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althou%h he $ould deviate )rom it at the very end o) his li)e, supportin% 'ald$ell:s
ar%ument re%ardin% the ultimate direction o) +,ayek:s journey/ 6,ayek, 2"52a> 9itt,
2"""7.
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0his )its in $ith the idea sometimes ar%ued that ,ayek made a +U4turn/ in his
thinkin% in the mid42"E!s. & do not $ish to $ei%h in independently on this subject, but
de)er to 'ald$ell $ho seems to lean more to the vie$ that $hile there $as clearly a
chan%e in ,ayek:s vie$s over time, it $as probably more %radual than some have
ar%ued.
&n any case, ,ayek certainly $as more conventional and less +comple8/ in his
earlier economics $ritin%s, althou%h his parallel thou%hts on psycholo%y datin% )rom his
e8periences in 9orld 9ar & already bore the seeds o) his later comple8ity vie$s, $ith his
The Sensory Order 62"F7 layin% these ideas out more )ully.
1n the other hand, $hile *oppl i%nores this non4comple8 vein very visible in
much o) #ustrian thou%ht, i) becomin% less popular $ithin it over time, he also curiously
i%nores another strand o) #ustrian thou%ht that can be ar%ued to )it in $ith the comple8ity
perspective, namely a$areness o) the deeply rooted presence o) )undamental uncertainty
in economics. #dmittedly this strand comes )rom )i%ures some$hat more on the )rin%es
o) #ustrian economics, notably @.=.(. (hackle 62"3E7 and =ud$i% =achmann 62"3A7.
0his idea clearly overlaps $ith Gost *eynesian ideas 6Rosser, !!A7, and it is a bit
surprisin% that *oppl does not reco%niHe this strand in #ustrian economics, %iven that in
re%ard to the concept o) computational comple8ity that he sees inherin% in ,ayek:s $ork
he has been $illin% to see links $ith ideas in the Gost *eynesian tradition as $ell 6*oppl
and Rosser, !!7.
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,ayek:s 2"52 address in -n%lish $ould be published in 2"5< in @erman.
#t opposite e8tremes are ,utchison 62""7 $ho ar%ues )or an abrupt chan%e in ,ayek:s vie$s in the
2"E!s versus Birner 62""<7 $ho sees )ull continuity o) ,ayek:s vie$s throu%hout his career, $ith 'ald$ell
some$here bet$een their positions.
E
Varieties of Co!"e#it$
0his is a $ell4$orn topic, nevertheless a brie) e8cursus $ill be use)ul )or
cate%oriHin% the various $ays in $hich #ustrian economics overlaps $ith the idea o)
comple8ity, %iven that (eth =loyd has listed as many as <F di))erent varieties o)
comple8ity 6,or%an, 2""3, p. E!E7. Rosser 6!!"a7 provides a current classi)ication
based on =loyd:s and others: vie$s on the matter. #t the most precise level $e can
identi)y $hat could be labeled +(anta ;e comple8ity,/ or $hat Rosser 62"""7 labeled
+small tent BdynamicC comple8ity./ 0his is called by others a%ent4based or
hetero%eneous interactin% a%ents comple8ity, and models the economy, usually usin%
computer simulations, as a system o) locally interactin% a%ents $ith no central controller,
little tendency to %lobal eDuilibrium, and continually evolvin% dynamics.
E
Many
phenomena such as spontaneous order and emer%ence can be observed $ith this )orm o)
comple8ity.
#mon% the earliest e8amples o) a model e8hibitin% this sort o) comple8ity $as
that o) urban se%re%ation due to (chellin% 62"327, (chellin% studied this model by playin%
on a chess board, $ithout any computers involved. ,e sho$ed that in an initially
inte%rated city $ith a%ents payin% attention to their nei%hbors, introducin% only the
sli%htest pre)erences )or one kind o) nei%hbor over another $ould over time lead to a
racially se%re%ated city, a result vie$ed as one o) emer%ence or spontaneous order.
1ne level up is dynamic comple8ity, $hich Rosser 62"""7 de)ines, )ollo$in% Richard
Iay 62""<7, as a system that does not endo%enously conver%e on a point, a limit cycle, or
a smooth e8plosion or implosion. 0his +broad tent BdynamicC comple8ity/ includes the
one just described alon% $ith its earlier )ello$ +< ':s,/ as mockin%ly labeled by ,or%an
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0his is precisely the )orm o) comple8ity that ?riend 6!!7 is thinkin% o) $hen he discusses ,ayek.
