Hayekian psychological economics: expectations and learning

This article argues that Friedrich Hayek’s theoretical psychology provides original insights for the discussion of a series of phenomena in economics. By discussing Hayek’s framework, the limitations of the dominant heuristics-and-biases approach in behavioral economics become more evident. While the heuristics-and-biases approach primarily focuses on human judgment and decision errors, Hayek’s framework provides a more comprehensive view of human cognition: it acknowledges the possibility of errors but also the possibility of learning and overcoming biases. 

The paper demonstrates how Hayek’s insights can help us understand topical phenomena such as counteractive self-control, the role of decision rules in complex situations, learning within small groups and firms, and the idea of the market and other social institutions as ‘thought aids’ that function as amplifications of the individual mind. The article discusses contemporary research in psychology and cognitive science that supports and extends Hayek’s theoretical contributions.

Find the paper here.