Advances in Austrian Economics

Purpose – To show that Hayek's prescient concepts on the cerebral cortex have received substantial support from modern neuroscience.

Methodology – Update the terminology of The Sensory Order to adjust it to prevalent concepts of cognitive network, plasticity, association, connectivity, and cortical dynamics. Extend his concepts of perception to other cognitive functions, notably memory. Reveal significance of modern methods to study the formation and organization of cognitive cortical networks (cognits), applying the same basic methodologies that he applied to perception. He also applied those methodologies to knowledge transactions in economics and the social order.

Findings – As Hayek proposed or assumed in his theoretical monograph:•Cognitive networks are spontaneously formed by associations (connections) between neuronal assemblies representing simultaneous elementary sensations.•Perceiving is classifying the world into categories of objects defined by those associations, in accord with a relational code.•Networks are hierarchically organized, with smaller networks constituting, and nested within, larger ones.•After formed and organized, a network becomes memory, which will make and shape future perception.•The interactions between the organism and its environment are governed by the perception/action (PA) cycle, a concept intuited by Hayek. This is the cybernetic interplay between the mammalian organism and its environment that courses through perceptual and executive networks of the cortex.•The dialog with an interlocutor epitomizes the PA cycle of language, unique to the human.

Social Implications – The brain embodies structure and dynamics similar to those relating the individual to society. They include a complex adaptive system, the cerebral cortex, which engages the brains of others through the PA cycle. Language is the highest operation of that cycle at interpersonal level. Transactions of knowledge within the cortex are similar to those of the market place, with their attributes of spontaneity, self-organization, and incompleteness.

Originality/Value of paper – This paper is unusual in that it highlights: (a) the insight of Hayek in cognitive neuroscience, anticipating by several decades the verification of his thinking on the role of the cerebral cortex in knowledge utilization and storage; and (b) the value for brain science of the principles of organization of knowledge that Hayek successfully applied to social sciences.