One of the hallmarks of the Austrian school of economics is its commitment to methodological subjectivism—the idea that mental entities such as purposes and plans provide an indispensable starting point for social scientific analysis. In the early 1940s, subjectivism came under assault from various perspectives—including behaviourism in psychology, physicalism in the philosophy of mind, and revealed preference theory in economics. In contrast with subjectivism, all of these schools contended that social scientific analysis should rely on concepts defined solely in physical terms. Advocates of behaviourist psychology like John B. Watson and of physicalist philosophy of mind such as Otto Neurath argued that subjectivism was unscientific; notions such as “purposes” and “plans” were to be expunged from economics and other social sciences.

Faced with such criticisms, Friedrich Hayek chose to dust off an aging manuscript, on which he had last worked two decades earlier. Surprisingly, given Hayek’s reputation as an economist, the manuscript was a work in theoretical psychology. He returned to it in the hope that it would help him to provide a defence of subjectivism that was scientific in the sense of being grounded in the best available account of the physiology of the human brain and central nervous system. Hayek thus sought to counter those who criticised subjectivism on the grounds that it was unscientific by offering a scientific critique of their claim that it was possible to dispense with references to notions such as “purposes” and “plans” in social science.

Hayek had become interested in theoretical psychology as a student in Vienna shortly after World War I. In a paper written in 1919–20, “Contributions to a Theory of How Consciousness Develops,” Hayek sought to explain the neurophysiological processes through which people come to experience the world as they do. However, he was unable to publish the paper and chose to set his manuscript aside, preferring to pursue his growing interest in economics rather than continue working on psychology. When his interest in psychology was rekindled in the early 1940s, Hayek began to work on his manuscript once again, eventually developing it into a book-length treatise on theoretical psychology that was published in 1952 under the title, The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology. An English translation of the original student paper, along with the final version of The Sensory Order, now appears in the Liberty Fund edition of the book, which has been expertly edited by Viktor Vanberg and recently published in paperback.

Hayek conceptualises the human central nervous system as a structure of interconnected nerve fibres. This structure acts as a classificatory device that, by discriminating between different physical stimuli, generates subjective impressions of the world people actually experience (the “sensory order”). On this account, perception always involves interpretation; even the simplest sensory impressions we experience are the outcome of a classificatory or interpretive process whereby we attend to some facets of the world and ignore others. Further classificatory processes lead ultimately to the triggering of dispositions for certain kinds of action. According to Hayek, therefore, all mental phenomena, including our experiences of the world, our emotions, and our actions are the result of classificatory processes carried out by our central nervous systems.

Hayek’s theory of the mind is relational in the sense that it is the structure of the connections between nerve fibres—as distinct from the physical properties of individual neurons—that generates the classification of external stimuli and thereby gives rise to the sensory or phenomenal order we experience. As he put it, “The connexions between the physiological elements are thus the primary phenomenon which creates the mental phenomena.” On this view, as Hayek states in a paper entitled “What is Mind?,” which was prepared in the late 1940s and published for the first time in this volume, his theory is “anti-dualist” in the sense that it recognises that “the mind is not a substance that differs from matter” but is, rather, structural or relational in nature, “an order that reveals itself in the relations between material things.” Or, as he indicates elsewhere in The Sensory Order, the mind is an emergent property of the structured arrangement of neurons found in the human brain.

It was through his conception of the mind as a classificatory device that Hayek sought to counter critics of subjectivism who argued that references to “mental” entities such as purposes and plans had to be eliminated from social science, to be replaced by—or reduced to—descriptions referring only objects defined in physical terms. Hayek’s ingenious response saw him deploy what might be described as a computational argument against reductionism. It begins with the premise that if a classificatory apparatus is to be able fully to explain some object, as required by reductionist accounts of human conduct, then it must possess a more complex structure than the object it is seeking to classify.

Put slightly differently, the capacity of any classificatory device to provide a complete explanation of some object is limited to objects with less complex structures than the device itself. It follows that the human brain will necessarily be incapable of fully classifying itself (i.e., of producing a complete physical classification of its own operations). When it comes to analysing its own working, therefore, the brain will be unable to “substitute a description in physical terms for a description in terms of mental qualities,” implying that “in the study of human action … our starting point will always have to be our direct knowledge of the different kinds of mental events, which to us must remain irreducible entities.” The conclusion Hayek draws from this argument is as follows:

Not only mind as a whole but also all individual mental processes must forever remain phenomena of a special kind which, although produced by the same principles which we know to operate in the physical world, we shall never be able fully to explain in terms of physical laws. … In discussing mental processes we will never be able to dispense with the use of mental terms. … We shall have permanently to be content with a practical dualism.

Contrary to subjectivism’s critics, therefore, references to mental entities such as purposes and plans cannot be eliminated from our efforts to explain the world. A subjectivist approach to the methodology of social science, according to which mental entities provide the indispensable starting point for inquiry, is thereby defended against its physicalist and behaviourist opponents.

The Sensory Order was, at first, largely neglected by both psychologists and social scientists. Hayek himself made little effort further to develop his ideas, beyond one abortive attempt to extend his approach to the analysis of questions of language and communication (in an incomplete and hitherto unpublished essay that appears in the volume under review as “Within Systems and About Systems: A Statement of Some Problems of a Theory of Communication”). In the late 1970s, however, Hayek’s theoretical psychology was belatedly “discovered” by prominent neuroscientists such as Joaquin Fuster and Nobel Laureate Gerald Edelman, who praised it as a pioneering contribution to connectionist or neural network theories of the mind. Around the same time, psychologist Walter Weimer also began promoting Hayek’s pioneering work, in particular by organising a conference panel at which Hayek presented a retrospective assessment of his ideas in theoretical psychology. Hayek’s paper, “The Sensory Order After 25 Years,” is also republished in this volume.

A significant literature has subsequently emerged exploring the connections between Hayek’s theoretical psychology and his economics and social theory. Hayek himself wrote, in his preface to The Sensory Order, that working out the basic ideas presented in that book “often proved helpful in dealing with the problems of the methods of the social sciences.” He elaborated briefly on that comment a quarter century later, writing in the epilogue to the final volume of Law, Legislation and Liberty that “my conception of evolution, of a spontaneous order and of the methods and limits of our endeavours to explain complex phenomena have been formed largely in the course of that book.”

In addition to offering a careful exposition of the key principles of Hayek’s theoretical psychology, and an account of the development of The Sensory Order, Viktor Vanberg’s insightful editorial introduction explores this point in considerable detail, offering an extended account of how—principally through its influence on Hayek’s thinking about epistemological issues—his work in theoretical psychology constitutes “an essential foundation for his comprehensive social theory, covering economics, law, politics and philosophy.” Finally, after years in which the book languished in obscurity, a proper appreciation has begun to emerge of the merits and significance of The Sensory Order.