The Role of Psychology in Austrian Economics and Game Theory: Subjectivity and Coordination

In this contribution we relate the respective works of two important economists, Friedrich von Hayek and Michael Bacharach, namely one of the main intellectual leaders of the Austrian Schools and one of the most original game theorists. Hayek and Bacharach are two authors - few in number – who do not conceive that economic analysis could be built without the help of psychology. They both considered that subjective perceptions of the real world provide the first stage of decision processes and that, within this stage, psychological factors played a fundamental role. Therefore, they both proposed how perceptions, economic rationality and social coordination could be combined. However economists who really accept to take psychology into account often face new difficulties. The incorporation of subjectivity in economic behaviour can make much more complex the analysis of economic and social coordination. To overtake these new difficulties we will see that both Hayek and Bacharach integrate a specific approach to human cognition and resort to an evolutionary explanation of social coordination. This is the main message we deliver in this contribution.