Search

The study of law and economics was built upon two pillars. The first is the familiar assumption of individual rationality. The second, less familiar, is the principle of methodological individualism. Over the last twenty years, law and economics has largely internalized behavioral critiques of the rationality assumption. By contrast, the field has failed to appreciate the implications of growing challenges to its methodological individualism. Where social norms shape individual choices, network externalities are strong, coordination is the operative goal, or information is a substantial determinant of value, a methodology strongly oriented to the analysis of individuals overlooks at least as much as it reveals. Among other potential distortions, indicia of consent may be given greater weight than they deserve, the evolution of law and norms may be underemphasized, and our regulation of information, knowledge, and even the financial markets may be flawed. As with the shift toward a more careful approach to rationality, then, attention to the limits of methodological individualism may lead us to a richer account of law and economics.

This thesis examines F.A. Hayek’s evolutionary theory. Much of his work in this field can be seen as a rejection of the Austrian School of economics, of which he is a central contributor. This thesis begins with background on Austrian economics. Understanding the tenets of this school uncovers the controversy in Hayek’s evolutionism. Three important contentions follow. First, Hayek’s theory of cultural evolution is the extension of Lamarckism from the biological realm to the social arena. Lamarckian evolution is the ‘inheritance of acquired characteristics.’ Secondly, Hayek underestimates the contribution to evolutionary economics that is made by Charles Darwin. This thesis examines the reasoning for this underestimation, citing Hayek’s alignment with the Scottish moral philosophers and Darwinian rejection of individual choice as the contributing factors. Finally, this thesis reconciles Hayek’s group selection with methodological individualism and Austrian economics. This is done through Ulrich Witt’s reductionist method.