The complex role of economists in society
as seen by F. A. Hayek

Economics holds a unique status among other sciences. However, rather than being its privilege, this is in some respects its unfavourable feature, which often causes difficulties for its scholars. For the work of an economist is by its very nature a somewhat thankless one, when he must avoid the effort of gaining public recognition and popularity, and when, to maintain his intellectual honesty, he should keep away from politics. Although economic phenomena are by their nature mostly purely abstract, it is at the same time true that an error in the formulation of theoretical reasoning can have utterly fatal consequences for society. Moreover, to make matters worse, economists can never be certain that even their best-intentioned efforts will not eventually result in something wholly undesirable.

Economics as Opposed to the Natural Sciences

The natural sciences differ from the fields of social sciences in a number of important respects. We will now focus on just some of their fundamental differences, namely, what progress in scientific knowledge in these disciplines means for the well-being of society, why sound economic theories might “fade away”, and what the specialisation of their students means for these disciplines.

In doing so, we will draw in particular on the work of the brilliant thinker F. A. Hayek, who is unique, among other reasons, for how broad his horizon was and for how many different scientific disciplines he made significant contributions to. It is probably worth mentioning that at the turn of 1919 and 1920, when the University of Vienna, the first of his alma mater, was temporarily closed for lack of fuel, the then twenty-year-old native of Vienna went to study in the laboratory of the brain anatomist von Monakow in Zurich. As Hayek himself let it be known in his Autobiographical Interviews, this period was crucial to his intellectual development, for it was during this time that he adopted the multidisciplinary approach that would guide him throughout his life. Let us recall that at that time he was still hesitating whether to study psychology or economics at university. In the end, economics won out for him, but he nevertheless devoted himself to theoretical psychology in his later writings, especially in the extraordinarily difficult book The Sensory Order, which Hayek himself considers one of his greatest achievements and contributions to human understanding, however little it was comprehended and recognised by the scientific community at the time.

Hayek argues that “the progress of the natural sciences often leads to unbounded confidence in the future prospects of the human race, and provides the natural scientist with the certainty that any important contribution to knowledge which he makes will be used to improve the lot of men.” The economist, or more generally the social scientist, on the other hand, cannot be certain that the stream of new knowledge in his field will, through its practical application, lead to a happier life for individuals. We can never be fully aware of all the consequences of a given policy, however well founded in theory, and be sure that even our honest and sincere efforts will not lead to something different (if not the very opposite) from our initial intention. We are able to find several examples in history where “progress” in economic thinking has subsequently led humanity astray, or, to put it another way, where the use of prevailing economic theories in economic policy has resulted in a longer-term deterioration of living standards.

In our field [i.e. economics] no knowledge can be regarded as established once and for all.

Hayek further points out that “in our field [i.e. economics] no knowledge can be regarded as established once and for all, and that, in fact, knowledge once gained and spread is often, not disproved, but simply lost and forgotten.” This brings us to the far more general and complex issue of the differences in methodology of economics and the natural sciences. Hayek was strongly influenced by the thought of his good friend Sir Karl Popper, and was clearly aware that “the test of the plausibility of empirical science is whether there is any possibility of its refutation” and that “any system which claims to be irrefutable is by definition unscientific.” But while he was a proponent of falsification (i.e., the approach that no scientific theory can be definitively confirmed but only unsuccessfully disproved), he was at the same time aware (as was Popper) of the limits of the use of experiments in the social sciences. The main reason why important principles are often forgotten in economics is precisely because they are usually not subjected to the test of experimental corroboration, but only tracked down through a rigorous process of deduction and theoretical reasoning. And it is because of this that it is necessary to explain the right principles tirelessly to the public, lest one day they fall into oblivion.

The Challenge of Specialisation in Economics

Another issue in the social sciences is that of specialisation. For economics students, specialisation is in some ways no less necessary than for any other scientist. What distinguishes the natural sciences from the social sciences in this sense, however, is the fact that knowledge of only one discipline of the social sciences is not sufficient. While you can be an excellent physicist or chemist and not know other related disciplines (although this is probably not the most usual case), being a great economist requires much more than just an understanding of economics.

