DOES THE SENSORY ORDER HAVE A USEFUL ECONOMIC FUTURE? Cognition and psychology have become central issues in economics. While this interest represents a radical change in economic theory, it does have a useful history that we believe is only partially recognized by contemporary economists | DOES THE SENSORY ORDER HAVE A USEFUL ECONOMIC FUTURE William N. Butos and Roger G. Koppl 1. INTRODUCTION Cognition and psychology have become central issues in economics. While this interest represents a radical change in economic theory it does have a useful history that we believe is only partially recognized by contemporary economists. Although it is customary to cite Herbert Simon s important work in this regard 1 we suggest Hayek s earlier work The Sensory Order 1952 should enjoy similar billing. The nexus of economics cognition and psychology has become a matter of interest to many contemporary We think this current high level of interest in such areas should induce a similarly high interest in Hayek s theoretical psychology. The level of interest has in fact been rising yet it is not always clear what value Hayek s very abstract notions might have for economists. We will offer some answers that we hope will increase economists interest in and understanding of Hayek s psychology. The next section is yet another summary of The Sensory Order. Logic seemed to demand that we include this section although we have tried to be brief. Readers who are familiar with the work should probably read the section anyway so that they know what we make of Hayek s book. The subsequent section articulates what we claim are errors of interpretation that have made their way into the economics literature. We try to show why Cognition and Economics Advances in Austrian Economics Volume 9 19-50 Copyright 2007 by Elsevier Ltd. All rights of reproduction in any form reserved ISSN 1529-2134 doi S1529-2134 06 09002-8 19 20 WILLIAM N. BUTOS AND ROGER G. KOPPL each of the supposed errors is in fact a false reading of Hayek. In the following section we give our reasons why economists should read The Sensory Order and build on it in their own work. Some of these reasons concern methodology others concern economic theory. A short conclusion recapitulates our main points
