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Some Confusions of Language in Economic Thought

Fifty years ago, in 1968, Austrian (and Austrian school) economist Friedrich A. Hayek published a monograph called The Confusion of Language in Political Thought [4]. Hayek argued that the words we use and the meanings we give to them greatly influence how we think about the political system and the wider social order in which we live. This is no less so, I would suggest, in the language and the meanings of words used in economics.

Hayek’s focus was on the misunderstanding created by the false notion that society is the product of design. He emphasized that many, if not most, of the institutions of the social order are not the result of human design, but are the cumulative results of multitudes of people interacting over many generations.

Social Order Without Political Design

This is a theme in social analysis that has been a part of Austrian economics since the founding of the Austrian school by Carl Menger. He explained that markets and money, language and much of the legal system, social customs and cultural traditions, and polite manners are all the evolved outcomes of a vast number of individuals, each pursing their own personal self-interest for the most part. Their interactions and associations with each other slowly form into behavioral patterns, informal rules, and interactive procedures by which and through which human beings come to arrange and adapt their conduct with one another in a wide variety of social settings.

It is not that human beings do not consciously guide their actions according to a plan. Indeed, all meaningful human action is pursuit of a chosen set of ends with selected means the use of which is believed most likely to bring about the desired ends.

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