Equilibrium versus Understanding: Towards the Restoration of Economics as Social Theory

By Mark Addleson | Go to book overview
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‘Modern hermeneutics’ is examined in Chapter 4, in analysing subjectivism. I argue that the hermeneutical turn belongs to the tradition of philosophy that has come down from Max Weber’s interpretative sociology through phenomenology.
Some philosophers see the contrast between the epistemological view and the hermeneutical view of science as establishing the foundations of the previous dualism versus monism debate. The reasoning is that the origins of methodological dualism lie in the idea of science as epistemology. Methodological dualism may be supported on the grounds that, as there are two sets of phenomena in the world, the physical and the social, two methodologies are needed to deal with them. People understand other people but not other objects, so the social sciences need to reflect this understanding.
I must emphasise that Hayek’s interest lies in articulating the assumptions about knowledge and foresight, which are implicit in orthodox economic theory, in order to make equilibrium theory more serviceable. His view is that this body of theory consists of tautologies. If ‘the pure logic of choice’—i.e. neoclassical theory—is to serve to explain, or to convey an understanding of, what happens in reality, then economists must clarify how individuals acquire that knowledge which the theory merely takes as ‘given’. Hayek, who takes it for granted that the theorist views the world in terms of some sort of equilibrium, does not consider the epistemological implications of doing so.
Throughout the book terms employed in neoclassical theory and defined by that epistemology and ontology, but which are unrelated to the same word used in everyday speech, are placed in quotation marks in order to show that the meaning is different. Terms like ‘choice’ and ‘decisions’ acquire their meanings in the context in which they are used—the social interaction of individuals in the life-world. It is unfortunate that economists do not have a separate language to describe the things that agents do. The absence of such a language is a source of considerable confusion. For example, the connotations of ‘rivalry’ and ‘the desire to attain a goal ahead of someone else’, which are integral to the notion of competition, are completely absent from ‘perfect competition’. Yet the latter is used—inappropriately—as some sort of benchmark in assessing the former. As a consequence, economic theory often does not make sense to businessmen (see Boettinger 1967), and policies on ‘competition’ do not promote competition.
Karl Mittermaier suggested to me that the epistemology of the third-person perspective is an attempt to convey the idea that ‘knowledge’ can exist without a knower. In this regard a positivist methodology, prefaced on the desire to describe


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Equilibrium versus Understanding: Towards the Restoration of Economics as Social Theory


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