Human society is such a complex arrangement that it certainly cannot be studied only as a whole. However, it is also true that some of the disciplines of the various social sciences are so closely interrelated (since they often study phenomena whose aspects necessarily extend into several other fields simultaneously) that knowledge based purely on an isolated examination of a given phenomenon within a single discipline may lack any meaning because of its narrowness. As Hayek bluntly put it, “if you know only economics and nothing else, you will be a bane to mankind, good, perhaps, for writing articles for other economists to read, but for nothing else.”

The Abstract Nature of Economic Phenomena

Economics by its very nature deals with highly abstract phenomena arising from complex human interaction. Key structures such as the market order do not offer themselves to our senses, which is why it is so difficult to fully appreciate their significance and so tempting to downplay their usefulness. Since such an order cannot be seen, intuited, or unconsciously sensed, the only way man can recognize it and discover its nature, which has been hidden to our senses, is to use the most valuable tool with which nature has endowed him: his reason. A similarly complex structure can only be reconstructed by a determined intellectual effort in the human mind, by tracing the existing relationships between the various elements which form part of it.

It is characteristic that resistance to such abstract social structures and processes is found among the adherents of what Hayek called constructivist rationalism and what Popper similarly called naïve rationalism (i.e. the belief, held by Descartes for example, that the mind gives man the ability to consciously direct society and shape morality or culture). However, Hayek, influenced by the teachings of Adam Ferguson, argues that “it would be no exaggeration to say that social theory begins with–and has an object only because of–the discovery that there exist orderly structures which are the product of the action of many men but are not the result of human design.”

The opposite approach (in Hayek’s words, ” evolutionary rationalism “, and in Popper’s language, ” critical rationalism “), on the other hand, recognizes abstraction as an indispensable tool of the mind, which enables it to grasp individual aspects of reality that it cannot fully encompass. It is a quality whose successful mastery is crucial to man’s ability to successfully navigate a world that is only imperfectly known to him. Abstraction, according to Hayek, expands the range of phenomena we can grasp with the intellect, but it does so in a way that reduces the degree to which we can predict the consequences of our actions, which further limits the degree to which we can shape the world as we please. It is liberalism that limits deliberate control of social order to the enforcement of general rules that are necessary to create a spontaneous order whose specific details we cannot predict. This thesis of Hayek is surprisingly consistent with the position of G. W. F. Hegel when he wrote that “the direction that clings to abstraction is liberalism…”

Constructivist rationalism recognizes in essence no limits to the use of reason or its practical applications for the governance of social affairs as a simple organization. One of the privileges of reason, however, is precisely its ability to assess which matters it should consciously control, or to what extent, and how far it should instead rely on forces it cannot fully control, and which may nonetheless produce better results than any conscious effort could ever bring about. As Hayek presciently writes, “it may indeed prove to be far the most difficult and not the least important task for human reason rationally to comprehend its own limitations.” Society, moreover, is the kind of order that it would be more accurate to analogize to an organism, rather than an organization, for its characteristics, since it is an arrangement that is the result of gradual evolutionary selection, consciously directed by no human mind, rather than the product of human decision and control (this analogy, like any other, to a term from the natural sciences is, of course, inaccurate and can lead to some undesirable confusions).As Hayek clearly points out, “the reliance on the abstract is thus not a result of an overestimation but rather of an insight into the limited powers of our reason.” One of the roles that reason should perform, therefore, is that of discipline, which teaches us the important lesson that the power of our intellect is far from being able to grasp reality in all its complexity, and that one of its advantages is the awareness of the limits of what can still be fully understood.

According to Hayek, the main reason why man has become so unwilling to admit that the naturally given limits of his knowledge constitute a permanent barrier to the possibility of rationally constructing the whole of society lies in his unquestioning trust in the power of science. The rapid progress of scientific knowledge, especially in the natural sciences, easily leads one to believe that all the limits of our knowledge will be eliminated by it once and for all. However, the various scientific disciplines and the individual branches of artificial intelligence, despite their exceedingly promising development, do not change the fact that no single mind can take into account all the individual facts relevant to the functioning of a rational economic order, which are always known only to certain individuals, but in the totality to no single person, and which largely take the form of inarticulable and therefore not applicable knowledge (e.g. tacit knowledge in the form of ‘business acumen’, through which an individual anticipates whether a product will be successful on the market).

