The Empiricist Moment in Hayek’s Economic Thought in the Early 1930s

Abstract

The purpose of this study is to demonstrate that first, F. A. Hayek incorporated an empiricist approach into his methodology as early as in the 1930s, and second, he approached David Hume and Adam Smith as “empiricists” from then onward. This clarifies that Hayek’s transition from theoretical economics to social philosophy was natural and allows us to view the “transformation problem” in the context of a positive “development” of Hayek’s thought. T. Hutchison argues that Hayek’s article “Economics and Knowledge” (1937) marks his shift from Misesian apriorism to Popperian falsificationism, thus identifying a methodological break in Hayek’s approach in the 1930s. However, while studying in the United States in the 1920s, W. C. Mitchell taught Hayek that the theory should not diverge from reality. Mitchell helped Hayek recognize the usefulness of empirical methods, including statistics, as tests for theories. In other words, the early Hayek considered economics an empirical study, not an a priori pure theory of human action like L. v. Mises did. This was the germ of the concept of “pattern prediction,” which B. Caldwell identified as a distinctive feature of the late Hayek’s methodology. The early Hayek stated that the role of theory was to make predictions, but these predictions were not specific to the consequences of events. Instead, they were “collective forecast[s]” describing general trends, which corresponded precisely to what the late Hayek called “pattern prediction.” Hayek emphasized this method because social phenomena are complex and predicting concrete outcomes of specific phenomena is impossible. From the 1930s onward, Hayek recognized this fact, asserting that Hume and Smith laid the foundation for social science methodologies as an approach to complex phenomena, such as social phenomena.