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62""37. 0he others are cybernetics, catastrophe theory, and chaos theory. 9hile the
latter t$o
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have had little link $ith most o) #ustrian economics 6aside )rom =avoie usin%
+chaos/ in the title o) his 2"5" paper7,
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much o) ,ayek:s investi%ations o) comple8ity
involved cybernetics 69iener, 2"<57 and its close relative, %eneral systems theory 6von
Bertalan))y, 2"A7, $ith a stron% in)luence )rom 9arren 9eaver 62"<57 as $ell..
Broadly speakin%, the source o) the endo%enous irre%ularities in these sorts o)
mathematical models that lead to dynamically comple8 irre%ularities depend on nonlinear
dynamics $ithin these systems. Jot all nonlinear systems are comple8, but $hen
nonlinear e))ects become su))iciently %reat, then such dynamics can occur, o)ten
associated $ith some destabiliHation o) a previously e8istin% eDuilibrium state. 0hus,
cybernetics )ocuses on the nature o) )eedbacks in systems. 9hen these are ne%ative, then
systems tend to be stable, to return to a previous state a)ter an e8o%enous shock.
,o$ever, $hen )eedbacks are positive, then a system tends to move even )urther a$ay
)rom its initial state a)ter the )eedbacks add to the shock, and i) these are su))iciently
stron%, the system can destabiliHe entirely. 9ithin economics, increasin% returns have
lon% been kno$n to be a source o) such potentially destabiliHin% positive )eedback e))ects
6#rthur, 2""<7.
;inally, $e have the broadest cate%ory, meta-complexity, $hich includes the )ull
array o) de)initions provided by =loyd, as $ell as others provided by other people.
<
(ee Rosser 6!!, chap. 7 )or a more thorou%h discussion o) the mathematics o) catastrophe theory and
chaos theory.
F
0he situation is a bit more complicated in that as reported by Rosser 62"""7, based on discussions $ith
Geter M. #llen and ,ermann ,aken, ,ayek $as in communication at various periods o) time $ith the
researchers in the Gri%o%ine %roup at the ;ree University o) Brussels as $ell as those at the (tutt%art
&nstitute o) 0heoretical Ghysics. Researchers in both o) these %roups ar%uably span all )our o) the ':s )rom
cybernetics/%eneral systems theory up to a%ent4based models, and includin% the intermediate catastrophe
and chaos theories, althou%h it remains the case that ,ayek seems to have not been much interested in those
intermediate )orms o) dynamic comple8ity. 60he conversation $ith #llen occurred in Beijin%, 'hina in
1ctober, 2""<, and the one $ith ,aken in Beer4(heva, &srael, 1ctober, 2""3.7
F
Grobably most important amon% these in terms o) links to ,ayek:s $ork, at least in the
eyes o) *oppl 6!!5, !!"7, is computational comple8ity, $ith deep development o) this
idea due to ?elupillai 6!!F7.
A
9hile there are %reat debates over $hich o) these various
vie$s and de)initions are most use)ul or most le%itimate, $e shall not concern ourselves
)urther $ith such matters, con)inin% ourselves to ho$ they relate to various parts o)
#ustrian economics.
Re%ardin% $here ,ayek $ould )it in $ith this ta8onomy o) comple8ities, it $ould
appear that actually has at least a potential presence at all o) these levels. 0hus, his
emphasis on the dispersed nature o) tacit economic kno$led%e and the sel)4or%aniHin%
nature o) markets throu%h localiHed interactions o) economic a%ents is very consistent
$ith the lo$est level, the a%ent4based modelin% level. ,is lon% interest in and a))iliation
$ith cybernetics puts him into the second level. ;inally, his understandin% o) ho$ the
limits o) human a$areness and consciousness have links $ith @Kdel incompleteness
throu%h dia%onal proo)s ties him up $ith the problems studied in computational
comple8ity and haltin% problems and the limits o) computability 6*oppl and Rosser,
!!7.
.
