ECONOMICS AND KNOWLEDGE

Economics And Knowledge

Economics And Knowledge

Economic and knowledge

In general, It seems that we have come to a point where we all realize that the concept of equilibrium itself can be made definite and clear only in terms of assumptions concerning foresight, although we may not yet all agree what exactly these essential assumptions are. This question will occupy me later in this essay. At the moment I am concerned only to show that at the present juncture, whether we want to define the boundaries of economic static's or whether we want to go beyond it, we cannot escape the vexed problem of the exact position which assumptions about foresight are to have in our reasoning. Can this be merely an accident? (Hayek, 1937, 54-65)

As I have already suggested, the reason for this seems to me to be that we have to (Hayek, 1937, 54-65) deal here only with a special aspect of a much wider question which we ought to have faced at a much earlier stage. Questions essentially similar to those mentioned arise in fact as soon as we try to apply the system of tautologies--those series of propositions which are necessarily true because they are merely transformations of the assumptions from which we start and which constitute the main content of equilibrium analysis--to the situation of a society consisting of several independent persons. (Hayek, 1937, 54-65)I have long felt that the concept of equilibrium itself and the methods which we employ in pure analysis have a clear meaning only when confined to the analysis of the action of a single person and that we are really passing into a different sphere and silently introducing a new element of altogether different character when we apply it to the explanation of the interactions of a number of different individuals. (Hayek, 1937, 54-65) I am certain that there are many who regard with impatience and distrust the (Hayek, 1937, 54-65) whole tendency, which is inherent in all modern equilibrium analysis, to turn economics into a branch of pure logic, a set of self-evident propositions which, like mathematics or geometry, are subject to no other test but internal consistency. But it seems that, if only this process is carried far enough, it carries its own remedy with it.

In distilling from our reasoning about the facts of economic life those parts which are truly a priori, we not only isolate one element ...