Books

See also foreward and bibliography to the 2nd German edition by Kurt R. Leube, “Vorwort und Bibliographie zur Weiderauflage F. A. Hayek: Geldtheorie und Konjunkturtheorie.” Salzburg: (W. Neugebauer) Philosophia Verlag, 1976. [Hayek’sGeldtheorie (1929) together with its English translation (1933) is an expanded version of the paper (A-7a) delivered at a meeting of the Verein für Sozialpolitik, held in Zurich, in September 1928 (See A-7a with annotations). Hayek cites earlier studies as the foundations for his Geldtheorie: A-2a, A-6, A-7a, A-9a, A-13. Hayek presents, from the Austrian School perspective, a critical assessment of rival theories on the cause of trade cycle. He argues that the cause of all significant trade cycle fluctuations are monetary interventions which distort relative price relationships.].

See also the selected bibliography to the 2nd German edition: Kurt R. Leube, “Ausgewählte Bibliographie zur Wiederauflage F. A. Hayek: Preise und Produktion.” Philosophia Verlag, 1976.

[The 1st edition of Prices (1931) literally reproduced Hayek’s four lectures on industrial fluctuations presented at the University of London (LSE) during the session 1930–1931. The “Preface to the Second Edition” of Prices (1935) states how Hayek developed Austrian capital theory following the four lectures. These developments were contained in the 2nd edition and prepared for by A-11a, A-12, A-13, A-14, A-21, A-22, A-23, A-24a, as well as by the first German edition of Preise (1931), the English version (B-1), and A-9a. Economist Sudha R. Shenoy, in an unpublished manuscript, has done a detailed comparative analysis of the differences between the 1931 and 1935 editions of Prices.]

[Revised version of five lectures delivered at the Institute Universitaire de Hautes Études Internationales at Geneva. Hayek surveys the consequence of alternative monetary arrangements, such as gold vs. paper currency and flexible vs. fixed exchange rates.]

[Collection of essays, mostly reprints or revised versions of earlier essays, which are attempts “to improve and develop the outline of a Theory of Industrial Fluctuations contained in” B-1 and B-2. The first chapter, “Profits, Interest and Investment” is new; the other chapters are revisions of A-37a, A-27a, A-26, A-19, A-21, A-14, A-9a. Hayek’s essays defend the Austrian School’s theory of the trade cycle. He argues that monetary interventions cause far-ranging economic distortions that bring about malinvestment and unemployment.]

[Growing out of Hayek’s concern for the causes of the trade cycle or industrial fluctuations, this work deals with capital, interest, and time components in the structure of production.]

[Hayek wrote The Road to Serfdom in his “spare time from 1940 to 1943” while he was engaged in pure economic theory. The central argument was first sketched in A-37b (1938) and expanded in P-2 (1939). Hayek’s thesis is that social-political planning endangers both political and economic liberties of the individual.]

See also bibliographic postscript in the German reprint of the 1st edition, Erlenbach-Zurich: 1952: Kurt R. Leube, “Bibliographisches Nachwort zur Wiederauflage F. A. Hayek: Individualismus und wirtschaftliche Ordnung.” Salzburg: Philosophia Verlag, 1977.

[Individualism reprints P-5, A-34, A-49, A-50, E-5 (Chapt. 1: “The Nature of the Problem”), E-5 (Chapt. 5: “The (Present) State of the Debate”), A-41, A-48, A-45, A-38; and some previously unpublished lectures: Chapt. 5: “The Meaning of Competition” and Chapt. 6 “‘Free’ Enterprise and Competitive Order.” These articles and speeches sound the Hayekian warning against economic and social planning.]

[During the 1920s the Mill-Taylor correspondence became available for scholarly assessment of how much ideological influence Harriet Taylor exerted on the political, economic, and social ideas of her intimate friend and eventual husband, John Stuart Mill. Hayek’s volume presenting their correspondence allows the reader to judge the nature of their relationship.]

[The two major sections of this volume first appeared as articles in Economica as A-46 (1942–1944) and A-42 (1941), respectively: the third study first appeared as A-70 (1951). Hayek analyzes the intellectual origins of social planning and engineering. Topics covered include: scientism and the methodology of studying society, collectivism, historicism, non-spontaneous or rationalistic social planning, as well as the role of Saint-Simon, Comte, and Hegel in legitimizing scientistic sociology.]

[Though published in 1952, the “whole principle” of The Sensory Order was conceived 30 years earlier by Hayek in a draft of a student paper composed around 1919–1920, while he was still uncertain whether to become a psychologist or an economist. Three decades later his concern about the logical character of social theory led him to reexamine favorably his youthful conclusions on certain topics of epistemology and theoretical psychology: concepts of mind, classification, and the ordering of our mental and sensory world. In his 1952 Preface Hayek acknowledges his indebtedness “particularly” to Ernst Mach and his analysis of perceptual organization.]

[Reprinted in a revised, edited, and abridged format as Chapters 11 and 13 - 16 of Hayek’s B-12; Chapters 11 and 16 of the B-12 version were reprinted under the title, The Rule of Law. Menlo Park, California: Institute for Humane Studies (Studies in Law, No. 3), 1975.]

German translation: Die Verfassung der Freiheit. Tübingen: Walter Eucken Institut (Wirtschaftswissenschaftliche und wirtschaftrechtliche Untersuchungen No. 7), [J. C. B. Mohr/P. Siebeck], 1971. (Spain 1961, Italy 1971, China [Taipei] 1975). [Hayek composed the Preface of The Constitution of Liberty on his 60th birthday (May 8, 1959). He intended this survey of the ideals of freedom in Western civilization to commemorate the centenary of John Stuart Mill’s On Liberty (1859). In “Acknowledgments and Notes” he describes the various preliminary drafts and versions he incorporated into this volume; also see B-11. Hayek stresses the working of the liberal, spontaneous order of society, which is too complex to be subjected to social planning and engineering.]

[This volume of 25 essays contains reprints of articles and speeches by F. A. H. as well as previously unpublished writing and speeches over a 20-year period preceding 1967. Reprints (often revised) include: A-76, A-102, A-103b, A-112, A-108, A-115, A-65, A-68, A-99a, etc. Consult volume to determine other essays published for the first time. The scope of topics includes essays on epistemology, history of ideas, specialization, Hume, spontaneous order, the liberal social order, the transmission of liberal economic ideas, and a variety of other topics on philosophy, politics, and economics.]

[“Freiburg Studies. Collected Essays.” German anthology of Hayek’s essays. Contains German versions of such items as P-9 and P-10.]

A trilogy published in the following sequence:

• Vol. I, Rules and Order, 1973
• Vol. II, The Mirage of Social Justice, 1976
• Vol. III, The Political Order of a Free People, 1979

[Vol. I distinguishes between liberal spontaneous order (‘cosmos’) and planned or engineered, rationalistic social orders (‘taxis’). Hayek also traces the changing concept of law, principles vs. expediency in politics, and the ‘law of legislation’.]

[Vol. II outlines the meaning of justice in the free, liberal social order, critiques the notion of ‘social’ or distributive justice, and contrasts it with the market order or ‘catallaxy’, the regime of the Open Society.]

Introduction: The Revival of Interest in Hayek—A Unified Research Program in Hayek’s Writings?

In the recent revival of public and scholarly interest in the values of limited government and the market order, no one has been more centrally significant than Friedrich A. Hayek. His works have figured as a constant point of reference in the discussions both of the libertarian and conservative theories of the market economy; they have also provided a focal point of attack for interventionist and collectivist critics of the market. Hayek’s return to such a pivotal position in intellectual life is remarkable when we recall that for several decades his work was subjected to neglect and obscurity. It was not until 1974 at the age of 75 that he was belatedly acknowledged by being awarded the Nobel Memorial Prize in Economic Science. During the three decades after 1945, when certain Keynesian ideas seemed to have been vindicated by the prevailing government policies of economic interventionism, Hayek may have seemed an intransigent and isolated figure, whose chief importance was that of an indefatigable critic of the spirit of the age. It was, however, during these very same years, in which he turned from economic theory to political thought, that Hayek made his greatest contributions thus far to the formulation of a public philosophy, including most notably his Constitution of Liberty (1960), surely the most powerful and profound defense of individual freedom in our time. It is noteworthy that, in the revival of interest in Hayek’s work, his contributions to political philosophy have attracted as much interest as have his works in economic theory.

The Unity and Coherence of Hayek’s Writings: Conception of Mind & Unity of Knowledge

In all of this revival of scholarly interest, however, Hayek’s work has rarely been viewed as a whole. In fact, it has often been suggested that what we find in his writings is a series of unconnected episodes, in which questions are addressed in a variety of disciplines on a number of disparate historical occasions, rather then a coherent research program implemented over the years. Even Hayek’s friends have sometimes discerned important tensions and conflicts in his writings, leading them to argue that his work encompasses methodological and political positions which are in the last resort incompatible. Against this view, to which I once subscribed myself, I want now to submit that Hayek’s work does indeed disclose a coherent system of ideas. Hayek’s system of ideas may not perhaps be wholly stable, but in this system positions covering a range of academic disciplines are in fact informed and unified by a small number of fundamental philosophical conceptions. Identifying these basic philosophical positions, and showing how they infuse his entire work, is the chief aim of this review of Hayek’s work. It will not be my argument that Hayek’s system lacks difficulties or internal tensions. I will try, however, to show that his work is given a cohesive and unitary character by the claims in theory of knowledge and in theoretical psychology which inform and govern his contributions to many specific debates.

My strategy in this survey of Hayek’s work is to seek the unifying wellspring of his thought in his conception of the mind and in his account of the nature and limits of human knowledge. My argument will be that Hayek’s general philosophy—a highly distinctive development of post-Kantian critical philosophy—informs and shapes his contributions to a variety of academic disciplines (jurisprudence and social philosophy as much as economic theory and the history of ideas), and Hayek’s philosophy does so in ways that have been persistently neglected or misunderstood. In particular, Hayek’s account of the structure of the mind, of the nature and limits of human knowledge, and of the use and abuse of reason in human life pervades his writings down to their last details, and gives to his work over the years and across many disciplinary boundaries the character of a coherent system. We can see the structure of Hayek’s system of ideas and we can realize its capacity to yield an integrated view of man and society only when we have adequately specified its philosophical foundations. It is only once we have grasped these philosophical foundations of his thought, again, that we may fully appreciate his originality as a thinker and the measure of his achievement as a social theorist.

