WHAT IS HERMENEUTICS? 55

25In this paper I have not been able to deal with one of Gadamer’s most important contributions to philosophy, which is surely of the utmost relevance to economics. This is his reconceptualization of rationality, and it forms a dominant motif in his writings subsequent to Truth and Method. In opposition to the traditional and still dominant view of reason as essentially theoreticalinstrumental (scientifictechnological), Gadamer defends (not as a substitute for the former but as something more basic than it) what could be called a communicative-critical conception of reason or rational praxis. I have sought to spell out the political implications of this view of rationality in my (1986) book, The Logic of Liberty. I have also shown how this alternative conception of rationality is fully present, long before it was dealt with in philosophy, in the work of Frank H. Knight.

For his part, Kirzner has argued that the rationality of entrepreneurial activity cannot be understood as a mere ‘economizing’ one (reason in the usual, instrumental sense), as calculative rationality. Entrepreneurial decision-making is most definitely not irrational, but neither is it rational in the usual, scientific sense of the term (see, for instance, Kirzner 1979, pp. 109, 226ff). Here is a good instance where work on a particular economic topic—entrepreneurship—calls for a nontraditional concept of rationality; one, precisely, which is Gadamer’s great merit to have attempted to articulate philosophically. Formalistic economics is radically called into question when it is realized that choice, the central phenomenon in economic analysis, does not have to do with solving a maximization problem (as Kirzner maintains that it does not), and that, as Lachmann maintains, the traditional economic view of decision, as Kirzner (1979, p. 227) says: ‘abstracts from elements that are crucial to the true character of human choice’.

This is one area where the convergence between certain strands of thinking in economics, on the one hand, and the position explored and defined in phenomenology and hermeneutics, on the other, is truly amazing.

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Part II

Alternative views of economics from a particular philosophical standpoint: hermeneutics ‘appropriated’ by neoclassicism, institutionalism, critical theory, and Austrian economics