But let’s get back to the abstraction. In general, as Popper instructed us, all statements of theoretical science take the form “if …, then …”. Hayek, however, comes to the remarkable conclusion that these statements are interesting mainly insofar as the conditions we insert in the “if” clause are different from those that actually exist. The value of science, then, lies largely in telling us what would have happened if some facts had been different from what they actually are (more precisely, if conditions had been changed in some respects from what they really are). Thus, according to Hayek, theoretical economics, like other theoretical sciences, must be largely a study of what is not really the case – constructing hypothetical models of such worlds as might exist if certain alterable conditions were different. And that, by definition, requires dealing with structures that are, at least broadly, purely abstract. The economist and Hayek’s great teacher, Ludwig von Mises, therefore goes so far as to say that economics, like logic or mathematics, is a sheer manifestation of abstract thinking.

The Power and Responsibility of Economists 

For economics, more than for almost any other discipline, it is true that the initiation of a process of inquiry is not the result of a kind of disinterested intellectual curiosity, but rather the response of an individual to his desire to contribute to the development of a theory whose practical application might provide a solution to some of the problems that society is currently facing. Economic analysis, according to Hayek has always been driven by “an intense urge to reconstruct a world which gives rise to profound dissatisfaction.”

Economists, although they may not be aware of it, hold great power in their hands. As the father of modern macroeconomics and one of Hayek’s greatest intellectual opponents, John Maynard Keynes, observed, “the ideas of economists and political philosophers – whether they are right or wrong – are more powerful than is commonly supposed; in fact, little else moves the world.” It can be argued, quite rightly, that economists and political philosophers are not the ones who put economic theory into practice, since they are predominantly laymen who are not at all steeped in economics. The fact remains, however, that it is their abstract reasoning that puts together some of the principles that then guide politicians in their decision-making. And as the Italian nationalist Giuseppe Mazzini supposedly said, “ideas rule the world and its events. A revolution is the passage of an idea from theory to practice.”

This, however, can have both beneficial and absolutely disastrous consequences. On the one hand, getting the rules and aspects of institutions right, backed by sound economic theory, can improve the lives of countless people. Indeed, it was the understanding of economic principles and the understanding of the principles of free trade, voluntary exchange, private property, the benefits of human cooperation, the division of labour, specialisation and the spontaneous order of society – in sum, the market order – that raised the world’s standard of living to the greatest extent ever. Economist Mojmír Hampl aptly notes that the recognition and formulation of the rules of the market may well have saved more lives than Sir Alexander Fleming’s discovery of penicillin. The reason why this statement may cause the reader to feel puzzled or doubtful is that the choice of social order is an abstract matter, whereas penicillin is a quite concrete discovery that has an easily traceable impact on human welfare.

On the other hand, a single mistake made by an economist in his field has the power to do more harm than errors in almost all other sciences combined and the unfortunate ability to significantly affect the well-being of entire generations. It was the colossal “scientific” blunder committed by social engineers and constructivists, guided by the teachings of Auguste Comte, Henri de Saint-Simon and Karl Marx, that breathed life into socialism and took it away with it from millions of poor people. No other ideology (with the possible exception of some religions) has caused the deaths of so many innocent individuals and given rise to such profound human misery as socialism, which directly called for the suppression of the freedom that is an obstacle to its full realisation, and which was openly described in its initial formulations as an authoritarian system. In short, as von Mises wrote, “more dangerous than bayonets and cannon are the weapons of the mind.” 