Overview of Topics Covered in This Essay

I begin my survey by examining briefly the chief claims Hayek makes in his centrally important but sadly neglected treatise in theoretical psychology, The Sensory Order(1952), where he most systematically and explicitly develops his account of the mind and of human knowledge. Having set out the principal features of Hayek’s view of the mind and of the forms of human knowledge, I shall try to show how these conceptions inform his account of a spontaneous order in society, and how they condition his distinction between ‘economy’ and ‘catallaxy,’ his elaboration of the argument about economic calculation under socialism, and his distinctive position as to the appropriate theory and methods for economics. I proceed then to examine how Hayek applies his general philosophy to the relations of individual liberty with the rule of law. In the course of this survey I will canvass some of the most important criticisms of Hayek’s system, concentrating particularly on the claim that his conception of a spontaneous order in society is unclear, and his use of it objectionable. It is often argued that, when taken in conjunction with its twin idea of cultural evolution by the natural selection of rival social practices, the idea of spontaneous social order has a conservative rather than any liberal or libertarian implication, since it appears to entail blind submission to the result of any unplanned social process. Against this criticism, which expresses the common view that Hayek’s political thought is an unstable compound of conservative or traditionalist and liberal or libertarian elements, I will argue that the idea of spontaneous social order in Hayek’s work is best seen as a value-free explanatory notion and that invoking this idea illuminates rather than undermines the bases for the commitment to liberty.

In developing my argument by way of an examination of the criticisms of a number of writers in opposed intellectual traditions—Michael Oakeshott, James Buchanan, and Irving Kristol, for example—I will conclude that Hayek’s chief achievement is in his reviving the intellectual tradition of classical liberalism of which varied strands in contemporary conservatism and libertarianism are quarreling offspring. In the course of this survey I will, also, identify three principal achievements of Hayek’s social philosophy: (1) his demonstration of the import for social theory of an erroneous Cartesian theory of the mind and the role of this theory in inspiring modern attempts at the rational design of social life; (2) his theory of the liberal order, which is a synthesis of the theories of justice of Immanuel Kant (1724–1804) and David Hume (1711–1776) with a devastating critique of contemporary conceptions of distributive justice; and (3) his proposal for a resolution of a central difficulty of classical liberal theory in the intriguing ideas of a market in traditions.

The upshot of my assessment of Hayek’s thought will be that, whereas his critics have identified ambiguities, tensions, and unclarities in some of his formulations, the interest and appeal of his system remains unimpeached. Despite (or even because of) its problematic aspects, Hayek’s system of ideas remains a powerful and compelling research program—in my own opinion, the most promising we have at our disposal—for classical liberal social philosophy.

Hayek’s General Philosophy—The Kantian Heritage

The entirety of Hayek’s work—and, above all, his work in epistemology, psychology, ethics, and the theory of law—is informed by a distinctively Kantian approach. In its most fundamental aspect, Hayek’s thought is Kantian in its denial of our capacity to know things as they are or this world as it is. It is in his denial that we can know things as they are, and in his insistence that the order we find in our experiences, including even our sensory experiences, is the product of the creative activity of our minds rather than a reality given to us by the world, that Hayek’s Kantianism consists. It follows from this skeptical Kantian standpoint that the task of philosophy cannot be that of uncovering the necessary characters of things. The keynote of critical philosophy, after all, is the impossibility of our attaining any external or transcendental standpoint on human thought from which we could develop a conception of the world that is wholly uncontaminated by human experiences or interest. We find Kant’s own writings—above all the Critique of Pure Reason (1781)—a case against the possibility of speculative metaphysics which Hayek himself has always taken to be devastating and conclusive. It is a fundamental conviction of Hayek’s, and one that he has in common with all those who stand in the tradition of post-Kantian critical philosophy, that we cannot so step out of our human point of view as to attain a presuppositionless perspective on the world as a whole and as it is in itself. The traditional aspiration of western philosophy—to develop a speculative metaphysics in terms of which human thought may be justified and reformed—must accordingly be abandoned. The task of philosophy, for Hayek as for Kant, is not the construction of any metaphysical system, but the investigation of the limits of reason. It is a reflexive rather than a constructive inquiry, since all criticism—in ethics as much as in science—must in the end be immanent criticism. In philosophy as in life, Hayek avers, we must take much for granted, or else we will never get started.

Hayek’s uncompromisingly skeptical Kantianism is strongly evidenced in The Sensory Order (see Hayek bibliography, B-10). There Hayek disavows any concern as to “how things really are in the world,” affirming that “…a question like ‘what is X?’ has meaning only within a given order, and…within this limit it must always refer to the relation of one particular event to other events belonging to the same order.” Above all, the distinction between appearance and reality, which Hayek sees as best avoided in scientific discourse, is not to be identified with the distinction between the mental or sensory order and the physical or material order. The aim of scientific investigation is not, then, for Hayek, the discovery behind the veil of appearance of the natures or essences of things in themselves, for, with Kant and against Aristotelian essentialism, he stigmatizes the notion of essence or absolute reality as useless or harmful in science and in philosophy. The aim of science can only be the development of a system of categories or principles, in the end organized wholly deductively, which is adequate to the experience it seeks to order.

Hayek as a Skeptical Kantian

Hayek is a Kantian, then, in disavowing in science or in philosophy any Aristotelian method of seeking the essences or natures of things. We cannot know how things are in the world, but only how our mind itself organizes the jumble of its experiences. He is Kantian, again, in repudiating the belief, common to empiricists and positivists such as David Hume and Ernst Mach, that there is available to us a ground of elementary sensory impressions, untainted by conceptual thought, which can serve as the foundation for the house of human knowledge. Against this empiricist dogma, Hayek is emphatic that everything in the sensory order is abstract, conceptual and theory-laden in character: “It will be the central thesis of the theory to be outlined that it is not merely a part but the whole of sensory qualities which is…an ‘interpretation’ based on the experience of the individual or the race. The conception of an original pure core of sensation which is merely modified by experience is an entirely unnecessary fiction.” Again, he tells us that “the elimination of the hypothetical ‘pure’ or ‘primary’ core of sensation, supposed not to be due to earlier experience, but either to involve some direct communication of properties of the external objects, or to constitute irreducible mental atoms or elements, disposes of various philosophical puzzles which arise from the lack of meaning of these hypotheses.” The map or model we form of the world, in Hayek’s view, is in no important respect grounded in a basis of sheer sense-data, themselves supposed to be incorrigible. Rather, the picture we form of the world emerges straight from our interaction with the world, and it is always abstract in selecting some among the infinite aspects which the world contains, most of which we are bound to pass by as without interest to us.

1. Ernst Mach and Metaphysical Neutrality

There are a number of influences on Hayek, however, which give his Kantianism a profoundly distinctive and original aspect. The first of these influences is the work of Ernst Mach (1838–1916), the positivist philosopher whose ideas dominated much of Austro-German intellectual life in the decades of Hayek’s youth. Hayek’s debts to Mach are not so much in the theory of knowledge, as in the attitude both take to certain traditional metaphysical questions. I have observed already that Hayek dissented radically from the Humean and Machian belief that human knowledge could be reconstructed on the basis of elementary sensory impressions, and throughout his writings Hayek has always repudiated as incoherent or unworkable the reductionist projects of phenomenalism in the theory of perception and behaviorism in the philosophy of mind. In these areas of philosophy, then, Hayek’s work has been strongly antipathetic to distinctively positivistic ambitions for a unified science. At the same time, while never endorsing the dogma of the Vienna Circle that metaphysical utterances are literally nonsensical, Hayek has often voiced the view that many traditional metaphysical questions express “phantom-problems.”

In both The Sensory Order and later in The Constitution of Liberty, Hayek affirms that the age-old controversy about the freedom of the will embodies such a phantom-problem. Hayek’s ‘compatibilist’ standpoint in respect of freedom of the will—his belief that the casual determination of human actions is fully compatible with ascribing responsibility to human agents for what they do—is analogous with his stance on the mind-body question. In both controversies Hayek is concerned to deny any ultimate dualism in metaphysics or ontology, while at the same time insisting that a dualism in our practical thought and in scientific method is unavoidable for us. Thus he says of the relations of the mental and the physical domains that “While our theory leads us to deny any ultimate dualism of the forces governing the realms of the mind and that of the physical world respectively, it forces us at the same time to recognize that for practical purposes we shall always have to adopt a dualistic view.” And Hayek concludes his study of the foundations of theoretical psychology in The Sensory Order with the claim that “to us mind must remain forever a realm of its own, which we can know only through directly experiencing it, but which we shall never be able to fully explain or to ‘reduce’ to something else.”

Hayek’s thought has a Machian positivist aspect, then, not in the theories of mind or perception, but in its attitude to traditional metaphysical questions, which is dissolutionist and deflationary. There is yet another link with positivism. Notwithstanding Hayek’s opposition to any sort of reductionism, whether sensationalist or physicalist, he seems to be a monist in ontology, averring that “mind is thus the order prevailing in a particular part of the physical universe—that part of it which is ourselves.” Hayek may seem here to be qualifying or withdrawing from that stance of metaphysical neutrality which in Machian spirit he commends, but this appearance may be delusive. There is much to suggest that, when Hayek denies any ultimate dualism in the nature of things, he is not lapsing into an idiom of essences or natural kinds, but simply observing—much in the fashion of the American pragmatist philosopher, W. V. Quine—that nothing in our experience compels us to adopt ideas of mental or physical substance. Though Hayek has not to my knowledge ever pronounced explicitly on the question, the whole tenor of his thought inclines to a Quinean pragmatist view of ontological commitments. In his skeptical and pragmatist attitude to ultimate questions in metaphysics and ontology, Hayek lines up with many positivists rather than with Kantian critical philosophy—though positivists themselves sometimes claim, with some justification, to be treading a Kantian path.