Austrian Co!"e#it$ Accordin% to &o!!"
*oppl 6!!"7 presents a set o) $ays in $hich he sees comple8ity ideas appearin%
in #ustrian economics. 0he earliest, and possibly the most $idely reco%niHed and
important, is the Duestion o) the spontaneous emergence of order. ,e sees this as
appearin% initially in Men%er:s $ork, $ith Men%er in this re%ard ultimately inspired by
the (cottish -nli%htenment o) Iavid ,ume and #dam (mith. 0here is no central
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Rosser 6!!"b7 provides an overvie$ o) the debate bet$een these competin% vie$s o) comple8ity.
A
controller in the economy brin%in% about its order, but rather the $orkin% o) the invisible
hand. # more speci)ic e8ample o) this in Men%er 625"7 is his discussion o) the
spontaneous historical emer%ence in ancient societies o) money )or transactions purposes.
,ayek 62"<5a7 stressed this precise ar%ument, althou%h it appears in an earlier )orm in his
$ork that some see as the key to his supposed +U4turn,/ his +-conomics and kno$led%e/
62"<5b7, ori%inally $ritten in 2"E3. &n this $ork, inspired by the socialist calculation
debate, ,ayek stressed the reality o) ho$ kno$led%e is dispersed amon% a%ents in the
economy, and ho$, nevertheless, market order emer%es )rom the interaction o) these
a%ents in this dispersed system. Both =avoie 62"5"7 and ?riend 6!!7 emphasiHe this
issue as central to ,ayek:s comple8ity vie$point, as do 'ald$ell 6!!<7 and @aus
6!!A7. 9hile ,ayek basically developed this idea $ith little direct input )rom
comple8ity theorists, it $ould appear that this idea $as $hat most stron%ly motivated his
study o) cybernetics and %eneral systems theory, $hich provided models o)
autopoetically sel)4sustainin% systems and ana%enetic emer%ence o) order.
&n a )amous passa%e in +0he theory o) comple8 phenomena/ 62"A3a, p. A7 he
directly poses the idea o) the emer%ence o) ne$ patterns.
+0he Lemer%ence: o) Lne$: patterns as a result o) the increase in the
number o) elements bet$een $hich simple relations e8ist, means that this lar%er
structure as a $hole $ill possess certain %eneral or abstract )eatures $hich $ill
recur independently o) the particular values o) the individual data, so lon% as the
%eneral structure 6e.%., by an al%ebraic eDuation7 is preserved./
3
3
'uriously this much4Duoted passa%e is )ootnoted to a brie) discussion o) the British school o)
+emer%entism,/ associated $ith '. =loyd Mor%an 62"EE7, $hich $ould later be denounced by reductionist
scientists. 0he emer%entists sa$ the basis o) their ideas in the +heteropathic la$s/ posited ori%inally by
John (tuart Mill 625<E7, also cited by ,ayek at this point. &t can be ar%ued that this emer%entist vie$ $as
consistent $ith the organicism opposed by Men%er in )avor o) atomistic individualism.
3
#nother ar%ument stressed by *oppl, but by )e$ other #ustrians, involves the
idea o) computational limits to kno$led%e, implyin% bounds to rationality and the need
)or policy makers to be humble and proceed $ith caution. 0his idea links to ideas o)
computational comple8ity, and *oppl 6!!5, !!"7, alon% $ith *oppl and Rosser 6!!7
see this ultimately inspired by his $ork on psycholo%y 6,ayek, 2"F, pp. 25F42"!7, and
e8pressed a%ain stron%ly in his essay on comple8 phenomena 62"A<7. 0he mind operates
as a rule4)ollo$in% classi)ier system. ,o$ever, as such it is subject to the la$s o) lo%ic,
and amon% those la$s are the theorems o) *urt @Kdel that imply incompleteness o)
lo%ical systems. 0his incompleteness is deeply tied to sel)4re)erencin% by systems, and
,ayek in particular cited the dia%onal proo) method to ar%ue that the mind cannot kno$
itsel), $hich can be e8tended to the idea that no a%ent or model o) the economy can )ully
kno$ the economy 6*oppl and Rosser, !!7. 0his then provides a computational
)oundation )or bounds on rationality.
#s ,ayek put it in The Sensory Order 62"F, pp. 255425", 5.5!7.
