WHAT IS HERMENEUTICS? 47

scientistic sense. The goal is most definitely not that of elaborating ‘laws’ which will enable us to ‘predict’ specific outcomes. The outcome, as Ricoeur would say, ‘can be neither deduced nor predicted’. ‘Explanation’ here is thus not explanation in the scientistic, causalistic sense—one couched in terms of socalled ‘behavior variables’, to use Lachmann’s term. It is, instead, an attempt to make events intelligible in a hermeneutical sense.

When the method is employed in reverse order, Lachmann says, one seeks to determine what constellation of plans has given rise to an existing situation. This is storytelling in the most proper, Ricoeurian sense of the term. As Lachmann himself says:

This is the real meaning of the method of Verstehen, which is also, of course, the historical method. There appears to be no reason why the theoretical social sciences, when they pursue their enquiries into the typical causes of typical social phenomena, should not make use of it.

(Lachmann 1984 [1969], p. 307)

The method of methodological individualism, as Lachmann portrays it, is thus also perfectly described in Ricoeur’s words: ‘Looking back from the conclusion towards the episodes which led up to it, we must be able to say that this end required those events and that chain of action.’ Or, as Lavoie says: ‘The only “test”…[is] the plausibility of the sequence of events that has been strung together by narrative.’ What truly counts in economic ‘explanation’ is not empirical verification (or falsification) but narrative acceptability.

CONCLUSION

In economics one is never dealing with ‘brute facts’. Statistics, as I said before, are themselves interpretations. ‘Economic facts’ are interpretations on the part of the economist; they are interpretations of the actual behaviour of a myriad of acting human beings which is itself interpretive (for an individual’s economic behaviour cannot be adequately understood in merely objective terms, as a kind of automatic reaction to objective stimuli; it must be understood in terms of his or her reading of prices, opportunities, relative costs, and so on). One could say of the economist what Roy Schafer says of the psychoanalyst: ‘The psychoanalyst interprets not raw experience, but interpretations’ (Schafer 1978, p. 24). Or again, the economist could say with the interpretive anthropologist Clifford Geertz: ‘what we call our data are really our own constructions of other people’s constructions of what they and their compatriots are up to’ (Geertz 1973, p. 9). If, like the culture the anthropologist studies, the economic order, which is the sphere of purposeful behaviour on the part of human agents, is not a realm of mechanical action and reaction but is a semiotic web of significance that they themselves have spun, it would follow, to use Geertz’s words, that ‘the

48 GADAMER AND RICOEUR

analysis of it [is] therefore not an experimental science in search of law but an interpretive one in search of meaning’ (Geertz 1973, P.5).

Interestingly enough, this is a point that Hayek in effect argued in the early 1940s, in the heyday of objectivistic positivism, in a series of articles subsequently published in book form (1972) under the title The CounterRevolution of Science. In this book, which is an attack on what he aptly referred to as ‘scientism’ or ‘the scientific prejudice’, Hayek, like Geertz later on, said that, unlike the situation in the physical sciences, ‘in the social sciences our data or “facts” are themselves ideas or concepts’ (Hayek 1972, p. 61). A purely explanatory, causalistic, physicalistic type of approach will not enable us to grasp these meanings; in the social sciences ‘the relations between men… cannot be defined in the objective terms of the physical sciences but only in terms of human beliefs’ (Hayek 1972, p. 52). Although Hayek expressed himself to a large extent in the dualistic language of modernist, Cartesian-Kantian epistemology and spoke, for instance, in terms of the mental versus the physical, the point he was seeking to make by means of his ‘anti-physicalist’ thesis is of genuine hermeneutical interest. We can, as the positivist would say, ‘observe and describe’ physical objects, but in order properly to understand things ‘mental’ we must interpret them. As Hayek remarked ‘wherever we speak of mind we interpret what we observe in terms of categories which we know only because they are the categories in which our own mind operates’ (Hayek 1972, p. 136). As Gadamer has pointed out, understanding the humanly other involves a ‘fusion of horizons’. Where such a ‘fusion’ is not possible, neither, says Hayek, is an understanding possible (see Hayek 1972, pp. 136 ff.). Interpretation, Hayek says, ‘is the only basis on which we ever understand what we call other people’s intentions, or the meaning of their actions; and certainly the only basis of all our historical knowledge since this is all derived from the understanding of signs or documents’ (Hayek 1972, p. 135). To speak of ‘interpretation’ is to speak of a situation where (as Heidegger would say) understanding is possible only because, in virtue of our being human subjects, we already have a pre-theoretical understanding of that which is to be understood and of what it means to be a human subject.

