on one-size-fits-all behavioral policies (Rizzo and Whitman, 2023).…”

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confidence: 99%

Hayekian psychological economics: a preliminary look

Dold,

Rizzo

2024

Behav. Public Policy

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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.”

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The unsolved Hayekian knowledge problem in behavioral economics

Abstract: No one sees farther into a generalization than his own knowledge of the details extends.'William James (Barzun, 1983, p. 14).

Cited by 9 publications

References 32 publications

Proxyeconomics, a theory and model of proxy-based competition and cultural evolution

Proxyeconomics, a theory and model of proxy-based competition and cultural evolution

Hayek's extended mind: on the (im)possibility of Austrian behavioural economics

Hayekian psychological economics: a preliminary look

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