Hayek, Law and Cognition
Friedrich Hayek studied law as well as economics in college—in fact his first university degree was in law—and in the latter part of his long career he wrote extensively about law, including the trilogy entitled Law, Legislation and Liberty. My goal in this paper is to describe and evaluate his theory of law and relate it to his theory of cognition, which provides the basis of his entwined legal and economic theories.
Hayek is famous for two ideas. The first, which builds on the work of the earlier Austrian economist Ludwig von Mises, is that socialism (in the sense of public ownership of the means of production) is unworkable because it requires more information about the economy than could possibly be obtained and processed by a central planning board. The information necessary for the operation of the economy is dispersed among the multitude of individuals who engage in economic activity. Each has a tiny amount of the relevant information and the price system is the only feasible way in which the information possessed by each can be pooled and translated into an efficient schedule of economic outputs. (A current example of decentralized pooling of information is the World Wide Web, with its literally millions of “bloggers” whose uncoordinated but rapid and far-reaching pooling of information has made the “blogosphere” a formidable rival to the organized corporate news media.)