2. Karl Popper: The Growth of Knowledge

A second influence on Hayek’s general philosophy which gives it a distinctive temper is the thought of his friend, Karl Popper (b. 1902). I mean here, not Popper’s hypothetico-deductive account of scientific method, which there is evidence that Hayek held prior to his meeting with Popper, nor yet Popper’s proposal (which Hayek was soon to accept) that falsifiability rather than verifiability should be adopted as a criterion of demarcation between the scientific and the non-scientific. Again, Hayek has under Popper’s influence come to make an important distinction between types of rationalism, such that “critical rationalism” is commended and “constructivistic rationalism” condemned. But this is not what I have in mind. I refer rather to certain striking affinities between Hayek’s view of the growth of knowledge and that adumbrated in Popper’s later writings on “evolutionary epistemology.” As early as the manuscript which later became The Sensory Order(published in 1952, but composed in the twenties), Hayek made it clear that the principles of classification embodied in the nervous system were not for him fixed data; experience constantly forced reclassification on us. In his later writings, Hayek is explicit that the human mind is itself an evolutionary product and that its structure is therefore variable and not constant. The structural principles or fundamental categories which our minds contain ought not, then, to be interpreted in Cartesian fashion as universal and necessary axioms, reflecting the natural necessities of the world, but rather as constituting evolutionary adaptations of the human organism to the world that it inhabits.

The striking similarity between Popper’s later views, and those expounded by Hayek inThe Sensory Order, is shown by Popper’s own application of the evolutionist standpoint in epistemology to the theory of perception:

J.W.N. Watkins’ comment on this view is as apposite in the respect of Hayek as it is of Popper:

Hayek’s account of sense perception anticipates Popper’s later views in a most striking fashion, because in both sensation is conceived as a decoding mechanism, which transmits to us in a highly abstract fashion information about our external environment. Again, both Hayek and Popper share the skeptical Kantian view that the order we find in the world is given to it by the creative activity of our own minds: as Hayek himself puts it uncompromisingly in The Sensory Order, “The fact that the world which we know seems wholly an orderly world may thus be merely a result of the method by which we perceive it.” One difference between Hayek and Popper is in the fact that, at any rate in his published work to date, Hayek has not followed Popper in his ontological speculations about a world of abstract or virtual entities or intelligibles.

3. Wittgenstein & Hayek

A third influence on Hayek’s thought which gives his view of knowledge and the mind a very distinctive character is that of his relative, Ludwig Wittgenstein (1899-1951). This influence runs deep, and is seen not only in the style and presentation of The Sensory Order, which parallels in an obvious way that of Wittgenstein’s Tractatus, but in many areas of Hayek’s system of ideas. It is shown, for example, in Hayek’s recurrent interest in the way in which the language in which we speak shapes our thoughts and forms our picture of the world. In fact, Hayek’s interest in language, and in a critique of language, predates Wittgenstein’s work, inasmuch as he had an early preoccupation with the work of Fritz Mauthner, the now almost forgotten philosopher of radical nominalism whom Wittgenstein mentions (somewhat dismissively) in the Tractatus. There are, however, many evidences that Wittgenstein’s work reinforced Hayek’s conviction that the study of language is a necessary precondition of the study of human thought, and an indispensable prophylactic to the principal disorders of the intellect. Examples which may be adduced are Hayek’s studies of the confusion of language in political thought and, most obviously, perhaps, of his emphasis on the role of social rules in the transmission of practical knowledge.

It is on this last point that one of the most distinctive features of Hayek’s Kantianism, its pragmatist aspect, is clearest. Of course there is a recognition in Kant himself that knowledge requires judgment, a special faculty, the Urteilskraft, which cannot be given any complete or adequate specification in propositional terms, and whose exercise is necessary for the application of any rule. In the sense that we must exercise this faculty of judgment even before we can apply a rule, it is action which is at the root of our very knowledge itself. Hayek’s concern is not with this ultimate dependency of rule following upon judgment—which the later Wittgenstein, perhaps following Kant, emphasizes—but rather with the way that knowledge of all sorts, but especially social knowledge, is embodied in rules. Our perceptual processes, indeed all our processes of thought, are governed by rules which we do not normally articulate, which in some cases are necessarily beyond articulation by us, but which we rely upon for the efficiency of all our action in the world. Indeed, it is not too much to say that, for Hayek (notwithstanding his stress on the abstract or conceptual character of our sensory knowledge) all our knowledge is at bottom practical or tacit knowledge: it consists, not in propositions or theories, but in habits and dispositions to act in a rule-governed fashion. There is here an interesting parallel with Popper’s view, which sees even our sense organs as being themselves embodied theories.

There is much in Hayek’s writings to suggest that he takes what Gilbert Ryle calls “knowing how,” what Michael Polanyi calls tacit knowing, what Michael Oakeshott calls the traditional knowledge, to be the wellspring of all our knowledge. It is in this sense—in holding the stuff of knowledge to be at bottom practical—that Hayek may be said to subscribe to a thesis of the primacy of practice in the constitution of human knowledge. It is not indeed that Hayek disparages the enterprise of theory-building, but he sees the theoretical reconstruction of our practical knowledge as necessarily incomplete in its achievements.

Why is this? Hayek argues that, not only human social life, but the life of the mind itself is governed by rules, some of which cannot be specified at all. Note that Hayek does not contend merely that we cannot in fact specify all the rules which govern both social and intellectual life: he argues that there must of necessity be an insuperable limit beyond which we are unable to specify the rules by which our lives are governed. As he puts it:

Hayek goes on to observe of the inability of the human mind reflexively to grasp the most basic rules which govern its operations that “this would follow from what I understand to Georg Cantor’s theorem in the theory of sets according to which in any system of classification there are always more classes than things to be classified, which presumably implies that no system of classes can contain itself.” Again, he remarks that “it would thus appear that Gödel’s theorem is but a special case of a more general principle applying to all conscious and particularly all rational processes, namely the principle that among their determinants there must always be some rules which cannot be stated or even be conscious.” Hayek concludes this development of themes first explored in his Sensory Order with the fascinating suggestion that conscious thought must be presumed to be governed by “rules which cannot in turn be conscious—by a “supraconscious mechanism,” or, as Hayek prefers sometimes to call it, a “metaconscious mechanism”—“which operates on the contents of consciousness but which cannot itself be conscious.”

The third source of influence on Hayek’s skeptical Kantianism, which I have ascribed primarily to the work of his relative Wittgenstein, plainly comprehends other influences as well. Hayek cites Ryle in support of his observations that “‘know how’ consists in the capacity to act according to rules which we may be able to discover but which we need not be able to state in order to obey them,” and glosses the point with reference to Michael Polanyi. Here the insight is that all articulated or propositional knowledge arises out of tacit or practical knowledge, the knowledge of how to do things, which must be taken as fundamental. Nothing is said in Ryle or Polanyi thus far about rule-governedness as a distinctive mark of human (and, it may well be, not only human but also animal) intelligent behavior.

It is for the insight that practical knowledge is transmitted mimetically through the absorption of social rules that we need to turn to Wittgenstein, from whom Hayek may have taken it. (There are, to be sure, contrasts between Hayek’s view of rule-governed behavior and Wittgenstein’s, particularly in regard to the skepticism about rule-following expressed in Wittgenstein’s On Certainty and the dependency of social rules upon forms of life, stressed in Wittgenstein but not discussed by Hayek; but these contrasts need not concern us here.) What is original and novel in Hayek’s account, and (so far as I know) is nowhere to be found in Wittgenstein, is his account, firstly, of the hierarchy of rules in perception and action, with the most fundamental rules being meta-conscious rules beyond the possibility of identification and articulation; and, secondly, Hayek’s systematic exploration of the selection of these rules in a process of evolutionary adaptation. According to Hayek, in other words, the rules of action and of perception by which both intellectual and social life are governed are in the first place stratified or ordered in a hierarchy, with the most fundamental rules (which shape the basic categories of our understanding) always eluding conscious articulation. But secondly, all of these rules, including even the most fundamental of them are products of a process of evolutionary selection, by which they may be further altered or eliminated. Systems of rules conferring successful behavior are adopted by others without conscious reflection. It is this disposition to emulate or copy successful behaviors which explains the cultural evolution of which Hayek speaks, and which (though he recognizes its primitive beginnings in the social lives of animals) Hayek regards as the distinguishing mark of human life.

Hayek’s Kantian Philosophy of Mind

I began by nothing the striking Kantian attributes of Hayek’s epistemology and philosophy of mind—aspects which Hayek himself does not stress, perhaps because he conceives the formative influence of Kantian philosophy on his thought to be self-evident. As he puts it himself in a footnote to his discussion in a recent volume of the government of conscious intellectual life by super-conscious abstract rules: “I did not mention…the obvious relation of all this to Kant’s conception of the categories that govern our thinking—which I took rather for granted.”

Hayek’s Kantianism is seen, first in his repudiation of the empiricist view that knowledge may be constructed from a basis of raw sensory data and, second, in his uncompromising assertion of the view that the order we find in the world is a product of the creative activity of the human mind (rather than a recognition of natural necessity). His Kantian view is distinctive in that it anticipates Popper in affirming that our mental frameworks by which we categorize the world are neither universal nor invariant, but alterable in an evolutionary fashion; his Kantian view also follows Wittgenstein in grasping the role of social rules in the transmission of practical knowledge. Hayek’s Kantian view is original, finally, in recognizing a hierarchy in the rules that govern our perceptions and actions, and in insisting that the most fundamental of these rules are “super-conscious” and beyond any possibility of specification or articulation.

Hayek’s Philosophy of Mind & His Social Theory: Beyond Kantianism

Hayek himself is emphatic that these insights in the theories of mind and knowledge have the largest consequences for social theory. The inaccessability to reflexive inquiry of the rules that govern conscious thought entails the bankruptcy of the Cartesian rationalist project and implies that the human mind can never fully understand itself, still less can it ever be governed by any process of conscious thought. The considerations adduced earlier, then, establish the autonomy of the mind, without ever endorsing any mentalistic thesis of mind’s independence of the material order. Where Hayek deviates from Descartes’ conception of mind, however, is not primarily in his denying ontological independence to mind, but in his demonstration that complete intellectual self-understanding is an impossibility.

Hayek’s conception of mind is a notion whose implications for social theory are even more radical than are those of Hayek’s Kantianism. It is the chief burden of the latter, let us recall, that no external or transcendental standpoint on human thought is achievable, in terms of which it may be supported or reformed. In social theory, this Kantian perspective implies the impossibility of any Archimedean point from which a synoptic view can be gained of society as a whole and in terms of of which social life may be understood and, it may be, redesigned. As Hayek puts it trenchantly: “Particular aspects of a culture can be critically examined only within the context of that culture. We can never reduce a system of rules or all values as a whole to a purposive construction, but must always stop with our criticism of something that has no better grounds for existence than that it is the accepted basis of the particular tradition.” This is a useful statement, since it brings out the Kantian implication for social theory: that all criticism of social life must be immanent criticism, just as in all philosophy inquiry can only be reflexive and never transcendental.

