Hayek and calculation

Thu Oct 20 10:09:34 MDT 1994

     Paul has practically invited me to respond to his recent
post, "Hayek or is the market eternal."

     I have checked his specific reference.  My own version
of THE COUNTER-REVOLUTION OF SCIENCE includes a reference to
Pareto on p. 75, note 8.  I don't find comparable material on
the pages that Paul has cited.  I'm assuming that the
reference I am currently looking over, dealing with "factors
determining the prices in [Pareto's] system of equations" is
the correct one.

     I think that Paul is correct, and I never denied this,
that Hayek suggests that the solution of a system of
simultaneous equations representing conditions of general
equilibrium would be practically infeasible.  But please
remember that Hayek here, is responding to neoclassical
Walrasian theorists who believe that the condition of general
equilibrium is REAL.  As an Austrian economist, Hayek NEVER
endorsed the notion that equilibrium was REAL.  The concept
of an "evenly-rotating economy" is a heuristic device.  It is
not an objective existent.  No economy is EVER in
equilibrium.  For even IF all of the data of equilibrium
could be plugged into a computer, analyzed, and solved, it
would be irrelevant, because the world does not stand still
long enough for any conditions of equilibrium to prevail.
This is the same issue that Paul and I debated when we
chatted about the labor theory of value.  Austrians are not
typical neoclassical theorists; they ALWAYS view the economy
in terms of a process of "becoming," a dynamic process that
never reaches equilibrium.  Data used for equations based
upon the assumption of equilibrium are irrelevant to the
economic processes of the real world.

     (By the way, I don't think that Hayek was being
disingenous to suggest, in an essay, based on lectures he had
given in the 1940s, that the resolution of simultaneous
algebraic equations for "a population of forty million and
several thousand commodities" would be practically
infeasible.  In Pareto's example, which Hayek cites, over
70,000 equations would have to be solved for a population of
merely 100!)

     On all of these issues, especially the calculation
debate, an absolutely brilliant book should be consulted.
extent to which Austrians and neoclassicals were talking past
each other, operating on wildly different assumptions.

     Now, on to other topics.  Hayek was not a "vulgar
economist" who believed "that the economic categories of
bourgeois society - prices, profits, capital and wage labour
are eternal."  He recognized that the evolution of markets
depended on a very broad constellation of factors, and that
without these factors, no markets could survive.

     When Hayek states that it is the market that supplies
the context in which the data has any meaning, he means that
one cannot abstract data AS IF THE WORLD STOPPED MOVING, and
"solve" the problems of economics.  The market is a DYNAMIC
context which GENERATES data, such as prices that reflect
relative scarcities.  Disconnecting such data from the
context that generates them, and assuming away the conditions
of process, puts the central planners in the position of
ivory tower theorists.  Maybe they will "solve" economic
equations in their ivory tower, but the world will go on as
before, and the workers whom they intend to benefit, will
resort to buying and selling on all of the black and gray
markets that proliferate in such "command economies," markets
that deliver the goods which technocratic leaders almost
always fail to provide.

     Now, I just want to clarify one point I made in my last
post.  When I said that "Paul seems so offended at even the
suggestion that somebody OUTSIDE Marxism might be able to
make a useful contribution to the radical project," I was not
talking about myself.  I MEANT Hayek.  I also believe that
other theorists operating outside Marxism can make important
contributions to our radical understanding - and alteration -
of the status quo.  I participate in this forum not to bury
Marx, but to suggest that there are others who must be taken
seriously in any quest to fulfill a progressive vision of
human freedom and autonomy.

                              - Chris

Dr. Chris M. Sciabarra
Visiting Scholar, N.Y.U. Department of Politics
INTERNET:  sciabrrc at acfcluster.nyu.edu
  BITNET:  sciabrrc at nyuacf


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