Hayek, Mises, and the Methodology of the Social Sciences
By Adam Martin
The Fortunes of Liberalism1 collects a wide-ranging number of Friedrich. A. Hayek’s articles, reviews, addresses, and even obituaries—35 in total—spanning all seven decades of his scholarly career from the 1920s to the 1980s. To call this collection eclectic is an understatement, but the unifying theme is Hayek’s perspective on thinkers who have some connection to Austrian economics, to Hayek’s reconstruction of liberalism, or to both. As such, it includes pieces engaging with the lives and work of thinkers like Carl Menger, Friedrich von Wieser, Ludwig von Mises, Wilhelm Röpke, Joseph Schumpeter, Ludwig Wittgenstein, Bruno Leoni, Leonard Read, and Lord Acton. It also contains several documents that explain Hayek’s thought processes leading up to and including the foundation of the Mont Pelerin Society.
The editors of this volume of Hayek’s collected works, operating under the unfortunate circumstance of founding Editor William Bartley’s death, organized it into two main parts: one on Austrian economics and one on the titular fortunes of liberalism. Within each part, Hayek’s thoughts are divided into chapters by thinker or theme rather than including a separate chapter for each original piece. So, for instance, the chapter on Carl Menger includes both a biography of Menger and an essay on Menger’s Principles of Economics. Sometimes pieces are folded into chapters as “addenda” that are thematically related. Each section begins with a “prologue,” a particular essay that is meant to set the tone for that part. And the chapter on Wittgenstein is presented as a “Coda” to Part I. While it makes perfect sense that the editors sought to provide some thematic structure to the book, this organization is ultimately bewildering.
Fortunately, the volume includes an appendix that lists the contents by date, making clear what elements constitute each chapter and when they were written. This is how I would recommend interested readers approach the text. Interested readers could either simply read the entries most relevant to their own interests or proceed chronologically. I took the latter approach, and found the contents a fascinating window into Hayek’s intellectual evolution.
It is certainly possible to read these essays in order to learn about their respective subjects. Hayek was himself interested in the history of ideas, and paints fascinating pictures of the state of the economics profession in the 1920’s, Carl Menger’s life and work, and the intellectual climate of interwar Vienna. But it is difficult to separate Hayek’s reconstructions of others’ ideas from his own thoughts. The essays here say as much or more about Hayek as they do about their subjects. Since the collected pieces span the entirety of Hayek’s career, Fortunes serves as a valuable companion piece to intellectual biographies and overviews of Hayek’s thought such as Hayek’s Challenge by Bruce Caldwell or Peter Boettke’s recent F.A. Hayek: Economics, Political Economy, and Social Philosophy.
Fortunes touches on an incredible breadth of topics, and it is impossible to comment on all of them. Here I focus on one theme in particular that recurs throughout this collection: Hayek’s views on the methodology of the social sciences. How can economists and other social scientists generate knowledge about economic and other social phenomena?
The primary figure Hayek engages with in this particular volume is Ludwig von Mises. While he engages with many other thinkers throughout the text, his agreements and disagreements with Mises are spelled out in far more detail. When it comes to other thinkers, Hayek frequently glosses over disagreements—”in a short review… it would not be appropriate to say more about any minor faults” (on Schumpeter, page 162)—or treats them in a sort of totemic fashion, dubbing thinkers like Lord Acton and Alexis de Tocqueville “patron saint[s]” (page 247) of the movement he wishes to build. This is even true of Hayek’s own teacher, Friedrich Wieser. While Hayek’s obituary of Wieser is packed to the brim with admiration, he is (appropriately) coy about points of agreement or disagreement with his former mentor. He engages Mises on a much more substantive level.
The relationship between Mises and Hayek has been hotly debated among economists interested in their ideas. Editor Peter Klein’s introduction surveys some of these debates (pages 9-13). Hayek himself penned “Economics and Knowledge” partly as a critique of what he understood as Mises’s extreme belief that economics was strictly a priori and deductive rather than empirical. In “Economics and Knowledge” Hayek qualifies this view by claiming that part of economics—that part dealing with how knowledge is generated and transmitted by the economic systems—is necessarily empirical. But as Hayek notes, after reading this article, Mises never expressed any disagreement with it (pages 55-56). How did Hayek’s views evolve after 1937?
Hayek’s 1941 review of Nationalökonomiei, the German language predecessor to Human Action, coincides with a crossroads in Hayek’s thought, around the time that he began work on his “Abuse of Reason” project (c.f. Caldwell 2004, Ch. 11). His views on this book are mixed. He expresses dismay that, while Mises’s thought has evolved over the decades, it does not engage seriously enough with contemporary economic theory (page 150). He praises the book on two specific grounds. First, he claims that the central part of the text is not Mises’s ruminations on methodology, but his analysis of an exchange society in terms of what is later called comparative advantage. Second, he admires Mises’s foray outside of economics proper into broader social philosophy (page 151). This would become a theme in all of Hayek’s work from the 1940’s onward. Because Nationalökonomiei is “more like [the work] of an eighteenth-century philosopher than that of a modern specialist… one feels throughout much nearer to reality” (page 152). In line with his own thinking at the time, he sees engagement with law, politics, and philosophy as a virtue rather than a vice. Hayek sums up his feelings thus:
- Although the reviewer would put many things differently, he must confess, at the risk of being condemned with Professor Mises as holding views conflicting with the whole trend of modern scientific development, that on the main point Professor Mises’s lone voice seems to him considerably nearer the truth than the commonly accepted views. (page 152)
A 1956 tribute to Mises that Hayek delivered at the Foundation for Economic Education reiterates this appreciation for a broader approach to economics, in line with older thinkers like Adam Smith and Montesquieu (page 133). In a tribute to Wilhelm Röpke published a few years later, Hayek makes his esteem for ‘political economy’ of this sort even more explicit:
- One is often more realistic and in closer touch with reality in the social sciences when one does not limit oneself to those facts that are measurable and quantifiable. There is also an intermediate realm between ‘pure’ theory and questions of practical politics where systematic treatment is at least as useful as in pure theory. (page 197)
In March 1964, Hayek reviews an English translation of Mises’s Epistemological Problems of Economics. He defends the contemporary relevance of the book, claiming that “the sort of uncritical empiricism against which this book is mainly directed is today probably found more frequently and in a more naïve form among American social scientists than anywhere else” (page 147). Hayek then goes on to claim that Mises’s view only gives the appearance of being extreme, and that, “on examination, the difference between the views which Professor Mises has long held and the modern ‘hypothetico-deductive’ interpretation of theoretical science (e.g., as stated by Karl Popper in 1935) is comparatively small” (page 148). This claim will surprise those who are familiar with the common reading of Mises as an ‘extreme’ apriorist. But Hayek shares this reading of Mises with Fritz Machlup (1955), a reading that has recently been articulated and defended by Gabriel Zanotti and Nicolas Cachanosky (2015). Hayek in fact sees this view as common to Austrian economics generally, arguing that Menger’s approach to understanding social institutions also has empirical, falsifiable content rather than being merely theoretical (pages 102-103).