Hayek goes beyond Kantianism, however, in his recognition that, just as in the theory of mind we must break off when we come to the region of unknowable ultimate rules, so in social theory we come to a stop with the basic constitutive traditions of social life. These latter, like Wittgenstein’s forms of life, cannot be the objects of further criticism, since they are at the terminus of criticism and justification: they are simply given to us, and must be accepted by us. But this is not to say that these traditions are unchanging, nor that we cannot understand how it is that they do change.

In social theory, Hayek’s devastating critique of Cartesian rationalism entails that, whatever else it might be, social order cannot be the product of a directing intelligence. It is not just that too many concrete details of social life would always escape such an intelligence, which could never, therefore, know enough. Nor (though we are nearer the nub of the matter here) is it that society is not a static object of knowledge which could survive unchanged the investigations of such an intelligence. No, the impossibility of total social planning does not rest for Hayek on such Popperian considerations, or, at any rate, not primarily on them.

Such an impossibility of central social planning rests, firstly, on the primordially practical character of most of the knowledge on which social life depends. Such knowledge cannot be concentrated in a single brain, natural or mechanical, not because it is very complicated, but rather because it is embodied in habits and dispositions and governs our conduct via rules which are often inarticulable. But, secondly, the impossibility of total social planning arises from the fact that, since we are all of us governed by rules of which we have no knowledge, even the directing intelligence itself would be subject to such government. It is naive and almost incoherent to suppose that a society could lift itself up by its bootstraps and reconstruct itself, in part at least because the idea that any individual mind—or any collectivity of selected minds—could do that, is no less absurd.

The errors of constructivist rationalism are closely connected with Cartesian dualism, that is, with the conception of an independently existing mind substance which stands outside the cosmos of nature and which enabled man, endowed with such a mind from the beginning, to design the institutions of society and culture among which he lives…The conception of an already fully developed mind designing the institutions which made life possible is contrary to all we know about the evolution of man.

Michael Polanyi has usefully described this distinction as that between a monocentric and a polycentric order. The first point which it is in this connection important to note is that the brain of an organism which acts as the directing centre for the organism is in turn a polycentric order, that is, that its actions are determined by the relation and mutual adjustment to each other of the elements of which it consists.

It is evident that this interplay of the rules of conduct of the individuals with the actions of other individuals and the external circumstances in producing an overall order may be a highly complex affair. The whole task of social theory consists in little else but an effort to reconstruct the overall orders which are thus formed…It will also be clear that such a distinct theory of social structures can provide only an explanation of certain general and highly abstract features of the different types of structures…Of theories of this type economic theory, the theory of the market order of free human societies, is so far the only one which has been developed over a long period…

Prediction vs. ‘Complex Phenomena’

Hayek’s conception of knowledge, when taken in conjunction with the idea of a spontaneous social order, has important implications for the proper method for the practice of social science. To begin with, Hayek’s affirmation of “the primacy of the abstract” in all human knowledge means that social science is always a theory-laden activity and can never aspire to an exhaustive description of concrete social facts. More, the predictive aspirations of social science must be qualified: not even the most developed of the social sciences, economics, can ever do more than predict the occurrence of general classes of events. Indeed, in his strong emphasis on the primacy of the abstract, Hayek goes so far as to question the adequacy of the nomothetic or nomological model of science (i.e. exact prediction through ‘laws’), including social science. At least in respect of complex phenomena, all science can aim at is an “explanation of the principle,” or the recognition of a pattern—“the explanation not of the individual events but merely of the appearance of certain patterns or orders. Whether we call these mere explanations of the principle or mere pattern predictions or higher level theories does not matter.” Such recognitions of orders or pattern predictions are, Hayek observes, fully theoretical claims, testable and falsifiable: but they correspond badly with the usual cause-effect structure of nomothetic or law-governed explanation.

In his most important later statement on these questions, “The Theory of Complex Phenomena,” [bibliography, A-109], Hayek tells us that, because social life is made up of complex phenomena, “economic theory is confined to describing kinds of patterns which will appear if certain general conditions are satisfied, but can rarely if ever derive from this knowledge any predictions of specific phenomena.” If we ask why it is that social phenomena are complex phenomena, part of the reason at any rate lies in what Hayek earlier characterized as the subjectivity of the data of the social sciences: social objects are not like natural objects whose properties are highly invariant relatively to our beliefs and perceptions; rather, social objects are in large measure actually constituted by our beliefs and judgments. Social phenomena are non-physical, and Hayek has stated that “Non-physical phenomena are more complex because we call physical phenomena what can be described by relatively simple formulae.” And, because of the subjectivity of its data, social life always eludes such simple formulae.

Hayek’s Opposition to Apriori Science

A number of points may be made briefly about Hayek’s conception of method in social and economic theory. First, whereas he follows his great teachers in the Austrian tradition in emphasizing the subjective aspects of social phenomena, Hayek’s methodology of social and economic science does not belong to that Austrian tradition in which social theory is conceived as an enterprise yielding apodictic truths. Specifically—contrary to T. W. Hutchinson, who periodizes Hayek’s work into an Austrian praxeological and a post-Austrian Popperian period, and also contrary to Norman P. Barry who sees both trends running right through Hayek’s writings—Hayek never accepted the Misesian conception of a praxeological science of human action which would take as its point of departure a few axioms about the distinctive features of purposeful behavior over time. In the Introduction to Collectivist Economic Planning [E-5, 1935] and elsewhere in his early writings, Hayek had (as Hutchinson notes) insisted that economics yields “‘general laws,’ that is, ‘inherent necessities determined by the permanent nature of the constituent elements.’” As Hutchinson himself acknowledges in passing, however, such laws or necessities function in Hayek’s writings as postulates(rather than as axioms), and they continue to do so even in his later writings, in which (as I have already noted) a suspicion of the nomothetic paradigm of social science is expressed. It is clear from the context of the quotations cited by Hutchinson that, in speaking of the general laws or inherent necessities of social and economic life, Hayek meant to controvert the excessive voluntarism of historicism, which insinuates that social life contains no unalterable necessities of any sort, rather than to embrace the view that there can be an apriori science of society or human action. To this extent Barry is right in his observation that, “there is a basic continuity in Hayek’s writings on methodology.”Certainly there seems little substance in a periodization of Hayek’s methodological writings by reference to the supposedly Popperian paper of 1937 on “Economics and Knowledge” (A-34).

At the same time, there seems little warrant for Barry’s claim that throughout his work Hayek tries “to combine two rather different philosophies of social science; the Austrian praxeological school with its subjectivism and rejection of testability in favour of axiomatic reasoning, and the hypothetico-deductive approach of contemporary science with its emphasis on falsifiability and empirical content.” For there is no evidence, so far as I know, that Hayek ever endorsed the Misesian conception of an axiomatic or apriori science of human action grounded in apodictic certainties. Again, as we have seen, Hayek’s view that the social sciences are throughout deductive in form antedates Popper’s influence and is evidenced in the Introduction to Collectivist Economic Planning [E-5, 1935].

Popperian ‘Conjectures & Refutations’

Hayek’s real debts to Popper are, I think, different from those attributed to him by Hutchinson and Barry. It is not that Hayek under Popper’s influence abandoned an apodictic-deductive method that was endorsed (in different versions, Kantian and Aristotelian) by Mises and Menger, but rather that he came to adopt Popper’s proposal that falsifiability be treated as a demarcation criterion of science from non-science. Again, Hayek follows Popper in abandoning his earlier Austrian conviction that there is a radical dualism of method as between natural and social science: this conviction, he tells us, depended on an erroneous conception of method in the natural sciences: as a result of what Popper has taught him, Hayek says, “the differences between the two groups of disciplines has thereby been greatly narrowed.” Hayek’s debts to Popper are, then, in his seeing that it is the falsifiability of an hypothesis rather than its verifiability which makes it testable and empirical, and, secondly, in his acknowledging the unity of method in all the sciences, natural and social, where this method is seen clearly to be hypothetico-deductive.

Even in these Popperian influences, it is to be noted, there are differences of emphasis from Popper himself. Hayek anticipates Lakatos in perceiving that the theoretical sciences may contain a “hard core” of hypotheses, well-confirmed and valuable in promoting understanding of the phenomena under investigation, which are highly resistant to testing and refutation. And Hayek explicitly states that in some fields Popper’s ideas of maximum empirical content and falsifiability may be inappropriate:

In general, then, it seems fair to hold that Hayek acknowledges that the proper method in social and economic studies, as elsewhere, is the hypothetico-deductive method of conjectures and refutations set out by Popper. On the other hand, he continues to recognize that in respect of complex phenomena such as are found in the social studies, testability may be a somewhat high level and protracted process, and the ideal of high empirical content captured in a nomothetic framework—a demanding and sometimes unattainable ideal.

Predictions of a pattern are…both testable and valuable. Since the theory tells us under which general conditions a pattern of this sort will form itself, it will enable us to create such conditions and to observe whether a pattern of the kind predicted will appear. And since the theory tells us that this pattern assures a maximisation of output in a certain sense, it also enables us to create the general conditions which will assure such a maximisation, though we are ignorant of many of the particular circumstances which will determine the pattern that will appear.

Hayek contra Friedman

In respect to Friedman’s proposals for monetary regulation by a fixed rule, Hayek has argued that in a modern democracy no governmental or quasi-governmental agency can preserve the independence of action essential if such a monetary rule is to be operated consistently. More fundamentally, such a policy of adopting a fixed rule in the supply of money is opposed by Hayek on methodological grounds. Such a policy calls for an exactitude in modeling and measuring economic life, and an unambiguity in the definition of money, which it is beyond our powers to attain. Hayek’s own objection to Friedman’s monetarist proposals is, then, most substantially that money is not the sort of social object that we can define precisely or control comprehensively; Hayek has even suggested that, in recognition of the elusiveness of the monetary phenomenon, we should treat “money” as an adjectival expression, applicable to indefinitely many distinct and disparate instruments. Hayek’s proposals in this area clearly open up technical questions in monetary theory which I am unqualified to adjudicate. It seems clear, though, that Hayek’s proposal favoring currency competition by the private issuance of money would be found objectionable by Friedmanites (who would argue that Hayek exaggerates the effect such competition would have in preventing currency debasement) and by advocates of the classical gold standard. It is clear, nonetheless, that in arguing for the establishment of a monetary catallaxy Hayek has illuminated questions both in monetary theory and in political economy which had hitherto gone largely neglected, but which it is critical that supporters of the market order now examine.

