"From these conceptions gradually grew a body of social theory that showed how, in the relations among men, complex and orderly and, in a very definite sense, purposive institutions might grow up which owed little to design, which were not invented but arose from the separate action of many men who did not know what they were doing. This demonstration that something greater than man’s individual mind may grow from men’s fumbling efforts represented in some ways an even greater challenge to all design theories than even the later theory of biological evolution. For the first time it was shown that an evident order which was not the product of designing human intelligence need not therefore be ascribed to the design of a higher supernatural intelligence, but that there was a third possibility—the emergence of order as the result of adaptive evolution."
Friedrich von Hayek's The Constitution of Liberty is not only a precurser of, and copybook for, todays "economic" styled apologias, but goes some way to providing a straightforward rendering of the rationalisations and presuppositions underlying the logic of economism.
Hayek intends to prove the folly of tampering the institutions of bourgeois society. He stresses the "evolutionary" basis of these institutions, and asserts that since the reasoning embodied in them will tend to exceed in quality the reasoning ability of any individual, or contrived group, then these institutions are to be preferred to any contrived alternative.
The form of reasoning on which Hayek, and Hayek's chosen predecessors, found this justification of modern society is contrasted with the form of reasoning utilised by those who theorised the deliberate reengineering of society, explicitly or implicitly. Hayek calls the respective philosophies that developed from these forms of reasoning "the empirical tradition" (also called "the evolutionary tradition") from which Hayek considers his own work to descend and opposed to this "the rationalist tradition", which no doubt points the way toward "the road to serfdom". This is something of a restatement of Burke's polemic against "Jacobinism", though Hayek prefers Adam Smith as a predecessor.
I think we should have proper names for these two forms of reasoning but Hayek's terms won't quite do. The "empirical" or "evolutionary" tradition as represented by, for example, Adam Smith probably provided a more accurate theory of the social world of the late eighteenth century than the "rationalist" tradition as represented by, say, J J Rousseau. The pragmatic quality of Smith's work can justly be contrasted to the idealism of Rousseau. The form of reasoning that Hayek correctly sees as central to Smith's work, the recourse to "markets", can hardly be guaranteed to be valid everywhere and for all time on account of this contrast. A theory ought to stand or fall on account of its relation to contemporary reality, not on account of its superiority to eccentric rival theories, in the distant past. The recourse to markets is not part of Smith's "empiricism". Rather Smith's theories come out of the interplay between the logic of markets and empiricist methodology.
Since the "recourse to markets" is in no way empirical and differs in important ways from the reasoning underlying Darwinian evolutionary theory, I suggest the kind of reasoning of which it represents one example ought to be called "naturalistic inductive logic". Hayek's method is slightly different from a general "recourse to markets" and represents another example of this logic. The methodology of the unhappy Rousseau and those other imaginative engineers of the social world could reasonably be called "rationalistic-inductive logic". Albeit, rationalistic-inductive logic is basically ordinary reasoning, in contrast to operations like the recourse to markets.
An approximate definition: rationalistic-inductive logic resembles deductive logic in every respect but admits approximate, provisional or conditional terms and produces approximate, provisional or conditional conclusions. It introduces expedients.
Naturalistic-inductive logic introduces expedients of a different sort from mere approximations, so deserves to be classed as a different kind of operation entirely. Before offering a definition of this way of thinking, it will be necessary to look at how it works.
The first disinterested genteel visitors to factories must have found them dirty, noisy and rather prosaic. To found a theory of modern society on its basic unit of commodity production: the factory, it's necessary to make the factory socio-economically meaningful. Hence the recourse to competitive markets, not merely as an explanation of the factory, but as the basis for a socio-economically viable definition of the factory. Markets, according to the theory, compel businesses to continue efficient operations and discontinue or modify inefficient operations. Consequently, given the reality of an untramelled free market the factory ought to be maximally efficient given the limitation of current technology.
In effect the institution, here "the factory" is abstracted from its context; it is considered to constitute a total object with a purpose of reproducing itself as itself. It stands on its own feet against the scouring of winds of free competition. This is to state its attributes in the order they might occur to someone versed in economism. The demonstration of these principles works best the other way. The bleak world of generalised countervailing force resembles the gloomy sphere of human existance. The purposiveness of institutions that really do exist, and exist in defiance of these forces, plausibly follows. For a thing to be purposive it must be a thing in itself: singular, iterated.
This isn't a logical demonstration because the operation itself isn't logical. Naturalistic-inductive logic ought to be aimed at practical usefulness rather than truth. It is, put crudely, illogical.
A further rule applies. The functional explanation of an institution as embodying a purposive force against a generalised countervailing force can only be a total explanation of that institution. This explanation therefore both cancels the real history of that institution and, in another sense, constitutes that history. Such an institution sublates its own history.
Naturalistic-inductive logic can therefore be defined approximately as the introduction of the notion that an institution has purposely reproduced itself as itself against a field of countervailing force. The institution thus idealised will thus be:
Economic theory as a whole is founded such idealisations of institutions (or aggregates, to which the same argument applies), that render the interactions between them amenable to scientific analysis. This process of idealisation has a particular logic which I've arbitrarily called "naturalistic-inductive". The name won't stick but the process will always be more or less the same.