Perhaps the ultimate implication of hermeneutics for economics is that ‘economic reality’ is not itself something fixed and objective that can be fully or even adequately grasped by means of objective, formalistic techniques and constructs—however sophisticated these might be made to be by having recourse to cybernetics, systems theory, organization theory, ‘economic data’, computer simulation models, or artificial intelligence. The acting human being, the proper object of economics, is not homo economicus, a mere economizing, calculating entity, for the latter is an interpretive abstraction, and while, like the purely objective body, he can be thought and has his uses, he does not, to speak like Merleau-Ponty, exist.21 ‘Economic reality’, similarly, does not exist, in any purely objective sense of the term (if it did there would be no need or place for entrepreneurship). It is dependent on, is the expression of, is the way in which a

WHAT IS HERMENEUTICS? 49

community of human agents interpret and arrange their collective being—in the same way that what counts as an economic ‘good’ is dependent upon how people interpret their lives and the priorities they set for themselves. Different cultures do this differently, and thus it would not be surprising if the ‘laws’ of economics were to vary from culture to culture. People everywhere can be said to want always to maximize their utility (this, I gather, is one of the fundamental ‘laws’ of economic science) only if one recognizes that they will always interpret ‘utility’ to mean what they want it to mean.22 Man is the speaking animal, the interpretive being, who is constantly telling stories and interpreting himself to himself, and he can properly be understood only in a storytelling fashion, interpretively.23

In his major work, Being and Time, Heidegger introduced a new twist into the ‘hermeneutical circle’. In traditional, pre-phenomenological hermeneutics, this notion expressed the fact that in textual interpretation our understanding of the ‘whole’ is built up as we read from our understanding of the meaning of the ‘parts’, however, the way we understand the parts is itself a function of the meaning of the whole that we project at the outset. The reading or interpretive process is thus one wherein the meaning of the whole and of the parts is constantly being modified through a kind of dialectical interchange. Geertz has shown that the hermeneutical circle applies as much to anthropology as it does to ‘literary, historical, philological, psychoanalytic, or biblical interpretation or for that matter… everyday experience’. What is called for in an understanding of men and their institutions is ‘a continuous dialectical tacking between the most local of local detail and the most global of global structures in such a way as to bring both into view simultaneously’ (see Geertz 1979, pp. 239–40).

The new twist that Heidegger introduced was that of maintaining that all understanding is basically of a circular nature. In opposition to empiricist positivism (for which the mind is a kind of tabula rasa or neutral mirror), Heidegger argued that we would never arrive at an explicit understanding of anything if we did not already have a kind of implicit understanding of that which is to be understood; if, that is, we did not bring to our encounter with the object in question certain interpretive presuppositions or ‘forestructures’ (Heidegger 1962, p. 195). Because understanding is essentially circular in this way, it makes no sense to say, as a logical positivist would, that the interpretive process involves a ‘vicious’ circle.

The simple phenomenological fact of the matter is that there is no way out of the hermeneutical circle; there is no disengaged subject. The attempt to get out of the circle—an attempt which serves to characterize modern objectivism—can only result in what Sartre would have called ‘bad faith’. If, per impossibile, we were able, in accordance with the objectivistic ideal, to divest ourselves of all of our culturally inherited presuppositions, we would find ourselves without anything at all to understand! Thus, the important thing, as Heidegger said, ‘is not to get out of the circle but to get into it in the right way’. It is meaningless and absurd to want to rid ourselves of all presuppositions, but what can we do,

50 GADAMER AND RICOEUR

Heidegger says, is to try to see to it that they are not determined for us by mere ‘fancies and popular conceptions’. What economists need to get out of is their Cartesian anxiety —to use Richard Bernstein’s nice term (1983)—their epistemological hangups over absolute starting-points, self-contained certainties, and presuppositionless foundations—the great, culturally inherited ‘popular conception’ of scientistic modernity.25

NOTES

1Milton Friedman’s famous article, ‘The methodology of positive economics’, is probably the best argued case for economics as a positive science.

