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Source link: http://archive.mises.org/9054/the-pretence-of-knowledge/

The Pretence of Knowledge

December 5, 2008 by

F.A. Hayek’s Nobel speech from 1974:

The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society — a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization

Read the full lecture


Arend December 5, 2008 at 7:54 am

The pretence of knowledge is a geniously articulated concept, and this is imho on of the best speeches an economist has ever delivered.

Ryan December 5, 2008 at 7:57 am

I read this essay about a year ago and thought it thoroughly demolished the idea that we should revere certain economists merely because they can have their names preceded by “Nobel winning” in newspaper columns. The Nobel Prize in economics is a meaningless award and it’s unfortunate that popular opinion does not yet recognize this. Regardless, we all still have a lot to learn from Hayek.

Michael A. Clem December 5, 2008 at 10:30 am

Good article on dispersed knowledge and the science of economics. Is it just me, or do these articles seem to appear in response to certain comments in previous blog posts?

fundamentalist December 5, 2008 at 11:21 am

Hayek never fails to astonish me with his brilliance and wisdom, the essence of which is humility!

eli December 5, 2008 at 12:36 pm

not taking anything away from F.A. Hayek, but isn’t the “Nobel Prize” in economics really “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel”? Not really the same thing as the Nobel Prize. I remember people criticizing Paul Krugman’s prize as not real when he ‘won’ it. I think it would behoove us to make the distinguish between the two when referring to Hayek, Krugman and others.

Current December 5, 2008 at 1:38 pm

Eli: “The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel”

Exactly, it’s the Swedish central bank’s prize. One reason it has not being given to more Austrians is probably that they are not exactly friendly to central bankers.

peter helbich December 5, 2008 at 4:58 pm

this is vienna austria. where it all began.
mozart, menger, mises, hayek etc
send tnis theorem to all your friends and let it loose in the internet.
it proofs mathematically that the austrian school of economics is right.
regards peter helbich

newson December 6, 2008 at 2:18 am

peter helbich (in his paper, cited regularly here):

Theorem 1 (Helbich): There is a significant positive correlation between the economic freedom of a country and its prosperity.
Theorem 2 (Helbich): There is a significant positive correlation between the economic freedom of a country and its life expectancy at birth.

As a measure for the prosperity of a country, the most obvious choice is certainly the GDP per capita, which can be found for all 155 countries at issue in the CIA factbook (http://www.cia.gov/cia/publications/factbook)
As a measure for the quality of life of a country the most obvious choice is certainly the life expectancy (or LE for short) at birth (again from the CIA factbook above).

i’m happy using life expectancy, child mortality as meaningful proxies for quality of life, but gdp for prosperity? a keynesian construct that ignores intermediate processes in the commercial sector and includes government spending as a positive?
i think these sort of calculations can lead to all sorts of mischief. not to mention the fact that the cia might conceivably have their own agenda.

newsonr December 6, 2008 at 2:22 am

i would have added, the birthplace of the sacher torte, but we agree that vienna is a charming city.

andras December 6, 2008 at 11:14 am

Economics is similar to biology in complexity.
Just imagine figuring out all the laws, rules and processes of biology with having only one Rat.
Biologist would be very very careful. That Rat would be the darling of them all. I wish economists could learn that attitude.

greg December 6, 2008 at 6:23 pm

If there is a significant correlation between economic freedom and prosperity means it can be measured and applied to an economic forecast. The process of establishing a correlation will give you a formula that can be applied to predict changes in the data.

The problem with Hayek’s excellent essay is that if it was read in front of Congress’s hearing on the auto bailout, it would go no where. We need someone to step up and quantify his approach and come up with a specific forecast of this course of action. And communicate this effectively to Congress.

The one thing we don’t need is people like Peter Schiff going off on his one sided over the top rants. Peter has major positions in gold and his motives are clear, pumping the price of gold at every chance he can get in front of the media. Basically, anyone taking a one sided position will be right someday but has no credibility.

The Austrian approach is the right one, the problem is in the delivery to the people that set policy.

Franklin December 7, 2008 at 5:31 pm

“The process of establishing a correlation will give you a formula that can be applied to predict changes in the data….”

Respectfully, Greg, the members of Congress will never tolerate the thrust of the argument, which is understood as laissez-faire. You will communicate nothing to them, nothing, except a “fantasy of the far right wing with some anecdotal numbers.” That’s how it will be spun.

The job of a congressman is to get re-elected. One is re-elected by demonstrating that he is actively involved in setting behaviors, taking credit for the transactions, and then proving that his rule-setting, tax-imposing, import-preventing, outsource-stopping, law-making, economy-intruding was the reason that the earth hasn’t imploded.

Congressmen are in their positions because they make promises to the electorate and to special interests. The promises are not effected by taking a hands-off approach to the economy. It’s just the opposite. If the economy doesn’t improve, then the other Party members get elected, and they subsequently do their utmost to prove that their hand guided the economy. Note I said, “Guided,” not “left alone.”

The Republicans expanded government as much as the Democrats. And not just in the last eight years but, rather, over the last two-hunded-and-eight.

Utilitarian arguments for expanding liberty have failed. The only hope left is for moral arguments. Those shouldl have no basis in arithmetic.


Ireland December 10, 2008 at 3:41 am

Brilliant piece, very very precise and on the mark.

Small nitpicking on the natural sciences: them having everything measurable and precise as painted by Hayek is the weakest point of his essay. Physics too has parts facing the same problems as economics. Then again the way to handle it is identified correctly – to do real science, one either proves the claim, or opens it to falsification (with thanx to Karl Popper).

The main difference is there’s very little to be gained by falsifying stuff in natural sciences. Other people will uncover it faster than you can say “cold fusion”, and there’s no advantage in having non-working gadgets based on the false theories.

In society though, there’s plenty of power and benefits to be reaped by following faulty economics advices, if one can do it carefully enough to have his term in the office end before the masses can see through, correctly link cause and effects, and reward it appropriately.

fundamentalist December 10, 2008 at 8:26 am

Ireland: “…there’s plenty of power and benefits to be reaped by following faulty economics…”

Exactly! To paraphrase Mencken, the art of practical politics is to keep the public so alarmed that they continually beg to be rescued. Faulty economics provides the fear and the excuse for a rescue. It’s about power, not truth.

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