Hayek, in effect, understands the institutions he valorises as sublative of a prehistory that includes the arguments of his opponents.
The sorts of reasoning I have delineated represent contrasting approaches to the problem of forming an adequate theory given limited information. They do not constitute an exclusive pair. There must be other ways by which a useable theory could be put together in these circumstances, so they aren't really "opposites". When these methods are applied to politics, however, they might appear to be "opposites" (as "forwards" is the opposite of "backwards"). Political institutions in the modern world tend to be distanced from everyday life. This would be a corollory of the abstractedness of political institutions, on which naturalistic-inductive logic is predicated, and which impels its development. Given this condition, it seems appropriate that rationalistic-inductive logic will work from a reasonable knowledge of everyday life, to a more sketchy idealised model of the institutions of the state. As Hayek correctly understood an idealised model of the institutions of the state entails exposing these institutions to criticism.
If rationalistic-inductive logic tends to err in its idealisation of institutions, naturalistic-inductive logic is prone to the opposite error, mangling the individual. The theory derived from naturalistic-inductive logic still has to be reconciled with ordinary knowledge. Its faulty assumptions can feed back into the sphere of everyday life. Economism feeds back its methodological principle of homo economicus, the economic man, as an anthropological principle. Hayek is obliged to disregard the possible "evolutionary" development of the organised working class, and of the intellectuals he censures, and assume humanity to be sociologically indeterminate, and consequently a suitable object of moral judgement. They are to be judged in the matter of their service to these institutions: banks, industrial conglomerates, the military and police.
So, these two sorts of logic can appear to be opposites when applied to politics, because they tend to have contrary orientations in the way they theorise the population and their institutions. But the orientation of either could work the other way. Someone with real experience of these institutions could analyse these institutions according to ordinary principles of logic, what I've called "rationalistic-inductive logic". Similarly, "naturalistic-inductive logic" could be the basis for an extreme functionalist sociology that insisted on the correctness of ordinary human behaviour, perhaps including even union membership.
These issues are illustrative of the way Hayek's "evolutionary tradition" diverges from the accepted theory of evolution in biology. In biology, every organism that exists contemporaneously is equally the outcome of evolution. There are certainly degrees of complexity among organisms but no gradations of rank; and certainly no gradations of moral standing.
Hayek's applied "evolutionism", like applied market theory, has a marked resemblance to certain aspects of Hegel's logic. For all his invectives against anti-empiricism, Hayek basically employs a system like that of Hegel, but with its rococo excesses deliberately concealed; and what is excised is precisely the system's development toward a valid account of its own methodology. To develop a properly Hegelian grandeur out of positions already based on so called "naturalistic-inductive" logic only requires the use of ordinary logic (deductive logic proper, or partial deductive logic, what I've called "rationalistic-inductive" logic). Hayek believes his ideas are perfectly sensible, and somehow akin to science proper. He wants it to be understood that there's an implicit line separating his work from that of someone like Georg Hegel. In fact, Hayek retains the irrational part of Hegel's system and excises the implications that reasonably follow from it. This affinity between Hegel and the economists, who mainly think the way Hayek does, might go some way toward explaining why Marx apparently borrows from the former in order to criticise the latter.
Hayek selects objects, institutions, or events that he believes ought to be allowed to continue to exist. These are rationalised according to a sytem of thought I have called "naturalistic-inductive" logic. By this process, they are reconfigured as the surface effects of "purposive institutions". These institutions subsume human intelligence generally, and in particular arguments against these institutions. This is Hayek's logic. The mock up of an intricate system of deductive logic in the style of Spinoza, which takes up most of The Constitution of Liberty is completely besides the point. It is threadbare and unconvincing. It is superfluous to Hayek's real argument, which depends on "naturalistic-inductive" logic, and is not coherent in itself.
The historical aspect of this enquiry may or may not interest a professional historian. It's certainly noteable that Adam Smith, Burke and Hegel are near enough contemporaries. I have elsewhere tried to show that the conditions underlying the logic they employ are complexity in the sphere of ideology reproduction, and the crumbling of central authority, the corrolate of which is the multiplication of, and increased importance of commercial printing. Evidence can be found corroborating a qualified relationship between "naturalistic-inductive" logic and the modernity of the late eighteenth century, as evidence can be found falsifying an extreme insistance on this relationship.
Since I don't want to be chained to my neologism, it's noteable that the characteristics pertaining to the elevated objects considered under the lens of "naturalistic-inductive" logic can be summarised by Hegel's term "spiritual", understood as the compound of the characteristics outlined above: abstraction, purposiveness, iteration, sublativity. The process that converts rotten corporatist legislation into the output of purposive institutions with superhuman intelligence has been called "naturalistic-inductive" logic. Alternatively, we could say this process is equivalent to the "spiritualisation" of the legislation.