2See their joint introductory essay, The interpretive turn: emergence of an approach’ in Rabinow and Sullivan (1979).

3See, for instance, Polkinghourne (1983).

4Speaking of the nineteenth-century founders of the American Economic Association, Culbertson says:

The founders would be struck by the powerful new tools that now could be used to build an evolutionary, empirical, scientific economics: the ideas of cybernetics, systems theory, organization theory, the wealth of data on economies, the new ways to think realistically about complex, interactive systems with computer simulation models, the new possibilities of applying empirical knowledge to economic policy with computer based expert systems and artificial intelligence.

5See, in this regard, my essay ‘Method in interpretation’, in Madison (1988).

6The work of hermeneutics, Gadamer (1975, p. 263) says, ‘is not to develop a procedure of understanding, but to clarify the conditions in which understanding takes place’.

7For a Gadamerian hermeneutical critique of Hirsch’s hermeneutical theory, see my essay ‘A critique of Hirsch’s validity’, in Madison (1988).

8Unfortunately, Gwartney and Stroup in their finely written (1980) textbook, Economics: Private and Public Choice, take over unquestioningly the orthodox, objectivistic view of science and presuppose an objectivistic, mirror view of knowledge as ‘consistency with events in the real world’ when they write:

The Test of a Theory Is Its Ability to Predict. Economic Thinking Is Scientific Thinking. The proof of the pudding is in the eating. The usefulness of an economic theory is revealed by its ability to predict the future consequences of economic action. Economists develop economic theory from the analysis of how incentives will affect decision-makers. The theory is then tested against the events in the real world. Through testing, we either confirm the theory or recognize the need for amending or rejecting it. If the events of the real world are consistent with a theory, we say that it has predictive value. In contrast, theories that are inconsistent with real-world data must be rejected.

WHAT IS HERMENEUTICS? 51

If it is impossible to test the theoretical relationships of a discipline, the discipline does not qualify as a science…

How can one test economic theory since, for the most part, controlled experiments are not feasible? Although this does impose limitations, economics is no different from astronomy in this respect. The astronomer also must deal with the world as it is. He cannot change the course of the stars or planets to see what impact the changes would have on the gravitational pull of the earth.

So it is with the economist. He cannot arbitrarily institute changes in the price of cars or unskilled labor services just to observe the effect on quantity purchased or level of employment. However, this does not mean that economic theory cannot be tested. Economic conditions (for example, prices, production costs, technology, transportation cost, etc.), like the location of the planets, do change from time to time. As actual conditions change, economic theory can be tested by analyzing its consistency with the real world. The real world is the laboratory of the economist, just as the universe is the laboratory of the astronomer.

9See Gadamer’s remarks on the subject in ‘The universality of the hermeneutical problem’, in Philosophical Hermeneutics:

Statistics provide us with a useful example of how the hermeneutical dimension encompasses the entire procedure of science. It is an extreme example, but it shows us that science always stands under definite conditions of methodological abstraction and that the successes of modern sciences rest on the fact that other possibilities for questioning are concealed by abstraction. This fact comes out clearly in the case of statistics, for the anticipatory character of the questions statistics answer make it particularly suitable for propaganda purposes…. what is established by statistics seems to be a language of facts, but which questions these facts answer and which facts would begin to speak if other questions were asked are hermeneutical questions. Only a hermeneutical inquiry would legitimate the meaning of these facts and thus the consequences that follow from them.