Hayek and Shackle

One objection to Hayek’s view may be worth addressing at this point. There is much in Hayek’s account of the business cycle, as in his more general account of spontaneous social order, to suggest that he believes economic discoordination results always from institutional factors, so that at any rate large-scale disequilibrium would be impossible in a catallaxy of wholly unhampered markets. Against this view, Hayek’s brilliant and largely neglected pupil, G.L.S. Shackle, has argued that the subjectivity of expectations must infect the market process with an ineradicable tendency to disequilibrium. It must be allowed that, if we accept Hayek’s view of equilibrium as a process in which men’s plans are coordinated by trial and error over time, there can be nothing apodictically certain about this process: conceivably, under some conditions of uncertainty in which hither to reliable expectations are repeatedly confounded, large scale discoordination could occur in the market process.

Three counter-observations are in order, however. First, nothing in Shackle’s argument tells against the point, defensible both on theoretical grounds and as an historical interpretation, that in practice by far the most destabilizing factor in the market process is provided by governmental intervention. Secondly, and relatedly, it is unclear that the kind of disequilibrium of which Shackle speaks—disequilibrium generated by divergency in subjective expectations—could amount to anything resembling the classical business cycle, which is more plausibly accounted for in Austrian and Hayekian terms as a consequence of governmental intervention in the interest rate structure.

And thirdly, it is unclear that Shackle’s argument shows the presence in the market process of any tendency to disequilibrium. What we have in the market process is admittedly a ‘kaleidic’ world, in which expectations, tastes, and beliefs constantly and unpredictably mutate. Yet, providing market adaptation is unhampered, what we can expect from the market process is an uninterrupted series of monetary equilibrium tendencies, each of them asymptotic—never quite reaching equilibrium—and each of them soon overtaken by its successor. In this kaleidic world there may well be no apodictic certainty that we shall never face large-scale, endogenous discoordination, but we are nevertheless on safe ground in preferring that the self-regulating tendencies of the process be accorded unhampered freedom and that governmental intervention be recognized as the major disruptive factor in the market process. We are on safe ground, then, in discerning in the tendency to equilibrium in the market process the formation of spontaneous order in the economic realm.

Clarifying Hayek’s Moral Theory

Given that we recognize governmental intervention to be the greatest subverter of spontaneous order in the realm of economic exchange, what legal framework is to be adopted for the regulation of economic life? Here we come to one of the most fascinating and controversial of Hayek’s contributions to social philosophy, his account of individual liberty under the rule of law. Before we can address ourselves to some of the problems surrounding Hayek’s contribution to philosophical jurisprudence, however, a few words must be said about Hayek’s moral theory, since few aspects of Hayek’s work are so often misunderstood. Hayek has been characterized as a moral relativist, an exponent of evolutionary ethics and, less implausibly but nonetheless incorrectly, as a rule-utilitarian. Let us see if we can dissipate the confusion.

In the first place, moral life for Hayek is itself a manifestation of spontaneous order. Like language and law, morality emerged undesigned from the life of men with one another: it is so much bound up with human life, indeed, as to be partly constitutive of it. The maxims of morality, then, in no way presuppose an authority, human or divine, from which they emanate, and they antedate the institutions of the state. But, secondly, the detailed content of the moral conventions which spring up unplanned in society is not immutable or invariant. Moral conventions change, often slowly and almost inperceptibly, in accordance with the needs and circumstances of the men who subscribe to them. Moral conventions must (or Hayek’s account of them) be seen as part of the evolving social order itself.

Now at this point it is likely that a charge of ethical relativism or evolutionism will at once be levelled against Hayek, but there is little substance to such criticisms. He has gone out of his way to distinguish his standpoint from any sort of evolutionary ethics. As he put it in his Constitution of Liberty:

Hayek’s argument here, then, is manifestly not that we can invoke the trend of social evolution as a standard for the resolution of moral dilemmas, but rather that we are bound to recognize in our current moral conventions the outcome of an evolutionary process. Admittedly, inasmuch as nothing in the detailed content of our moral conventions is unchanging or unalterable, this means that we are compelled to abandon the idea that they have about them any character of universality or fixity, but this is a long way from any doctrine of moral relativism. As Hayek observes in his remarks on the ambiguity of relativism:

Hume’s Influence on Hayek’s Social Philosophy

Hayek does not, then subscribe to any sort of ethical relativism or evolutionism, but it is not altogether clear from these statements if he thinks humanity’s changing moral conventions have in fact any invariant core or constant content. In order to consider this last question, and to attain a better general understanding of Hayek’s conception of morality, we need to look at his debts to David Hume, whose influence upon Hayek’s moral and political philosophy is ubiquitous and profound.

Hayek follows Hume in supposing that, in virtue of certain general facts about the human predicament, the moral conventions which spring up spontaneously among men all have certain features in common or (in other words) exhibit some shared principles. Among the general facts that Hume mentions in his Treatise, and which Hayek cites in “The Legal and Political Philosophy of David Hume” (in B-13), are men’s limited generosity and intellectual imperfection and the unalterable scarcity of the means of satisfying human needs. As Hayek puts it succinctly: “It is thus the nature of the(se) circumstances, what Hume calls ‘the necessity of human society,’ that gives rise to the ‘three fundamental laws of nature’: those of ‘the stability of possessions, of its transference by consent, and of the performance of promises.’” And Hayek glosses this passage with a fuller citation from Hume’s Treatise: “Though the rules of justice be artificial, they are not arbitrary. Nor is the expression improper to call them Laws of Nature; if by natural we understand what is common to any species, or even if we confine it to mean what is inseparable from the species.”

Hume’s three rules of justice or laws of nature, then, give a constant content to Hayek’s conception of an evolving morality. They frame what the distinguished Oxford jurist, H. L. A. Hart, was illuminatingly to call “the minimum content of natural law.” The justification of these fundamental rules of justice, and of the detailed and changing content of the less permanent elements of morality, is (in Hayek’s view as in Hume’s)that they form indispensable conditions for the promotion of human welfare. There is in Hayek as in Hume, accordingly, a fundamental utilitarian committment in their theories of morality. It is a very indirect utilitarianism that they espouse, however, more akin to that of the late nineteenth-century Cambridge moralist Henry Sidgwick (1838–1900) than it is to Jeremy Bentham or John Stuart Mill. The utilitarian component of Hayek’s conception of morality is indirect in that it is never supposed by him that we ought or could invoke a utilitarian principle in order to settle practical questions: for, given the great partiality and fallibility of our understanding, we are in general better advised to follow the code of behavior accepted in our own society. That code can, in turn, Hayek believes, never properly be the subject of a rationalist reconstruction in Benthamite fashion, but only reformed piecemeal and slowly. In repudiating the claims that utilitarian principles can govern specific actions and that utility may yield new social rules, Hayek shows himself to be an indirect or system utilitarian, for whom the proper role of utility is not prescriptive or practical but rather as a standard of evaluation for the assessment of whole systems of rules.

Hayek’s Utilitarianism & Liberty

Again however, Hayek’s utilitarian outlook is distinctive in that he explicitly repudiates any hedonistic conception of the content of utility itself. How, then, does he understand utilitarian welfare? Just how are we to assess different systems of rules in regard to their welfare-promoting effects? Here Hayek comes close to modern preference utilitarianism, but gives that view an original formulation, in arguing that the test of any system of rules is whether it maximizes an anonymous individual’s chance of achieving his unknown purposes. In Hayek’s conception, we are not bound to accept the historical body of social rules just as we find it: it may be reformed in order to improve the chances of the unknown man’s achieving his goals. It will be seen that this is a maximizing conception, but not one that represents utility as a sort of neutral stuff, a container of intrinsic value whose magnitude may vary. Indeed, in taking as the point of comparison an hypothesized unknown individual, Hayek’s conception (as he recognizes) parallels John Rawls’ model of rational choice behind a veil of ignorance as presented in Rawls’ Theory of Justice.

Mention of Rawls’ contractarian derivation of principles of justice at once raises the question of how Hayek’s indirect or system utilitarian argument is supposed to ground the rules of justice he defends, and, in particular, how Hayek’s defense of the priority of liberty squares with his utilitarian outlook.

Several observations are apposite here. First, Hayek undoubtedly follows Hume in believing that, because they constitute an indispensable condition for the promotion of general welfare, the rules of justice are bound to take priority over any specific claim to welfare. Again, it is to be noted that Hume’s second rule of justice, the transference of property by consent, itself frames a protected domain and so promotes individual liberty. Finally, Hayek argues forcefully that, if individuals are to be free to use their own knowledge and resources to best advantage, they must do so in a context of known and predictable rules governed by law. It is in a framework of liberty under the rule of law, Hayek contends, that justice and general welfare are both served. Indeed, under the rule of law, justice and the general welfare are convergent and not conflicting goals or values.

Criticisms of Hayek’s Universalizable ‘Rule of Law’

This fundamental criticism of Hayek, stated powerfully by Hamowy and Raz and endorsed in eariler writings of my own, now seems to me to express an impoverished and mistaken view of the nature and role of Kantian universalizability in Hayek’s philosophical jurisprudence. It embodies the error that, in Hayek or indeed in Kant, universalizability is a wholly formal test.

In his “Principles of a Liberal Social Order,” (A-115, in B-13) Hayek tells us: “The test of the justice of a rule is usually (since Kant) described as that if its ‘universalizability,’ i.e. of the possibility of willing that rules should be applied to all instances that correspond to the conditions stated in it (the ‘categorical imperative’).” As an historical gloss, Hayek observes that:

Hayek’s own argument, that applying Kantian universalizability to the maxims that make up the legal order yields liberal principles of justice which confer maximum equal freedom upon all, has been found wanting by nearly all his critics and interpreters. Thus Raz quotes Hayek as follows:

Raz comments on this passage: “Then, aware of the absurdity to which this passage leads, he modifies his line, still trying to present the rule of law as the supreme guarantee of freedom…”

Similarly, discussing Hayek’s criteria that laws should not mention proper names and that the distinctions which the law makes be supported both within and without the group which is the subject of legislation, Hamowy comments:

How are these standard objections to be rebutted?