+#pplyin% the same %eneral principles to the human brain as an apparatus
o) classi)ication it $ould appear to mean that, even thou%h $e may understand its
modus operandi in %eneral terms, or, in other $ords, possess an e8planation o) the
principle on $hich it operates, $e shall never, by any means o) the same brain, be
able to arrive at a detailed e8planation o) its $orkin% in particular circumstances,
or be able to predict $hat the results o) its operations $ill be. 0o achieve this
$ould be to reDuire a brain o) a hi%her order o) comple8ity, thou%h it mi%ht be
built on the same %eneral principles. (uch a brain mi%ht be able to e8plain $hat
5
happens in our brain, but it $ould in turn be unable )ully to e8plain its o$n
operations, and so on./
Ira$in% also on ideas e8pressed in The Sensory Order 6p. 2"7, *oppl also
ar%ues that ,ayek advocated the importance o) verstehende psycholo%y, $ith this
implyin% the superiority o) a moderately hermeneutic approach to economic analysis
6*oppl and 9hitman, !!<7. ,e )urther ar%ues that this is linked to comple8ity, as $ell
as to vie$s o) =achmann, althou%h & con)ess that & am not sure $hich o) the many vie$s
o) comple8ity this vie$ links to precisely, althou%h askin% precision o) hermeneutics may
be an un)air demand.
*oppl 6!!A, !!"7 summariHes his vie$ o) comple8ity and #ustrian economics
$ith his BR&'- acronym: bounded rationality, rule )ollo$in%, institutions, co%nition, and
evolution, seein% essentially all o) these as implied by ,ayek:s $ork in particular. 0hus,
as already discussed, bounded rationality is implied by the limits o) kno$led%e due to
lo%ical and computational limits to sel)4a$areness both in individuals and in the broader
economy.
Rule )ollo$in% is ho$ ,ayek sees our minds operatin% and a%ents operatin% in
the economy. &n my vie$ this is perhaps the $eakest o) these )ive elements in terms o)
its ability to %enerate comple8ity. 'ertainly there are plenty o) systems that are based on
rule4)ollo$in% that are not particularly comple8 by any de)inition. But i) the rules
connect up $ith %eneratin% positive )eedback loops or enhance local interactions in a
hetero%enous a%ent4based systems, they may lead to comple8 outcomes. 'ertainly )or
,ayek the rules that drive thou%ht can lead to comple8ities. ?ernon (mith 6!2!7 has
"
ar%ued that )or #dam (mith, the )undamental de)inition o) fairness depended on rules,
and that these rules could lead to the spontaneous emer%ence o) order in markets.
&nstitutions are seen as key, a%ain in ,ayek, $ith his later emphasis on evolution
o) institutions central. 9hile this is correct, it must be kept in mind that more %enerally
there $as a historical con)lict bet$een institutionalism and #ustrian economics, %oin%
back to that bet$een Men%er and the predecessors o) the institutionalists in the @erman
,istorical (chool, led by @ustav von (chmoller in the Methodenstreit 6'ald$ell, !!<,
'hap. E7. -ven thou%h ,ayek studied brie)ly $ith 9esley 'lair Mitchell, most #merican
institutionalists o) the !
th
century $ere not very sympathetic to #ustrian economics.
'o%nition clearly relates a%ain to ,ayek:s vie$s o) pattern )ormation in the mind
in his psycholo%ical theory. (uch pattern )ormation out o) perceptions can be seen as
another e8ample o) the spontaneous emer%ence o) order in the comple8 system o) the
mind, althou%h it is less clear ho$ this relates to economics e8cept perhaps throu%h
bounded rationality. &ndeed, to the e8tent that such perceived patterns represent +real
truth/ 6as a subjectivist approach $ould assert7, this may o))er a $ay around the bounds
on rationality. 1) course, )rom a perspective that is not purely subjectivist, the patterns
remain bounded in terms o) kno$led%e o) certain aspects o) objective reality, such as o)
the )uture.
;inally there is the matter o) evolution, $ith *oppl mostly stressin% ho$ in his
later years ,ayek deeply studied the evolution o) institutions. &t is uneDuivocal that
,ayek sa$ evolution as deeply linked to comple8ity, as this Duotation )rom +0he theory
o) comple8 phenomena/ indicates 62"A3a, p. E27:
2!
