Hayek, Keynes, Institutions and Cognitive Processes: A General Systems Approach

Exegetical study of the economics of Hayek and Keynes are active research industries in the form of the neo-Austrian and Post-Keynesian research programmes respectively. Often it would appear that these efforts would benefit from an underlying methodological orientation. It is our argument that General Systems Theory (GST) is an approach conducive to synthesising the various insights provided by the two schools. The case is made along two lines. The first is the study of cognitive processes which is an important component of GST. The second related element is the theory of institutions as responses to the bounds on the rationality of agents. Our broad conclusion is that the economics of Hayek fits relatively easily in the General Systems paradigm as Hayek was an illustrious member of a cohesive school. The economics of Keynes, on the other hand, was an attempt at “escape from Marshallian habits of thoughtâ€. It is generally accepted that Keynes only imperfectly made the transition to an alternative methodology. Consequently, the Post-Keynesian research enterprise would benefit more from the ambit of a consistent methodology like GST.