Meeting Objections to the Universalizability Test

We must first of all note that, even in Kant and in Kantian writers other than Hayek, such as R.M. Hare and John Rawls, the test of universalizability does far more than rule out reference to particular persons or special groups. The test of universalizability does indeed, in the first instance, impose a demand of consistency as between similar cases, and in that sense imposes a merely formal requirement of non-discrimination. This is the first stage or element of universalization, the irrelevance of numerical differences. But the next stage of universalization is that of asking whether one can assent to the maxim being assessed coming to govern the conduct of other towards oneself: this is the demand of impartiality between agents, the demand that one put oneself in the other man’s place. And this element or implication of universalizability leads on to a third, that we be impartial as between the preferences of others, regardless of our own tastes or ideals of life—a requirement of moral neutrality. I do not need to ask here exactly how these elements of universalizability are related to one another, to ask (most obviously) if the second is entailed by the first in any logically inexorable way, or similarly the third by the second. It is enough to note that there is a powerful Kantian tradition according to which strong implications do link the three phases of universalization, and that this is a tradition to which Hayek himself has always subscribed.

Applying the full test of universalizability to the maxims that go towards making a legal order, we find that, not only are references to particulars ruled out, but the maxims must be impartial in respect of the interests of all concerned, and they must be neutral in respect of their tastes or ideals of life. If it be once allowed that the test of universalizability may be fleshed out in this fashion, it will be seen as a more full-blooded standard of criticism than is ordinarily allowed, and Hayek’s heavy reliance on it will seem less misplaced. For, when construed in this fashion, the universalizability test will rule out (for example) most if not all policies of economic intervention as prejudicial to the interests of some and will fell all policies of legal moralism. Two large classes of liberal policy, supposedly allowable under an Hayekian rule of law, thus turn out to be prohibited by it.

Hayek himself is explicit that the test of universalizability means more than the sheerly formal absence of reference to particulars. As he puts it:

The maxims tested by the principle of universalizability, then, must be integrated into a system of nonconflictable or (in Leibniz’ terminology) compossible rules, before any of them can be said to have survived the test.

Again, the compatibility between the several rules is not one that holds in any possible world, but rather that which obtains in the world in which we live. It is here that Hayek draws heavily on Hume’s account of the fundamental laws of justice, which he thinks to be, not merely compatible with, but in a large measure the inspiration for Kant’s political philosophy. As I have already observed, the practical content of the basic rules of justice is given in Hume by anthropological claims, by claims of general fact about the human circumstance. It is by interpreting the demands of universalizability in the framework of the permanent necessities of human social life that we derive Hume’s three laws of natural justice.

Kantian Universalizability & Liberal Justice

Note again that, in Hume, as in Hayek, the laws of justice are commended as being the indispensable condition for the promotion of general welfare, i.e. their ultimate justification is utilitarian. But in order to achieve this result, neither Hayek nor Hume need offer any argument in favor of our adopting a Principle of Utility. Rather, very much in the spirit of R.M. Hare’s Kantian reconstruction of utilitarian ethics, Hayek’s claim is that an impartial concern for the general welfare is itself one of the demands of universalizability. A utilitarian concern for general welfare is yielded by the Kantian method itself and is not superadded to it afterwards. Hayek’s thesis, like Hume’s, is that a clear view of the circumstances of human life shows justice to be the primary condition needed to promote general welfare. But, like Hare and Kant, he thinks concern for both justice and the general welfare to be dictated by universalizability itself.

Hayek’s argument, then, is that the maxims of liberal justice are yielded by applying the Kantian universalizability test to the principles of the legal order. As he puts it:

Again, in listing the essential points of his conception of justice Hayek asserts:

There seem to be several elements, then, in Hayek’s contention that applying the Kantian test to the legal framework yields a liberal order. First, though he does not explicitly distinguish the three stages or phases of universalization I mentioned earlier, he is clear that the universalizability test is not only formal, and that it comprehends the requirement that the scheme of activities it permits in the real world would be conflict-free. Second, at any rate in a society whose members have few if any common purposes, law must have a largely formal character, stipulating terms under which men may pursue their self-chosen activities rather than enjoining any specific activities on them; in the term Hayek adopts from Oakeshott, the form of legal rule appropriate to such an abstract or open society is “nomocratic” rather than “teleocratic,” purpose-neutral rather than purpose-dependent. Third, in a society whose members lack common purposes or common concrete knowledge, only abstract rules conferring a protected domain on each can qualify as rules facilitating a conflictfree pattern of activities. This means that the conditions of our abstract or open society will themselves compel adoption of a rule conferring just claims to liberty and private property—which Hayek rightly sees and indissolubly linked—once these conditions are treated as the appropriate background for the Kantian test.

One crucially important implication of this last point, noted in all of Hayek’s political writings over the last twenty years but spelled out most systematically in the second volume of his recent trilogy, Law, Legislation and Liberty, is that the rules of justice which survive the Kantian test can prescribe justice only in the procedures and never in end-states. As Hayek puts it, explicating Hume: “There can be no rules for rewarding merit, or no rules of distributive justice, because there are no circumstances which may not affect merit, while rules always single out some circumstances as the only relevant ones.”

This pattern of argument is an important and striking one, worth examining in detail on its merits, and not capable of being dismissed as prima facie unworkable. One important point may be worth canvassing, however. Hayek argues that once the legal framework has been reformed in Kantian fashion, it must of necessity be one that maximizes liberty. Hamowy goes so far as to assert that Hayek defines liberty as conformity with the rule of law. Now, whereas not every aspect of Hayek’s treatment of freedom and coercion is clear or defensible, it seems a misinterpretation to say that he ever defines freedom as consisting solely in conformity with the rule of law. Rather, he takes such conformity to be a necessary condition of a free order. His thesis is that applying the Kantian test to the legal order will of itself yield a maxim according equal freedom to all men. So it is not that the rule of law contains freedom as part of its definition, but rather that a freedom-maximizing rule is unavoidably yielded by it. In other terms, we may say that, whereas moral rights do not come into Hayek’s theory as primordial moral facts, the right to a protected domain is yielded by his conception as a theorem of it.

If Hayek is right that his method shows the unacceptability of contemporary patterned conceptions of justice, for example, and if, as I think, he has shown that only procedural justice can be squared with the liberal maxim demanding equal freedom of action, then we can begin to see the measure of his achievement. Certainly, his Kantian derivation of equal freedom deserves close and sympathetic scrutiny, and it cannot be assumed without argument that Hayek’s system cannot protect individual rights or claims to justice simply because such rights do not enter the system at a fundamental level. For the most original and striking claim of Hayek’s legal and political philosophy, which in this respect may be regarded as a synthesis of the theories of justice of Hume and Kant, is that applying the rational test of universalizability to the conditions of our world must of necessity yield a system of rules in which a protected domain of individual liberty is secured.

James Buchanan on Hayek

One of the clearest and deepest statements of some of the difficulties in Hayek’s use of spontaneous order arguments may be found in James M. Buchanan’s writings. In an important paper, Buchanan observes that, in Hayek’s later writings we find:

Buchanan’s criticism, then, is that Hayek’s apparent extension of spontaneous order or evolutionary arguments from the market processes to institutional structures is bound to disable the tasks of criticism and reform. We are left with no leverage in Hayek’s account which might be used against the outcomes of the historical process. Instead, it seems, we are bound to entrust ourselves to all the vagaries of mankind’s random walk in historical space.

In an earlier critique, Buchanan noted perceptively the phenomenon of “spontaneous disorder” —the emergence of patterns of activity that thwart the purposes and damage the interests of all who participate in them. Such “spontaneous disorder” is, after all, the core of the idea of the Prisoner’s Dilemma, which has been explored imaginatively in Buchanan’s writing in its political and constitutional applications. The neglect in Hayek’s political work in English of any treatment of the problem this Dilemma poses for his system invites the attempt to accomodate these fundamental objections.

It is clear, however, that as it stands Hayek’s conception of spontaneous order needs revision or at least refinement. Buchanan’s identification of certain states of affairs as manifesting spontaneous disorder suggests the question whether the idea of spontaneous order in Hayek is a value-free explanatory notion or else a moral notion of some sort. If the former—as Hayek’s examples of spontaneous order in nature suggest—then spontaneous order really functions as a cipher for invisible hand explanations of the sort brilliantly discussed by Robert Nozick in his Anarchy, State, and Utopia.

We might then be compelled to regard the growth of interventionism and of the welfare state, and even certain aspects of the functioning of totalitarian regimes, as exemplifying spontaneous order inasmuch as we might be able to explain these social phenomena as the unintended outcomes of human action. If, on the other hand, spontaneous orders are taken as embodying positive moral values—if, that is to say, the idea of a maleficient or destructive spontaneous order is repudiated as incoherent—then it seems clear that Hayek requires a far bolder moral theory than any he has advanced thus far. In particular, such a moral theory would need to bridge the gap between evaluative and descriptive language which is a feature of modern moral philosophy, and in this and other respects it would need to come much closer to natural law ethics than Hayek has ever himself done.

Buchanan’s critique is decisive, then, in compelling Hayek to clarify the idea of spontaneous order as being either a moral notion, which might plausibly be embedded only in some variant of natural law ethics, or else as a value-free explanatory concept whose political uses must then be made more explicit than Hayek has heretofore done.

Buchanan’s critique is important, again, in disclosing that Hayek’s attitude to rationalism is ambivalent and unstable. If we adopt the latter view of spontaneous order as a value-free explanatory idea, its uses in political argument depend upon two kinds of considerations. First, they must invoke a political ethics, which arguably is given by Hayek’s synthesis of Hume with Kant. More problematically, however, the use of an explanatory idea of spontaneous order in political argument presupposes that we have a genuine theoretical or synoptic knowledge of social life of just the sort that Hayek occasionally suggests is impossible. This is to say that, if we are to make use of the idea of spontaneous social order in framing or reforming social institutions so as to make best use of society’s spontaneous forces, we need to invoke a theoretical model of social structure and social process which gives some assurance as to the outcome of our reforms. To this extent, contrary to some of Hayek’s recommendations but in line with a part of his recent practice, we cannot avoid adopting a critical rationalist stance toward our inherited institutions and the historical process. This is true, whether we accept Hayek’s own effort at a political ethics, or Buchanan’s neo-Hobbesian contractarian constitutionalism.

