Wednesday April 20, 2016
In 1974, when Friedrich Hayek won the Nobel Prize in Economics, he used his acceptance speech to deliver a warning to the world. Do not again fall for “the pretense of knowledge,” he counseled.
Hayek was singling out economic policymakers who presume to possess the knowledge needed to confidently predict and design market outcomes, much as engineers precisely predict and design mechanical outcomes.
Yet, as Hayek surely recognized, such epistemic arrogance is rampant throughout all social thought, and not just economics. It particularly plagues the realm of foreign policy.
Consider how impossible it is to know exactly what is going on in anyone else’s mind. Nobody can predict with certainty an individual’s future choices, and the preferences those choices reveal. The mind of even a single person is to a great degree opaque. Now take that opacity and multiply it by the millions of minds that make up an economy or a country. That is a hell of a lot of ignorance and unpredictability.