The situation is further complicated by the fact that economists to a large extent come to the study of their field with a priori views on matters that they cannot even understand sufficiently at the time. It is then a test of their intellectual integrity to what degree they are willing to change their beliefs vis-à-vis new factual information they learn in the course of their studies that contradicts the picture their imagination has painted. And as Hayek said, “nothing is more pernicious to intellectual honesty than pride in not having changed one’s opinions …”

In this context, it is worth mentioning one other issue that illustrates the fact that within what the father of economics, Adam Smith, called the great society and what the philosopher Sir Karl Popper similarly called the open society,the principle that the end justifies the means used to achieve it simply cannot apply. Indeed, the source of the most dangerous and pernicious influences in this world is often not malicious individuals but, on the contrary, noble idealists. According to Hayek, it was the venerable, benevolent-minded scholars who laid the foundations of totalitarian regimes, not realising the offspring they had spawned. Thus, as the Scottish anthropologist James Frazer wrote, “surely it is better for the world that men should be right from wrong motives than that they would do wrong with the best intentions.” And one can scarcely imagine a more lamentable misfortune than to unwittingly produce the exact opposite of one’s own efforts by trying to consciously shape the future of humanity in accordance with worthy intentions.

The Dangerous Temptation of Popularity

Another distressing task of the economist who is thoroughly committed to his subject is to resist and never succumb to the seductions of popularity and public acclaim. There is nothing more tempting than to accept and follow dogmatically the communis opinio, reflecting above all the wishes of individuals, whether in the formulation of economic theories or in their practical application in economic policy. The economist, however, is there to point out the bitter consequences of apparently beneficial measures, to put an end to attractive but illusory ideas about society, and to dispel the perennial myths with which public opinion abounds. For, as the renowned economic journalist Henry Hazlitt declared, “economics is haunted by more fallacies than any other study known to man.”

It should always be at least a warning to an economist to find that his views are popular. As Alfred Marshall, the leading figure in English political economy, argues , “students of social science must fear popular approval; evil is with them when all men speak well of them.“ The temptation to embrace public attitudes, and thus gain widespread recognition, is undeniably enormous. But economists are not there to satisfy the public’s demand for views that flatter their desires, and they must not opportunistically accept judgments that do not stand up to serious examination. If an economist does not retain such intellectual independence, he can scarcely be an asset to society.

Indeed, this is the reason why the work of a true economist is incompatible with that of a politician – while a successful politician must be a leader without original ideas on social issues and only expressing convincingly what the majority feels, an economist is forced to preserve his identity, which consists also in the obligation to be guided in his judgments not by the wishes, dreams or opinion of the public, but by cold rational reasoning. This, of course, deprives the economist of many pleasant and tempting advantages when his honour forces him to forgo many lucrative job opportunities. But there is nothing else for the conscientious economist to do in the end, for, as Hayek said, “all economists who work for the government will be corrupted by that work.”

Concluding Remarks

The unique challenges facing economists stem from the abstract and complex nature of the phenomena they study, as well as the profound impact their theories can have on society. The tension between intellectual honesty and public acceptance is a constant struggle for those involved in the development of the discipline. As history has shown, economic theories can have far-reaching and sometimes unintended consequences, which makes it all the more important for economists to remain vigilant in their pursuit of objective truth. The works of economists such as F. A. Hayek and John Maynard Keynes highlight both the power and dangers of economic thought, reminding us that ideas, for good or ill, have the potential to shape the course of history.

Economists therefore have a considerable responsibility not only to develop theoretical knowledge, but also to do so with prudence and humility. Their work, though often thankless, is crucial to the development of policies that promote human well-being and prevent the disastrous consequences that can result from faulty economic thinking. In a world that often seeks quick fixes and universal approval, the economist must uphold rational inquiry and a voice for the complexities of economic reality.

Štěpán Drábek is a young Czech economist and commentator. 

Since August 2024, he has been the head of the analytical team of ECONET, the association of Economics Olympiad winners. He is also an analyst at the Centre for Economic and Market Analysis (CETA) and the Institute for Liberal Studies.

His academic and popular writings focus mainly on macroeconomics, central banking, the Austrian School of Economics (especially the thought of F. A. Hayek) and economic methodology.

In his spare time, he translates essential economic writings (primarily by Austrian School economists) and popularizes economic science. He is the author of the project Economics Simply (“Ekonomie Jednoduše”), which aims to increase the economic literacy of students in the Czech Republic.

He is the laureate of several economic and scientific prizes for high school students, including the Prize of the Learned Society of the Czech Republic, which brings together the most prominent scientists in the country.