Michael Oakeshott on Hayek

These cited points are reinforced if we consider Michael Oakeshott’s attitude to Hayek’s work. Oakeshott is a more intrepid traditionalist than Hayek in that Oakeshott claims that we cannot in the end do anything but accept the traditions which we inherit in our society. Certainly, we cannot appraise our traditions by reference to any transcendental standard of reason or justice, since such standards (in Oakeshott’s view) necessarily turn out to be abridgements of our traditions themselves. Like Hayek, then, Oakeshott maintains that all moral or political criticism must be immanent criticism, but, unlike Hayek, he denies that there is any inherent or evolutionary tendency for the development of traditional practices to converge on liberal institutions. For this reason Oakeshott would insist that his conception of civil association or nomocracy—upon which, as we have already seen, Hayek draws in his conception of the juridical framework of the liberal order—is a description of a strand of practice in the modern European state and has no necessary application beyond the cultural milieu in which it came to birth. Oakeshott would accordingly repudiate the implicit universalism of Hayek’s argument for the liberal order.

To some extent, of course, Hayek concedes that there cannot be universal scope for liberal principles when he allows that the Great or Open Society is itself an evolutionary emergence from rude beginnings. Where he differs from Oakeshott is in affirming that the Great or Open Society in which liberal principles are uniquely appropriate represents the future of all mankind. In this respect, Hayek continues to subscribe to an Enlightenment doctrine of universal human progress which Oakeshott has abandoned. I do not mean that Hayek has ever endorsed the belief that historical change is governed by a law of progressive development, but rather that he seems to take for granted (what surely is most disputable) that the unhampered natural selection of rival practices and traditions will result in a general convergence on liberal society.

Hayek’s Voluntaristic Traditionalism: A Market in Traditions

There is in Hayek’s work an argument for voluntaristic traditionalism which goes some way toward answering this question. Hayek sees that the principal cause of the erosion of definitive moral traditions in advanced societies is not so much the market itself, but rather interventionist policies sponsored by governments. Often with the support of business, governments have contributed to the erosion of moral traditions by their educational, housing, and welfare policies. Hayek’s argument for a voluntaristic traditionalism distinguishes him from neo-conservatives, firstly in that he would argue that it is government interventionism which causes much of the contemporary moral malaise and because he would not seek to use government power to prop up faltering traditions. Rather, he seeks to establish something like a market in traditions, in the hope that the traditions which would emerge from an unhampered social life would be most congenial to the stability of the market order itself. In his argument for a competitive and voluntaristic traditionalism, Hayek plainly treats particular traditional communities as filter devices for social practices of the sort Robert Nozick discusses in his fascinating and profound account of the framework of utopia.

It cannot be said unequivocably that Hayek’s libertarian traditionalism answers the most profoundly disturbing doubts of the neo-conservatives. In particular, Hayek’s advocacy of procedural justice, with the role of chance in distributing incomes being recognized clearly, confronts the difficulty that the moral defense of capitalism has chiefly been conducted by reference to the notion of desert. By comparison with this traditional defense, Hayek’s apologia for the market order may be, as Kristol observes, “nihilistic.”

Against this criticism Hayek may justifiably maintain that there is a sheer conflict between traditional sentiments of desert and merit and any clear-sighted defense of the market order—a conflict which the neo-conservative endorsement of the market order does nothing to resolve.

Kristol’s criticism of Hayek has other, and perhaps profounder aspects, however. Hayek recognizes that contemporary moral sentiment is by no means uniformly, or even generally, favorable to the market order, and, both in his writings on Mandeville and elsewhere, Hayek has implicitly acknowledged that the spontaneous growth of moral norms may not, in fact, yield results congenial to a stable market order. At the same time, Hayek continues to advocate a strong form of moral conventionalism, resisting the claims of those who see modern morality as in need of radical reform. There is thus a tension, perhaps irresolvable in terms of Hayek’s system, between his Mandevillian moral iconoclasm and his moral conservatism.

∗A note stimulated by reading Norman Barry, “The Tradition of Spontaneous Order,” Literature of Liberty, V (Summer 1982), 7–58.

Center for the Study of Public Choice George Mason University (after 1983)

[I]f there is nothing unforeseen, no invention or creation in the universe, time is useless… For time is here deprived of efficacy, and if it does nothing, it is nothing.

“SPONTANEOUS ORDER”—A COMPLEX IDEA

Norman Barry’s richly erudite essay on the “tradition of spontaneous order” could, I believe, have provided even more valuable historical insight with the help of a simple yet highly significant distinction (somehow not articulated in the essay.) Barry sees the idea of spontaneous order as consisting in the view “that most of those things of general benefit in a social system are the product of spontaneous forces that are beyond the direct control of man.” What is not made clear in Barry’s paper, however, is the circumstance that this idea is itself made up of two quite distinct and separate ideas—each of which is, in a way, entitled to its own (admittedly not entirely separate) history.

Consider the position of critics of the idea of spontaneous order. Such critics may deny the validity of the idea on either (or both) of two quite distinct sets of grounds. (So that the affirmation of the idea of spontaneous order presumes the refutation of bothgrounds.) First, critics may argue that, in the absence of the “direct control of man,” social phenomena emerge in entirely haphazard, unsystematic fashion. For example, it may be held that the results produced by a free market exhibit no orderliness whatsoever, benign or otherwise. Second, it may be argued that, although analysis of decentralized, non-controlled, freely interacting systems may indeed demonstrate the spontaneous emergence of regularities, these regularities must, nonetheless, be judged as carrying implications for society that are the oppostie of benign. Conversely, therefore, to uphold the idea of spontaneous order means to uphold two ideas: (1) the idea that permitting spontaneous social forces to work themselves out results in systematic, rather than in random or chaotic results; (2) the idea that the normative character of these systematic results can hardly be judged as other than socially beneficial. Clearly this second idea could have little scope without acknowledgement of the first. But, on the other hand, acceptance of the first idea carries with it, of itself, no commitment to the second.

Ludwig von Mises, in fact, saw the great contribution of the classical economists in a manner not depending on the second idea at all. This contribution consisted, Mises wrote, in the demonstration that “there prevails” in the course of social events, “a regularity of phenomena to which man must adjust his actions if he wishes to succeed.” (Human Action, 1949, p. 2). What separated the great classical economists from their predecessors was that the latter (because they “were fully convinced that there was in the course of social events no such regularity and invariance of phenomena as had already been found in the operation of human reasoning and in the sequence of natural phenomena”) believed “that man could organize society as he wished.” This discovery of the inherent regularities that emerge spontaneously from free society interaction represented the major scientific breakthrough in the history of social understanding. To be sure many of the exponents of this discovery recognized, in addition, the benigncharacter of these regularities. But many (one thinks perhaps of Marx, Pigou, Keynes) have questioned the social desirability of at least some aspects of these accepted regularities. Thus the ranks of those skeptical of the idea of spontaneous economic order have been swelled, in the past, not only by historicist or institutionalist critics of the possibility of economic theory as such, but also by economic theorists who have claimed, correctly or otherwise, to perceive theory as showing the systematic emergence of socialimmoralities or social inefficiencies.

In tracing the history of the idea of spontaneous order, therefore, it would appear of value to trace through the development of each of these two separable components of the complex idea of spontaneous order. Precisely because the separate components have often appeared together in integrated form, it would be useful to trace the separable traditions from which they have emerged over the centuries.

It will be noticed that Barry does take pains (pp. 11–12) to distinguish two distinct senses of “spontaneous order.” One refers to “a complex aggregate structure which is formed out of the uncoerced action of individuals.” The second refers to “the evolutionary growth of laws and customs through a…’survival of the fittest’ process” (with this second kind of undesigned process quite possibly producing dead-ends the escape from which might be held to call for massive centralized control.) Barry’s distinction certainly presupposes the possibility, at least, of articulating the distinction offered in this note. Our argument here, however, is that Barry’s superb historical survey could have offered an even richer yield if it were presented with explicit attention to the historical antecendents of this latter distinction itself.

ON “THE TRADITION OF SPONTANEOUS ORDER”

Norman Barry (Literature of Liberty 5, Summer 1982) has hinted at a crucial problem in Hayek’s evolutionary theory of spontaneous orders. Hayek claims that “all progress must be based on tradition,” but, Barry points out, this would seem to lead to a conclusion uncomfortable for libertarian ideology:

How indeed?

The difficulty with the way Barry puts the question is that it seems to misconstrue the purpose of theories of social evolution. Even if we agree with Hayek that cultures evolve as the unintended and largely unconscious consequences of human action, that carries with it no necessary implication about how one should morally evaluate a society or a social practice. A scientific theory about how societies do in fact evolve cannot be taken as a basis for ethical judgment without some very carefully thought-out intervening steps. Furthermore, to say that “all progress must be based on tradition” is not also to say that we cannot imagine or work toward whatever idea of progress we adopt. Indeed, it may only be possible to effect social change by starting from a firm basis in tradition, but that says nothing about the moral worth of tradition from which we start.

The hidden premise in Hayek’s work, and the source of Barry’s criticism, is the idea that evolution somehow must progress toward “the good.” Yet if evolution is a process in which the fittest survive, what are we to make of the fact that some very unpleasant societies have survived? Hayek’s way out of that trap is to implicitly limit evolution toward “the good” to that which evolves spontaneously as humans search to discover rules of just behavior rather than to design them, while bad change is the product of “constructivist rationalism.” Thus Hayek gives us a way of judging different societies, but he does not gives us a scientific explanation of why spontaneous orders often seem to lose out in the evolutionary struggle to more constructed societies. To reply, as some of my colleagues do, that constructivist change can only win via use of force really begs the question. Force is as much a means to achieve ends at the disposal of human beings as is persuasion and exchange. A theory of cultural evolution must be able to explain the change that has in fact occured apart from any judgments about good or bad change. Hence the question remains: why do some cultures thrive and prosper while others wither and die? Even more to the point, is there a natural selection process at work for human culture analogous to the natural selection process hypothesized for the biological world?

Hayek does want to incorporate a theory of natural selection into his evolutionary theory. For Hayek, cultures are successful because they evolve in a way that economizes on the amount of articulated knowledge necessary for an individual to function in that society. Those cultures survive which incorporate in their customs and rules of behavior practices which unbeknownst to individuals in that culture are important to their survival. While that seems a useful starting place for a theory of natural selection among cultures, we still have no theory about how cultural practices arise, and what kinds are “naturally selected.” Answers to both questions are crucial to the development of a full theory of cultural evolution. They are also crucial if we want to have any chance of changing the less than satisfactory society in which we live today.

This is not the place to attempt to develop a theory of natural selection in cultural evolution. Instead I would like to raise some questions that such a theory would have to address to be complete.