+Grobably the best illustration o) a theory o) comple8 phenomena $hich is
o) %reat value, althou%h it describes merely a %eneral pattern $hose detail $e can
never )ill in, is the Iar$inian theory o) evolution by natural selection./
'ald$ell 6!!<, 'hap. 2A7 notes the peculiar parado8 that eventually appeared as
,ayek $ould come to advocate %roup selection o) institutions over time, $hich contrasts
$ith his usual assertion o) methodolo%ical individualism, althou%h 'ald$ell ar%ues that
throu%hout his career ,ayek $as never as $edded to this idea as many think.
# curious aspect arises here in that at the end *oppl mentions brie)ly &srael
*irHner 62"3E7 and his ar%uments, dra$in% on $ork o) =ud$i% von Mises 62"AA7, )or the
important role o) entrepreneurs in drivin% the evolutionary process o) the economy,
includin% the process o) technolo%ical chan%e, an idea traceable back to ;riedrich von
9ieser 6255<7. 'omple8ity can arise in many $ays in this process, includin% throu%h
such phenomena as path dependence and technolo%ical lock4in as ar%ued by #rthur
62"5"7. 9hile *oppl did not develop it much, many 6,od%son, !!A7 ar%ue that
evolution is the centerpiece o) the comple8ity vie$, in this not too )ar o)) )rom ,ayek:s
vie$.
# loose end here that potentially links to Gost *eynesian economics and
comple8ity is the idea o) radical uncertainty 6Rosser, !!A7, $hich $as stressed by both
(hackle 62"3E7 and =achmann 62"3A7. Both dynamic and computational comple8ity
imply such ultimate uncertainty, althou%h )e$ #ustrians play this idea up as much as do
some o) the Gost *eynesians 6Iavidson, 2""<7. 0here may also ultimately be di))erences
in the source o) such uncertainty bet$een the t$o schools, $ith most #ustrians relyin% on
the same sort o) computational ar%uments that underlie their vie$ o) the limits o)
22
kno$led%e and rationality, $hereas Iavidson at least ar%ues that such uncertainty is
more pro)oundly ontolo%ical and a8iomatic, ar%uin% that this $as *eynes:s vie$.
T'e Non(Co!"e#it$ Tradition in Austrian Econoics
9e have seen so )ar that even i) it $as not al$ays $ell4de)ined or )ocused, there
have been elements and )ollo$ers o) the #ustrian (chool $hose $ork can be vie$ed as
bein% consistent $ith a comple8ity perspective, especially ,ayek in his later years, $ho
)ollo$ed to some de%ree the (chool:s )ounder, 'arl Men%er. But $hat then o) the other
members o) the (chool, and $as there 6is there7 a non4comple8ity tradition amon%
#ustrian economists. 0he ans$er is certainly yes.
0he theme in #ustrian economics that most clearly stands a%ainst this comple8ity
perspective is the emphasis on mar%inalism and eDuilibrium. 0hus, it must be
remembered that in the Methodenstreit, it $as the #ustrians $ho upheld the nascent
neoclassical orthodo8y o) mar%inalist eDuilibrium theory a%ainst the proto4
institutionalism and opposition to abstract theory articulated by (chmoller 62"35 B2"!!4
2"!<C7 and the )ollo$ers o) the @erman ,istorical (chool.
5
Men%er himsel) is %enerally
listed $ith Jevons and 9alras as the @erman4speakin% o) the three putatative discoverers
o) mar%inal utility and ho$ it can be used to solve the parado8 o) value, althou%h Men%er
$as some$hat di))erent )rom the other t$o in his relative dislike o) mathematics and $as
ar%uably closer in approach in some $ays to von (chmoller than to Jevons or 9alras.
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5
'ald$ell 6!!<, p. 5!7 ar%ues that the term +#ustrian economics/ $as ori%inally a term o) derision
applied by members o) the @erman ,istorical (chool to the #ustrians durin% the Methodenstreit.
