While Friedrich August von Hayek’s name will forever remain associated with economics, his original scholarly interest was cognitive psychology. In 1952 he wrote The Sensory Order: An Inquiry into the Foundations of Theoretical Psychology. It foreshadows later developments in psychology, neurology, and artificial intelligence research. However, few economists have attempted to understand Hayek’s psychological writing in any great detail. Many commentators seemingly regard this work as something of an oddity in the context of his broader writings on economic, legal, social and political issues.
In this paper, Julie Novak illustrates the connection between The Sensory Order and Hayek’s economic thought. His psychological theories were profound in understanding how human beings acquire and communicate the subjective knowledge of the world that allows them to operate within different physical and human (including economic) environments. The arguments for economic freedom and competitive markets are substantially enriched by appreciating Hayek’s work in human cognition.