(Gadamer 1976, p. 11)

10In his article, ‘On Robert Nozick’s “On Austrian methodology”’, Walter Block writes:

The reason we may object to the explanation of human action in terms of the movement of subatomic particles or electrical impulses across neurons is because there is simply no equivalence between the thoughts, feelings, pains, purposes, and plans which make up the reality of acting individuals, on the one hand, and the constructs of physics and neurophysiology, on the other. And this is completely apart from the question of whether these sciences will ever succeed in correlating the two, or explaining human decision-making in these terms….

Purposeful, futureand forward-looking behaviour is the essence of human action. People act because they envision a future that is preferable to

52 GADAMER AND RICOEUR

one that does not include their present action. The explanation, then, of why people act is teleological; they act because they have purposes which they think can be accomplished if they act. But such a mode is completely at variance with that which prevails in the natural sciences. There, causality or correlation is all, and teleology is dismissed as a suspect and illegitimate kind of anthropomorphism.

Austrians reject the reduction of economics to physics on the grounds of the incompatibility of the subject-matters of the two disciplines.

(Block 1980, p. 398)

11This has to do with the conception of understanding as essentially transformative that I mentioned above. Compare Gadamer, Truth and Method, p. 264: ‘Not occasionally only, but always, the meaning of a text goes beyond its author. This is why understanding is not merely a reproductive, but always a productive attitude as well…. It is enough to say that we understand in a different way, if we understand at all.’ On this theme (the linking of understanding with interpretation and ‘application’), see also: pp. 275, 278, 289, 293, 297, 304, 346, 350, 357, 359, 364, 428, 430, 432, 497.

12Typical of Hayek’s position are the following remarks:

We flatter ourselves undeservedly if we represent human civilization as entirely the product of conscious reason or as the product of human design, or when we assume that it is necessarily in our power deliberately to recreate or to maintain what we have built without knowing what we were doing. Though our civilization is the result of a cumulation of individual knowledge, it is not by the explicit or conscious combination of all this knowledge in any individual brain, but by its embodiment in symbols which we use without understanding them, in habits and institutions, tools and concepts, that man in society is constantly able to profit from a body of knowledge neither he nor any other man completely possesses. Many of the greatest things man has achieved are the result not of consciously directed thought, and still less the product of a deliberately co-ordinated effort of many individuals, but of a process in which the individual plays a part which he can never fully understand.

(Hayek 1972, pp. 149–50)

Speaking of the actions of people in response to changing prices, Hayek says: ‘their decisions have significance far beyond their immediate aim’ (see Hayek 1948, p. 47).

13On this issue I am at odds with some of the remarks expressed by Don Lavoie in his (1985) paper, ‘The interpretive dimension of economics: science, hermeneutics and praxeology’. In subsequent writings of his, Lavoie is careful to note the misleading characteristic of speaking of ‘knowledge from the inside’.

14Compare Frank H.Knight (1956, p. 156): ‘A conscious, critical social consensus is of the essence of the idea of objectivity or truth’.

WHAT IS HERMENEUTICS? 53

15 With reference to Hayek’s notion of methodological individualism, Ricoeur remarks:

One can indeed ask whether, to understand ‘we’, it is not first of all necessary to know the meaning of ‘I’. But such a derivation of ‘we’ from ‘I’, as sketched by Husserl in his fifth Cartesian Meditation, is not a scientific hypothesis: it concerns the origin of meaning though it is in no way empirical; it consists in saying that one cannot understand the meaning of an institution, a group belief or a collective symbolism unless these phenomena are related to a ‘we’. But one can speak of a ‘we’ only if every member of it can say ‘I’; thus meaning proceeds from ‘I’ to ‘we’ and thence to the group, the beliefs, the institutions. In this sense Hayek’s and Popper’s thesis might be justified, but it would no longer be the thesis of a methodological individualism.

Human phenomena can accordingly be regarded as irreducibly social for the purposes of description and explanation; their reduction into terms of an ‘I’ is relevant to an analysis of a different sort, which has nothing to do with the construction of a theory of social phenomena.

(Ricoeur 1979b, p. 138)

16See also my essay, ‘Ricoeur and the hermeneutics of the subject’, in Madison (1988).