"
(treissler 6!!27 has ar%ued that rather than bein% a )ounder o) mar%inalism, Men%er $as actually the
culmination o) a proto4neoclassical school that had been operatin% in @ermany since the late 25E!s, and
had incorporated mar%inal utility and even had innovated the use o) supply and demand curves $ith price
on the vertical a8is as early as 25<2 by *arl ,einrich Rau, $ith Marshall later takin% this idea )rom them.
0his school $as a product o) the period in @ermany be)ore the Bismarckian uni)ication in 2532, $hen
these )i%ures $ould be identi)ied $ith small re%ions in @ermany, only to be s$ept a$ay and dominated by
2
0hus, Men%er $as a complicated )i%ure in this matter, e8hibitin% a tendency to$ards
comple8ity in his invocation o) evolution and the emer%ence o) spontaneous orders, even
$hile he de)ended abstract theoriHin% and mar%inalism a%ainst the historical approach.
0his more orthodo8 strand $ould be )urther emphasiHed by his immediate
)ollo$ers, the second $ave o) #ustrian economists: -u%en von BKhm4Ba$erk and
;riedrich von 9ieser. 9hile as noted, 9ieser $ould to some e8tent )avor a dynamic
approach in his vie$ o) entrepreneurs and technolo%ical chan%e, both o) these )i%ures
$ould more clearly stress the importance o) mar%inalism, even i) $ith an emphasis on
subjective mar%inal utility over supply4side aspects such as mar%inal cost, and more
importantly the idea o) economic eDuilibrium and its link to determinin% value in
conjunction $ith mar%inalism 6BKhm4Ba$erk, 25"2> 9ieser, 25"E7, in short, an even
more stron%ly orthodo8 neoclassicism than e8hibited by Men%er.
0he more )amous o) the t$o, BKhm4Ba$erk, $ould particularly support a very
orthodo8 approach $ith essentially no hint o) comple8ity, ar%uably the e8treme opposite
o) ,ayek in this re%ard, $ithin the #ustrian tradition. ,e $ould develop the idea o) the
avera%e period o) production as the independent measure o) the value o) capital, $hich he
then used alon% $ith the subjectivist vie$ o) mar%inal utility as a batterin% ram to
criticiHe the Mar8ian model 6BKhm4Ba$erk, 2"3F B25"5C7, thus establishin% this theme in
#ustrian economics that $ould be taken up later by von Mises and ,ayek in the socialist
calculation debate. But in contrast to them, especially ,ayek, he did so essentially )rom
$ithin the con)ines o) neoclassical orthodo8y $ith nary a $hi)) o) a comple8ity
perspective, Mar8 bein% the anti4eDuilibrium, comple8ity economist by contrast $ith
the @erman ,istorical (chool approach comin% out o) Berlin that $as identi)ied $ith the ne$ly uni)ied
@ermany. &n that re%ard the epithet o) +#ustrian/ applied to them by the @ermans had a political aspect o)
their bein% outside the political jurisdiction and control by von (chmoller and his allies. Men%er $as
especially in)luenced by Roscher )rom this %roup, to $hom he dedicated his Principles book.
2E
BKhm4Ba$erk, $ho $as also much more )amous in his day than either Men%er or
9ieser. &t $ould take a lon% time and a lot o) e))ort to overcome this deeply rooted
neoclassicism emphasiHed and en)orced by BKhm4Ba$erk.
1) the ideas involved here, probably adherence to the eDuilibrium approach $as
the %reater obstacle to adoptin% a comple8ity perspective than $as the subjectivist
emphasis on the importance o) mar%inal utility, althou%h )or von Mises the subjectivism
o) this $ould become tied up $ith a rationalistic a priorism that also inhibited a more
dynamic approach compatible $ith the comple8ity perspective. ?on Mises emphasiHed
the eDuilibrium approach, $hich $ould also have this rationalistic )oundation. 0hus, in
the socialist calculation debate he stron%ly emphasiHed the inability o) the socialist
planner to calculate prices that $ould re)lect the rationality o) a market eDuilibrium,
determined by the actions o) pro)it4seekin% o$ners o) )actors o) production such as land
and capital 6von Mises, 2"52, 'hap. A7. 9hile ,ayek $ould a%ree $ith this, he $ould
emphasiHe more the problem o) dispersed in)ormation, $hich, as $e have seen ar%ued
above $ould lead him a$ay )rom the more orthodo8 position on to his journey to$ards
comple8ity.