Hayek also mentions approvingly Mises’s argument that social science can also lean on our understanding (German Verstehen) of human intentionality (page 148). We understand human values and goals because we ourselves are human. This point is quite similar to Hayek’s own argument that the “facts of the social sciences” consist partly in what people think and believe. A dollar bill, for example, counts as money because we believe that it does.
But Hayek’s thoughts on the role of qualitative understanding, as opposed to a more mathematical approach to human behavior, are muddied by two later entries in Fortunes. In his 1978 chapter on the historical significance of Menger’s Principles of Economics, Hayek expresses sympathy for Menger’s reliance on Verstehen, but wonders whether later mathematical techniques—particularly indifference curve analysis—render this approach unnecessary for economic theory (pages 102-103). In an unfinished essay for the New Palgrave dictionary of economics from the early 1980s, Hayek states that indifference curve analysis as developed by John R. Hicks in the 1930s “may well be regarded as the ultimate statement of more than half a century’s discussion in the tradition of the Austrian school.” (page 54)
I raise these complications not because I think they are particularly important, but as a note of caution. It is tempting to read either too much coherence or too much incoherence into Hayek’s thought, especially when pulling from articles, book reviews, obituaries, and fragments that span seven decades. It is not always clear when Hayek is expressing ecumenical professional judgments independent of his agreement or disagreement, when he is understating his own views, or when he is simply being kind to those he discusses. It is especially unwise to develop a strong impression of Hayek’s views from only considering this volume. So the interpretation I offer here should be taken as leaning on a limited and inconsistent set of observations.
In 1978, Hayek pens the foreword to the Liberty Fund edition of what is his favorite book by Mises, Socialism. He credits this book with a fundamental change in his views. With the benefit of hindsight, Hayek recognizes that Mises’s theory of the market process differed substantially from that of other economists (pages 140-141). This meant that his argument that a socialist planner could not engage in economic calculation fell at least partly on deaf ears. The pushback against Mises in the broader economics profession is, I suspect, what ultimately led both Mises and Hayek to write so much on economic methodology in the ensuing decades. They did not understand why everyone else did not see the point as clearly as they did.
This foreword also includes the most direct critique of Mises in Fortunes. Hayek takes issue with Mises’s claim that liberalism comes from a rational recognition of the benefits of social cooperation (page 142). Rather, says Hayek, human beings stumbled into a liberal, market order largely by accident. We may have come to prefer living in this sort of society ex post, but we did not rationally design it. This claim of course echoes Hayek’s famous view that important social institutions often evolve spontaneously rather than intentionally, one that he associates in this volume primarily with Menger (page 103) and Smith (page 56). Hayek goes on to claim that Mises later “largely emancipated himself from that rationalist-constructivist starting point” (page 142), but does not cite any work in particular. Perhaps he has in mind Human Action, since it post-dates socialism. Without speculating on particular passages Hayek might be thinking of, this book has a number of statements such as “the evolution of reason, language, and cooperation is the outcome of the same process; they were inseparably and necessarily linked together” (1949, page 43). This view is similar to Hayek’s argument in Law, Legislation, and Liberty that reason is a product of social evolution (1973, Ch. 1).
The difference between Mises and Hayek is often portrayed as the difference between an arch-rationalist and a skeptical empiricist. The essays in Fortunes, while not speaking decisively to this view—and obviously not considering Mises’s own words—complicate this simplistic view. It is no accident that both Mises and Hayek wrote so widely on so many topics. For both, understanding the process of social cooperation requires attention to the institutional framework of economic activity. Economists need to interact with diverse disciplines such as law, history, politics, moral philosophy, and psychology. And economics is but one part of a broader social philosophy, a philosophy that both of them identify with liberalism.
In his later work, Hayek does not object to Mises’s methodology so much as his early social rationalism. Time and again Hayek casts Mises in a more nuanced light than either his critics or some of his more enthusiastic followers. Maybe he is wrong. But Hayek takes the work of his revered mentor not as settled doctrine but as a launching pad to develop new and better ways of understanding the world. This is the best any academic mentor can hope for. As Peter Klein quotes in his introduction, Margit von Mises [Mises’s wife] said that “Lu[dwig] met every new student hopeful that one of them might develop into a second Hayek” (page 9).
 The Fortunes of Liberalism: Essays on Austrian Economics and the Ideal of Freedom, by F. A. Hayek. Edited by Peter G. Klein. Liberty Fund, Inc., December, 2008.