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PALGRAVE STUDIES IN CLASSICAL LIBERALISM
SERIES EDITORS: DAVID F. HARDWICK · LESLIE MARSH
The Evolutionary
Invisible Hand
The Problem of Rational
Decision-Making and Social
Ordering over Time
Matúš Pošvanc
Palgrave Studies in Classical Liberalism
Series Editors
David F. Hardwick, Department of Pathology and
Laboratory Medicine, The University of British Columbia,
Vancouver, BC, Canada
Leslie Marsh, Department of Pathology and Laboratory
Medicine, The University of British Columbia, Vancouver,
BC, Canada
This series offers a forum to writers concerned that the central presuppo-
sitions of the liberal tradition have been severely corroded, neglected, or
misappropriated by overly rationalistic and constructivist approaches.
The hardest-won achievement of the liberal tradition has been the
wrestling of epistemic independence from overwhelming concentrations
of power, monopolies and capricious zealotries. The very precondition
of knowledge is the exploitation of the epistemic virtues accorded by
society’s situated and distributed manifold of spontaneous orders, the
DNA of the modern civil condition.
With the confluence of interest in situated and distributed liber-
alism emanating from the Scottish tradition, Austrian and behavioral
economics, non-Cartesian philosophy and moral psychology, the editors
are soliciting proposals that speak to this multidisciplinary constituency.
Sole or joint authorship submissions are welcome as are edited collec-
tions, broadly theoretical or topical in nature.
The Evolutionary
Invisible Hand
The Problem of Rational
Decision-Making and Social Ordering
over Time
Matúš Pošvanc
F. A. Hayek Foundation
Bratislava, Slovakia
© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature
Switzerland AG 2021
This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher,
whether the whole or part of the material is concerned, specifically the rights of translation, reprinting,
reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical
way, and transmission or information storage and retrieval, electronic adaptation, computer software,
or by similar or dissimilar methodology now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this
publication does not imply, even in the absence of a specific statement, that such names are exempt
from the relevant protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in this
book are believed to be true and accurate at the date of publication. Neither the publisher nor the
authors or the editors give a warranty, expressed or implied, with respect to the material contained
herein or for any errors or omissions that may have been made. The publisher remains neutral with
regard to jurisdictional claims in published maps and institutional affiliations.
This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland
AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
Dedicated to my family. Thank you for your support.
Contents
1 Introduction 1
References 6
2 Why Are We Economically Successful? 7
2.1 Defining the Problem: A Comparison Over Time 10
2.1.1 Risk and Uncertainty 16
2.1.2 Estimating of the Future as the Economics
Problem 22
2.2 Intersubjectivism: The Path (Leading)
to the Solution 51
2.2.1 Some Assumptions and Claims 52
2.2.2 Evolutionary Apriorism: A Methodological
Introduction 55
2.2.3 Modified Theory of Subjective Value 64
2.2.4 How Do We Estimate the Future, and Why
We Are Economically Successful 76
2.3 Economic Coordination and Ordering: Process
Description 88
vii
viii Contents
References 299
Index 301
1
Introduction
same time, a homogenous concept applicable; the portfolio per se. This
brings qualitatively new possibilities to describe economic phenomena
over time. The second characteristic is the anchoring of this modifica-
tion of the theory of subjective value in evolutionary (intersubjective)
apriorism. The anchoring of the concept in evolutionary apriorism
allows a description of development; not empirical, so to speak accurate
description, but the construction of the so-called conjunctural history
or logical-historical method of describing the evolution of phenomena
where exact empirical data are missing (the method has already been
used by Adam Smith, Friedrich Hegel, F. A. Hayek, and other evolu-
tionary thinkers). The vitality of this new theoretical approach is shown
in the fundamental problem that the book solves: “How do we do that
which we can correctly estimate for the future, so that we can learn
from realized mistakes and be economically successful?” To deal with the
problem, the text is divided into the three logical parts. The first part
provides basic argumentation for the main question “How do we deal
with economic problems in time?” The vitality of the presented concept
is then shown in the following two parts of the book—the application
of the presented concept onto the problem of equilibrium and in the
problem of indifference.
The first part of the book is presented in the following way: “Why Are
We Economically Successful? The Theory of Economic Error and Learning.”
It addresses two basic issues: “Why are we economically successful?” and
“How do we know that we have made an economic error?” From the
point of view of the practical life of any individual, these are trivial issues.
We know when we are economically successful and when we are not. We
know when we have made an economic error, and possibly, we know
how to correct it. These questions are much more challenging to a social
scientist, who should explain this very “trivial” knowledge. The problem
is inevitably related to our outlook for the future. It is problematic to
explain how we compare two points in time: The moment when the deci-
sion that led us to the future was implemented and a comparison of the
moment that actually came. Only this comparison allows us to answer
the question of whether we were successful or whether we have made
a mistake. The triviality of the problem is immediately lost, once we
realize that we do not know what the future will be like when we make
1 Introduction 3
References
Hayek, A. Friedrich. 1937. Economics and Knowledge. Economica. New Series
4 (13): 33–54. Online version on WWW. DOCUMENT. https://mises.org/
library/economics-and-knowledge Accessed 22 Jan 2021.