Jevertheless, von Mises $as not )ully $edded to the eDuilibrium approach,
invokin% static eDuilibrium as a use)ul concept, but ultimately emphasiHin% the
importance o) dynamic processes o) entrepreneurs pursuin% pro)its and %eneratin% prices
in doin% so, $ith the system constantly chan%in% and movin% on, never settlin% do$n to
any static eDuilibrium, a vie$ that $ould stron%ly in)luence his )ollo$ers, *irHner and
=achmann. 0hus he declares that
2<
+0o assume stationary economic conditions is a theoretical e8pedient and
not an attempt to describe reality./ 6von Mises, 2"52, p. 2<7
2!
,e %oes on to declare that capitalist market processes involve a constant dynamic, and
that it is socialism that seeks a stationary state, $hich is part o) the )undamental problem
$ith it as a system. &ndeed, ar%uably the ultimate source o) economic sta%nation in
actually e8istin% command planned socialist economies $as not their static
microeconomic ine))iciency, but the lack o) technolo%ical dynamism and tendency to
adhere to a stationary condition. ?on Mises repeatedly emphasiHes the uncertain nature
o) the )uture and necessity )or dynamic +speculators/ to constantly brin% )orth ne$
innovations to keep the economy movin% and evolvin%. &n this re%ard, as von Mises
emphasiHes the dynamic over the static, he becomes more o) a comple8ity economist.
9e are no$ at the point o) con)rontin% that old bu%aboo amon% #ustrian
economists o) the split bet$een von Mises and his )ollo$er, ,ayek, $hich is tied up $ith
this matter o) ,ayek movin% a$ay )rom a more conventional, non4comple8ity approach
to$ards the comple8ity perspective. 9e have noted above that accordin% to 'ald$ell, it
$as ,ayek:s essay )irst $ritten in 2"E3 on +-conomics and kno$led%e/ that )irst moved
him a$ay )rom the conventional vie$, even thou%h his psycholo%y side had harbored
some o) these thou%hts )or nearly ! years.
22
'ald$ell 6!!<, 'hap. 2!7 %oes )urther to
ar%ue that this essay $as speci)ically $ritten as a criticism o) the a priorism o) von
Mises, althou%h it $as so mutedly so that )e$ observers realiHed this, and that ,ayek
covered this aspect over by his maintainin% a personally diplomatic relationship $ith von
Mises as lon% as the latter $as alive. &t $ould only be a)ter von Mises:s death in $ritin%
2!
& thank an anonymous re)eree )or pointin% out this Duote and the related ar%ument.
22
'ald$ell 6!!<, pp. 2E542E"7 reports that ,ayek nearly majored in psycholo%y rather than economics,
his interest in the t$o bein% so even, $ith the better prospect )or employment in economics bein% the
ultimate decidin% )actor in his decision to pursue economics primarily.
2F
the ;ore$ord to the 2"52 edition o) von Mises:s Socialism that ,ayek $ould more
openly e8press his criticism in a )amous passa%e 6,ayek, 2"52b, pp. 88iii488iv7.
. +& had al$ays )elt a little uneasy about that statement o) his basic
philosophy, but only no$ can & articulate $hy & $as uncom)ortable $ith it. Mises
asserts in this passa%e that liberalism +re%ards all social cooperation as an
emanation o) rationally reco%niHed utility, in $hich all po$er is based on public
opinion, and can undertake no course o) action that $ould hinder the )ree decision
o) thinkin% men./ Bp. <25 o) von Mises, 2"52C &t is the )irst part o) this statement
only $hich & no$ think is $ron%. 0he e8treme rationalism o) this passa%e, $hich
as a child o) his time he could not escape )rom, and $hich he perhaps never )ully
abandoned, no$ seems to me )actually mistaken. &t certainly $as not rational
insi%ht into its %eneral bene)its that led to spreadin% o) the market economy./
0his thro$s us back to the Duestion o) the evolution o) ,ayek:s vie$s )rom bein% a
)aith)ul )ollo$er o) von Mises to the apostate student o) comple8ity.
