Advances in Austrian Economics

Purpose – To present the connection between modern network theory and Hayek's ideas on the brain and spontaneous orders.

Methodology/approach – To show that Hayek's ideas on the brain, spontaneous order, and why socialism cannot work are confirmed by network and self-organization theory, and to use network and self-organization theory to bridge Hayek's theory of the mind to his work on spontaneous orders.

Findings – Spontaneous orders are scale-free networks, but humans evolved a preference for hierarchical networks, which are typical of tribes and firms – and socialism. However, hierarchies only work for teleological organizations, not for ateleological spontaneous orders like economies. Part of the human preference for human-organized networks comes from our “intentional stance,” which automatically sees patterns as evidence of an organizer.

Research limitations/implications – This work acts as an introduction to possible directions in spontaneous order research. New work in bridging evolutionary and cognitive psychology (which includes Hayek's work) with self-organization and network theory acts as a promising development for neuro-Hayekians.

Social implications – Understanding there is an evolutionary bias for certain kinds of networks, even though those are not appropriate for certain kinds of social orders, and understanding the nature of these networks should help us understand the true relationships among individuals, organizations, and spontaneous orders.

Originality/value of chapter – This work brings Hayek “up to date,” with network theory and self-organization, showing to what extent Hayek was talking about these concepts. Seeing the similarities and differences between hierarchical and scale-free networks helps one understand how they come about, and in what contexts.