In addition to the main papers which make up each issue, there is an extensive It is of course also in this connection that the contrast between the verstehende social science and the behaviourist approach becomes so glaring. Yet it is evident that most of the propositions of equilibrium analysis are not supposed to be applicable only in that stationary state which will probably never be reached. Datum means of course something given, but the question which is left open, and which in the social sciences is capable of two different answers, is to whom the facts are supposed to be given. In the usual presentations of equilibrium analysis it is generally made to appear as if these questions of how the equilibrium comes about were solved. But the assumptions or hypotheses, which we have to introduce when we want to explain the social processes, concern the relation of the thought of an individual to the outside world, the question to what extent and how his hypotheses must necessarily run in terms of assertions about causal connections, about how experience creates knowledge. And equilibrium will continue, once it exists, so long as the external data correspond to the common expectations of all the members of the society. And we may therefore very well have a position of equilibrium only because some people have no chance of learning about facts which, if they knew them, would induce them to alter their plans.Or,in other words,it is only relative to the knowledge which a person is bound to acquire in the course of the carrying out of his original plan and its successive alterations that an equilibrium is likely to be reached. Hamowy’s Critique of Hayek’s Concept of Freedom. If it were at all clear what the hypotheses usually employed in this respect were, we should have to scrutinize them in two respects: we should have to investigate whether they were necessary and sufficient to explain a movement towards equilibrium, and we should have to show to what extent they were borne out by reality. ‘Datum’ meant given, known, to the person under consideration. In the first instance, in order that all these plans can be carried out, it is necessary for them to be based on the expectation of the same set of external events, since, if different people were to base their plans on conflicting expectations, no set of external events could make the execution of all these plans possible. Surely if the alternations of the seasons suddenly ceased and the weather remained constant from a certain day onward, this would represent a change of data in our sense, that is a change relative to expectations, although in an absolute sense it would not represent a change but rather an absence of change. Wiley is a global provider of content and content-enabled workflow solutions in areas of scientific, technical, medical, and scholarly research; professional development; and education. It may of course be based on wrong assumptions concerning the external facts and on this account may have to be changed. These considerations seem to throw considerable light on the relationship between equilibrium and foresight, which has been somewhat hotly debated in recent times.8 It appears that the concept of equilibrium merely means that the foresight of the different members of the society is in a special sense correct. . Our online platform, Wiley Online Library (wileyonlinelibrary.com) is one of the world’s most extensive multidisciplinary collections of online resources, covering life, health, social and physical sciences, and humanities. First published in Economica (February 1937). But there will always be a conceivable set of external events which would make it possible for the plan to be executed as originally conceived. The important point is rather that we should become clear about what the questions of fact are on which the applicability of our argument to the real world depends, or, to put the same thing in other words, at what point our argument, when it is applied to phenomena of the real world, becomes subject to verification. The first answer which would seem to follow from our approach is that equilibrium in this connection exists if the actions of all members of the society over a period are all executions of their respective individual plans on which each decided at the beginning of the period. It should, however, be mentioned here that some of the most stimulating suggestions on problems closely related to those treated here have come from this circle. Correct foresight is then not, as it has sometimes been understood, a precondition which must exist in order that equilibrium may be arrived at. Economists appear subconsciously always to have been somewhat uneasy about this point, and to have reassured themselves against the feeling that they did not quite know to whom the facts were given by underlining the fact that they were given – even by using such pleonastic expressions as ‘given data’. The main differences seem to me to be two. The only trouble is that we are still pretty much in the dark about 1) the conditions under which this tendency is supposed to exist, and 2) the nature of the process by which individual knowledge is changed. In order that the results of the combination of individual bits of knowledge should be comparable to the results of direction by an omniscient dictator, firther conditions must apparently be introduced.19 And while it seems quite clear that it is possible to define the amount of knowledge which individuals must possess in order that this result should be obtained, I know of no real attempt in this direction. This is what we call a change in the (objective) data, which disturbs the equilibrium which has existed. It is necessary to remember here that the perfect market which is required to satisfy the assumptions of equilibrium analysis must not be confined to the markets of all the individual commodities; the whole economic system must be assumed to be one perfect market in which everybody knows everything. But if we look closer it soon becomes evident that these apparent demonstrations amount to no more than the apparent proof of what is already assumed.12 The device generally adopted for this purpose is the assumption of a perfect market where every event becomes known instantaneously to every member. But all this means that we can speak of a change in data only if equilibrium in the first sense exists, that is, if expectations coincide. It is an interesting question, but one which I cannot discuss here, whether in order that we can speak of equilibrium, every single individual must be right, or whether it would not be sufficient if, in consequence of a compensation of errors in different directions, quantities of the different commodities coming on the market were the same as if every individual had been right. 129-8; Cf. Liberty Fund, Inc. All rights reserved. It has become customary among economists to stress only the need of knowledge of prices, apparently because – as a consequence of the confusions between objective and subjective data – the complete knowledge of the objective facts was taken for granted. That it cannot be a necessary condition follows from the facts, firstly, that nobody would want to interpret it in the absolute sense that nothing must ever happen in the world, and, secondly, that, as we have seen, as soon as we want to include changes which occur periodically or perhaps even changes which proceed at a constant rate, the only way in which we can define constancy is with reference to expectations. At the moment I am only concerned to show that at the present juncture, whether we want to define the boundaries of economic statics or whether we want to go beyond it, we cannot escape the vexed problem of the exact position which assumptions about foresight are to have in our reasoning. Essays on Cost, ed. The data which now are supposed to be objective facts and the same for all people are evidently no longer the same thing as the data which formed the starting point for the tautological transformations of the pure logic of choice. See N. Kaldor, ‘A Classificatory Note on the Determinateness of Equilibrium’, Review of Economic Studies, 1, No. There are evidently two senses in which it can be said that the subjective data, given to the different persons, and the individual plans, which necessarily follow from them, are in agreement.