&n his early economic $ritin%s such as Prices and Production 62"A3b B2"EFC7,
,ayek clearly )ollo$ed in the mold o) not only von Mises, but his predecessor, BKhm4
Ba$erk, as $ell. #nalysis )ocuses on static eDuilibrium states, even i) intertemporal
eDuilibria are allo$ed. 0he value o) capital is %iven by avera%e period o) production, and
indeed ,ayek:s macroeconomic theory that $as posed a%ainst the *eynesian model
emphasiHed deviations )rom the natural rate o) interest associated $ith the eDuilibrium
avera%e period o) production as the source o) business cycle )luctuations.
,o$ever, startin% $ith +-conomics and kno$led%e,/ ,ayek became a$are that in
a $orld o) dispersed in)ormation there may be an a%%re%ation problem. ,e continued to
2A
accept the idea o) eDuilibrium )or the individual, but came to )eel that this did not
necessarily imply or correspond $ith eDuilibrium in the a%%re%ate. 0his $ould set him
o)) on his most )rustratin% project, and $ould lead to his least4read book by his )ello$
#ustrian economists, The Pure Theory of Capital 62"<27. 9hile in e))ect stru%%lin% to
reconcile micro $ith macro eDuilibrium in a $orld o) hetero%eneous capital he $ould
%ive up the doctrine o) the avera%e period o) production as the measure o) the value o)
capital, reco%niHin% in e))ect some o) the problems later raised in the 'ambrid%e
controversies in the theory o) capital. 0he book:s )rustratin% conclusions re)lect the mire
,ayek )elt himsel) in as his older, more conventional vie$ clashed unresolvedly $ith his
ne$er, more comple8ity4oriented vie$.
Jevertheless, ,ayek held on to the idea o) eDuilibrium )or most o) his li)e and
career, only )inally abandonin% it in 2"52 in his not $idely4kno$n essay on +0he )lo$ o)
%oods and services/ 6,ayek, 2"52a, p. 57.
+&t is temptin% to describe as an LeDuilibrium: an ideal state o) a))airs in
$hich the intentions o) all participants precisely match and each $ill )ind a
partner $illin% to enter into the intended transaction. But because )or all
capitalistic production there must e8ist a considerable interval o) time bet$een the
be%innin% o) a process and its various later sta%es, the achievement o) an
eDuilibrium is strictly impossible. &ndeed, in the literal sense, a stream can never
be in equilibrium, because it is diseDuilibrium $hich keeps it )lo$in% and
determinin% its directions. -ven an apparent momentary state o) balance in $hich
everybody succeeds in sellin% or buyin% $hat he intended may be inherently
unrepeatable, irrespective o) any chan%e in the e8ternal data, because some o) the
23
constituents o) the stream $ill be the results o) past conditions $hich have
chan%ed lon% a%o./
&ronically, in the end, it may $ell have been that ,ayek $as the deeper believer in
eDuilibrium than $as von Mises, holdin% on to the notion until very late in li)e, $hile von
Mises in many $ays abandoned it )or his more dynamic and process4oriented approach,
althou%h it continued to haunt the a prioristic part o) his weltanschauung.
Conc"usion
&n the end $e must conclude that #ustrian economics is only partly compatible
$ith the comple8ity perspective. Ieep roots, perhaps most )irmly associated $ith BKhm4
Ba$erk, are essentially )ully conventionally neoclassical, albeit more stron%ly oriented
to$ards a subjectivist perspective. ,o$ever, the subjectivist perspective is not inherently
a comple8ity perspective, even i) it can be compatible $ith it. 0his tradition, especially
that part emphasiHin% the eDuilibrium approach, is not part o) the comple8ity perspective.
,o$ever, there has also been )rom its be%innin%s $ith 'arl Men%er, a vein $ithin
#ustrian economics that has emphasiHed the spontaneous emer%ence o) social orders out
o) dispersed processes. 0his vie$ $ould culminate in the $ork o) ,ayek, $ho be%an
$ith the more conventional approach, but in)luenced stron%ly by his studies o)
psycholo%y and his consideration o) the problems o) dispersed kno$led%e, $ould move
to$ards a comple8ity approach and $ould consciously pursue this perspective, includin%
actively contactin% many important individuals involved in its early development. Iue
lar%ely to his in)luence, today, #ustrian economics is much more oriented to$ards a
comple8ity approach.
25
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