Mises, Ludwig. 1949, 1998. Human Action. Scholar Edition. Auburn, Ala:
Ludwig Von Mises Institute. WWW DOCUMENT. https://mises.org/lib
rary/human-action-0/html/pp/663.
Nozick, Robert. 1977. On Austrian Methodology. Synthese. Vol. 36, No. 3,
Mathematical Methods of the Social Sciences, Part II (Nov. 1977), pp. 353–
392. WWW DOCUMENT. https://www.jstor.org/stable/20115233.
Tiebien, Bert. 2012. The Concept of Equilibrium in Different Economic Tradi-
tions. Edward Elgar Publishing.
2
Why Are We Economically Successful?
At the same time, our actions and activities are constantly focused only
on the future. We cannot change the past. We do not know the future in
terms of whether and what natural deterministic phenomenon will occur,
i.e., how nature and the surrounding reality will behave. A much bigger
problem is that we do not know the future reactions of other members
of society. We cannot look into the minds of people, nor can we analyze
their thoughts, or plans. The bigger the society, the higher the so-called
uncertainty resulting from possible combinations of actions of all people.
Given this massive degree of darkness connected with risk and uncer-
tainty, how is it even possible for us to survive? How is it even possible
that we can deal with the future and do it even relatively successfully?
Is it all just a coincidence? Is it just our illusion that we are behaving
rationally? How is it possible for an entrepreneur to successfully bring
to the market a product whose planning, production, and subsequent
successful sales are sometimes several years apart, yet they are successful?
Explaining or grasping the future is a challenge.
If we knew the future, we could be objectively certain, when we have
made a mistake. If we knew the future and acted unfavorably toward it,
we would be objectively wrong. However, if we do not know the future,
how can we ever say later that what we did was an error? As the reader
will see below, an ex post evaluation, when we say: “had I known then
what I know now, I would have behaved differently” will not help either.
How do we know we would have behaved differently from today’s point
of view? Because we do not know the alternative development of our
past, we are unable to say objectively, ex post, that by making a decision
at time t, we have made an objective error. Had we decided differently,
in a way we now consider appropriate, today we could claim once again,
that the decision was wrong because we do not know the alternative
consequences of our alternative decision.
If it is difficult to compare the plans (the plan drawn up at time t )
with the reality of what will happen (at time t + 1), how do we know
that we have even made a profit or a loss? This is still not the final
problem if we realize that profit/loss is a subjective phenomenon that
can be perceived as utterly different by everyone. It is also question-
able whether achieving profit means the entrepreneur achieved any result
expressed e.g., if money received is higher than zero or if the achieved
result is higher than the original plan that the entrepreneur had?
2 Why Are We Economically Successful? 9
1The authors often supplement each other. The reader should not get the impression that if this
essay cites, e.g., Mises or Hoppe, that Shackle–Lachmann’s interpretations of a phenomenon
related to the future are completely different and less relevant. I originally wanted to focus
on three lines of approach: The Knight–Mises–Hoppe–Hülsmann line, the Shackle–Lachmann
line, and the Hayek–Kirzner line. However, after a more detailed examination of the selected
authors, I had great difficulty in classifying them in this way.
10 M. Pošvanc
In Shackle’s view, the future is empty. Although the present shows us that
the choices made in the past have filled it with some content that mani-
fests itself in the present. Shackle’s view is that we cannot speak of any
kind of rational action and decision-making in the context of the future,
because we live in a world that we influence through the choices we make
and that our choices have a unique and always anticipatory character.
We are simply not equipped with enough information to make a “fully
informed decision” and Shackle believes that only such a decision could be
considered a rational one.2 From Shackle’s point of view, there are simply
no objective criteria for a rational decision that would make it possible
to assess what was rational and what was not. The future is referred to
as kaleidic. This inevitably follows Shackle’s claims that everyone else
faces the same problem. This means that by not knowing what the other
person will do, I cannot even anticipate my own correct and rational
decision made in the context of the other. Selgin (1990, p. 34) perfectly
describes the problem:
Now let us pass briefly to Shackle’s strong thesis: the matter of the kaleidic
future. Here what may be claimed against praxeology is not that it fails
to recognize the categories of uncertainty, time, and expectations, but rather
that it fails to reckon with some of the more crucial implications of these.
What praxeology fails to account for … is how actors may effectively antici-
pate the future and, in particular, how they may anticipate future actions of
other people, given that the future is “unknowable.” If people cannot foretell
the future, then even the broader, praxeological idea of “rationalism” (which
assumes some-more than incidental-capacity for actors in the social world to
select means appropriate to their chosen ends) is unfounded. Economics is
obliged, in this case, not merely to account for the use and dissemination of
2 Shackle approaches the possibility of economic analysis only in terms of objectively given facts
of neoclassical equilibrist analysis which eliminates the time factor from economic analysis.
According to neoclassical economics, it is the only applicable economic analysis. In principle,
it is an honest awareness of the problem of time and change, and the application of economic
analysis only in the context of certain theoretical assumptions, e.g., Selgin (1990, p. 30) quotes
Shackle in this context: “If there is a fundamental conflict between the appeal to rationality and the
consideration of the consequences of time as it imprisons us in actuality, the theoretician is confronted
with a stark choice. He can reject rationality or time.” However, one of our tasks is to identify
the possibilities of implementing economic analysis in the context of the passage of time.
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