17That the We is merely ‘the result of a summing up which puts together two or more Egos’ (Mises 1963, p. 44) is highly dubious. There may be some worthwhile implications for economics in recent hermeneutical research into the nature of subjectivity and the relationship between the I and the We. See, for instance, my essay ‘The hermeneutics of (inter)subjectivity, or: the mind/body problem deconstructed’, in Madison (1988); and also Schrag (1986).

18See Gadamer, ‘The problem of historical consciousness’, in Rabinow and Sullivan (1979). See also my essay, ‘Husserl’s contribution to the explanation/ understanding debate’, in Madison (1988).

19See Ricoeur, ‘The model of the text: meaningful action considered as a text’, in Rabinow and Sullivan (1979).

20See, for instance, Friedman’s writings on the subject in Bright Promises, Dismal Performances: An Economist’s Protest and, more recently, the paper he presented to the 1983 Regional Meeting of The Mont Pelerin Society, ‘What could reasonably have been expected from monetarism: the United States’.

21I am here paraphrasing from my study of the philosophy of Merleau-Ponty: ‘The body of which science and objectivistic philosophy speak, is a secondary, thematized body, and that body does not exist; it is but a thought body’ (Madison 1981, pp. 23–4). Merleau-Ponty was one of the first people to direct a sustained, explicit attack against objectivistic thinking—what he called ‘la pensée objective’— and his work remains, in this regard, a classic. Anyone who is seriously concerned with the status of the social sciences should, at least one time in their lives, have made a serious study of Merleau-Ponty’s Phenomenology of Perception.

Unlike some of his many students, Frank H. Knight was fully aware of the artificiality of homo economicus, of the fact that it is a theoretical construct useful for certain purposes but that it in no way designates a reality or tells us what man is

54 GADAMER AND RICOEUR

(to think so would be to fall into what Knight would have called ‘naïve economism’), and this awareness has been inherited by one of his students, James Buchanan (for numerous remarks on the subject, see Buchanan, What Should Economists Do?). Israel Kirzner, quoting William Jaffe, maintains that Menger, too, was not a victim of economism in his conception of man. Kirzner writes:

In Menger, man is not depicted as a hedonistic ‘lightning calculator of pleasures and pains’. Man, as Menger saw him, far from being a ‘lightning calculator’ is a ‘bumbling, erring, ill-informed creature, plagued with uncertainty, forever hovering between alluring hopes and haunting fears, and congenitally incapable of making finely calibrated decisions in pursuit of satisfactions’.

(Kirzner 1979, p. 61)

22This freedom of interpretation poses problems for scientific prediction and led Knight (1956, pp. 175–6) to say: ‘This trait of human beings, in contrast with physical things…is admittedly embarrassing to the economist as a scientist, but there does not seem to be anything that he can do about it.’

23See, in this regard, the remarks of Charles Taylor:

Man is a self-interpreting animal. He is necessarily so, for there is no such thing as the structure of meanings for him independently of his interpretation of them; for one is woven into the other. But then the text of our interpretation is not that heterogeneous from what is interpreted; for what is interpreted is itself an interpretation: a self-interpretation which is embodied in a stream of action. It is an interpretation of experiential meaning which contributes to the constitution of this meaning. Or to put it another way, that of which we are trying to find the coherence is itself partly constituted by self-interpretation.

(Interpretation and the sciences of man, Taylor 1979, pp. 37–8)

See also the remarks of James Buchanan:

[Man is] an artifactual animal bounded by natural constraints. We are, and will be, at least in part, that which we make ourselves to be. We construct our own beings, again within limits. We are artifactual, as much like the pottery sherds that the archaeologists dig up as like the animals whose fossils they also find.

(Buchanan 1979, pp. 94–5)

Mises himself knew full well that what determines human history is not ‘facts’ but ideas, the ideas that human beings make of their own existence.

24Geertz writes: ‘Hopping back and forth between the whole conceived through the parts which motivates them, we seek to turn them, by a sort of intellectual perpetual motion, into explications of one another’ (Geertz 1979, p. 239).