First of all, how do cultural practices and institutions originate? While we can agree with Hayek that spontaneous orders arise from the unintended consequences of human action, one imagines that the originating actions must have been intentional in some sense. Humans act because they believe their actions have consequences. What is the relationship between intended outcomes and unintended consequences? To what extent are the expected results of various actions realized, and what differentiates intentional acts that fulfill expectations from those that do not? Are there no institutions that are the product of conscious design? In other words, what is the role of human intentions in the establishment of rules, customs, institutions, and political organizations?

Second, and equally important, if there is a natural selection process in cultural evolution, what is it that gets selected? In biological evolution, success is defined as survival of a trait in the gene pool or survival of a particular species. By what criterion are successful cultures selected? Some might argue that success of a culture is demonstrated by numbers of individuals surviving in a society—a population count. But then, what demographic characteristics describe a “larger” population? Would a population with a large number of births and high infant mortality be considered more successful than one with fewer births and more children surviving to adulthood? Both kinds of societies exist today. Which is more successful? Or would a large, relatively young population with a short life span for any one individual be considered more successful than a smaller population where individuals live longer productive lives?

Consider another possible criterion for describing a successful society: the ability of a society to command resources. This seems to be the implicit criterion used by economists when they speak of successful societies. If this is truly what “nature” selects for among cultures, than small wealthy cultures should always be observed to win out over potentially larger but poorer cultures. But then why do poor cultures coexist with wealthy ones, and why do poorer cultures sometimes survive (and even defeat) very wealthy ones? Success at commanding material resources might be a viable criterion to use as a basis for a theory of natural selection, but if so, the full implications of the theory have yet to be worked out.

Part of the problem with both these suggested criteria of natural selection is that the level of analysis is wrong. We fall into the habit of thinking of societies and political units rising and falling, winning and losing, when it would be a great deal more fruitful to think of specific ideas or specific practices as the substance of cultures and cultural change. In other words, a good theory, I believe, would disaggregate the societies into the various ideas and practices of which they are composed and view the ideas and practices as the units that “nature” selects. This is not inconsistent with Hayek’s work; he refers to human imitation as the transmission mechanism for cultural evolution in the same sense that genes are the transmission mechanism for biological evolution. What humans imitate are ideas and actions, and in so far as specific actions can be explained as ideas put into practice, it is ideas that arise, get imitated, and either survive in the ‘idea pool’ or get discarded.

If we are willing to think of ideas as the units of cultural evolution, a whole host of interesting possibilities present themselves.

For instance, how do new ideas and combinations of ideas arise, and why do some ideas appeal to individuals enough to be “imitated” or believed while others do not? Are there different criteria that individuals apply for selecting among ideas? If we start from the premise that individuals choose (in some sense) the ideas they believe, one can then take the next step of assuming they choose ideas to fulfill purposes. But what criteria do individuals apply to choose among competing ideas? The criteria may vary depending on the nature of the idea. For example, technical ideas that explain how to do something to achieve a specific end are “selected” if they actually work. They are subject to a reality test that allows people to weed out useless ideas rather quickly, and hence one would expect to observe progress in technical knowledge. Moral ideas have a less obvious purpose and a very nebulous reality test; there is no easy way to discover whether they “work” or not. Hence, progress in moral knowledge might be as difficult to define as it is to observe. In either case, however, the “natural selection” process is a process of human selection among humanly inspired ideas. And the survival of the fittest becomes a survival of ideas that human beings believe are the fittest for their purposes.

On a more aggregated level, groups of individuals or societies have as a unifying force a common set of ideas, an ideology, that is a composite of many smaller sets of ideas that may or may not be consistent with each other. Survival of the group may depend on adherence to some of those ideas but not others, but since they are all accepted by the group as a bundle, there may be no way that individuals can determine which are crucial; the valuable traditions are bundled with the irrelevant. This is consistent with Hayek’s view of the value of tradition. By developing a theory of cultural evolution based on the idea as the cultural analogue of the gene in biology, however, we might be able to develop a theory to help us “unbundle” the ideas inherent in a tradition in a way that will make progress toward the libertarian ideal possible.

A theory of spontaneous order is a first step, but only a first step, to understanding the process of cultural change.

The reader will probably wonder by now what role there remains to be played by reason in the ordering of social affairs… We have certainly not meant to imply…that reason has no important positive task. Reason undoubtedly is man’s most precious possession. Our argument is intended to show merely that it is not all powerful… What we have attempted is a defense of reason against its abuse by those who do not understand the conditions of its effective functioning and continuous growth… What we must learn to understand is…that all our efforts to improve things must operate within a working whole which we cannot entirely control…None of these conclusions are arguments against the use of reason, but only arguments against such uses as require any exclusive and coercive powers of government. (pp. 69–70)

Our issue may now be pointed by asking whether…human civilization is the product of human reason, or whether…we should regard human reason as the product of civilization… Nobody will deny that the two phenomena constantly interact. (“Kinds of Rationalism,” in:Studies in Philosophy, Politics and Economics, p. 186)

While the rules on which a spontaneous order rests may also be of spontaneous origin, this need not always be the case… It is possible that an order which would still have to be described as spontaneous rests on rules which are entirely the result of deliberate design. (Law, Legislation and Liberty, Vol. 1, pp.45–46)

Their gradual perfection will require the deliberate efforts of judges (or others learned in the law) who will improve the existing system by laying down new rules. Indeed, law as we know it could never have fully developed without such efforts of judges, or even the occasional intervention of a legislator to extricate it from the dead ends into which the gradual evolution may lead it, or to deal with altogether new problems. (Law, Legislation and Liberty, Vol. 1, p. 100)

Voluntary rules…allow for gradual and experimental change. The existence of individuals and groups simultaneously observing partially different rules provides the opportunity for the selection of the more effective ones. (The Constitution of Liberty, p. 63)

What we wish to stress…is…the importance of the existence of numerous voluntary associations, not only for the particular purposes of those who share some common interest, but even for public purposes in the true sense. (Law, Legislation and Liberty, Vol. 2, p. 151)

Since rules of just conduct can affect only the chances of success of the efforts of men, the aim in altering or developing them should be to improve as much as possible the chances of anyone selected at random. (Law, Legislation and Liberty, Vol. 2, pp. 129–30)

1.1 Smith, Virtue and Commercial Society

Barry quoted Adam Smith on the ‘fatal dissolution that awaits every state and constitution whatever,’ but he made no more of it than to say that ‘the explanation of spontaneous order in the non-economic sphere may slip unintentionally into a kind of determinism.’ But the ‘fatal dissolution’ theme in fact goes with the concern about the ‘inadequacies’ of a commercial system, and the misgivings about its impact on civic virtue, that Barry discusses in connection with both Ferguson and Smith. It is all, I think, most plausibly understood as the tail-end of the ‘civic humanist’ tradition, stemming from the works of Polybius and Machiavelli, and then influential in the work of many other figures in the history of political thought.

The civic humanist tradition included the theme of the cyclical development of constitutional orders, and of each ‘good’ constitutional form in time becoming corrupt, and declining into its corresponding ‘bad’ form; but where there is a possibility that this corruption, and thus the decline, might be halted through the actions of a ‘statesman.’ This theme, it seems to me, is both echoed and transformed not only in Smith and Ferguson’s depictions of the disadvantages of commercial society, but also in the interventionism that Smith produces in response, much of which may, I think, be seen as an attempt to safeguard virtue in the face of the corrupting influences of commercial society.

1.2 Hayek and the Self-Destruction of a Free Society

Barry rightly emphasizes Hayek’s concern about the breakdown of a cosmos under the impact of interventionism. What is not, perhaps, adequately stressed is the way in which a free society could, on Hayek’s account, be expected to break down of its own accord. For Hayek, following Mandeville and Hume, emphasizes that a free society depends, crucially, for its functioning, on arrangements (including both the market itself and the legal order appropriate to it) some features of which will strike the individual members of that society as unfair or undersirable. If they could understand how these mechanisms function, Hayek thinks, they would see that all is for the best. But Hayek, here following the Scottish Historical School, takes a realistically skeptical view about the role of human reason in society. In Hayek’s view, the individual’s compliance with these institutions was earlier archived through the influence of custom and uncritically accepted religious belief. But the power of these has, Hayek thinks, been weakened by the development of the market order itself—which, indeed, could be described as having created the social preconditions for the possible practice of Hayek’s false individualism.

Hayek believes that, for a free society to flourish—or even for it to continue in existence—individuals must take up an attitude of ‘humility’ toward the various social forces and processes which they do not understand, but which play a positive role in a free society. But how, on Hayek’s account, is it possible for them to know which are the forces etc. before which they should be humble? Hayek certainly does not advocate a generalattitude of the passive acceptance of existing arrangements, and, in some areas, he is all in favor of innovation and change. But how is the individual member of society supposed to tell which elements of his heritage are to be conserved and which overthrown? Here, Hayek seems to oscillate between a view which plays up the role of ideas in society and the possibility of a rational understanding of how society functions (at least for the ‘intellectual’), and a view which emphasizes the role of the customary, the traditional and the tacit. It is difficult to see how any resolution of this problem can be offered within the compass of Hayek’s work, and I think that it is a more general problem for libertarianism, too.

Transactors will not be able to sort out the relevant “real” price signals from the relative price changes due to … inflationary leads and lags. How could they? Messages of changes in “real scarcities” come in through a cacophony of noises signifying nothing…and “sound” no different. To assume that agents generally possess the independent information required to filter the significant messages from the noise would…amount to assuming knowledge so comprehensive that reliance on market prices for information should have been unnecessary in the first place.

A. Gold: A Note on the “Classical” Solution

The oldest and certainly most familiar solution to the corrupting effects of state-controlled paper money is a return to a gold standard. To many of us, the idea of reintroducing the use of specie (coined precious metals) and specie-convertible bank liabilities as exchange media is practically synonymous with a return to stable money. The essential virtue of a monetary system based on “hard” currency is perhaps best expressed by one of the leading proponents of the gold standard, Hans F. Sennholz. He writes, in his Inflation or Gold Standard:

As anyone pursuing the question of monetary reform soon discovers, a mountain of literature—both popular and technical —has been published over the years on the nature and benefits of commodity money. Ludwig von Mises, in The Theory of Money and Credit, has deeply explored the distinctions among the three types of money: commodity money, credit money, and fiduciary, fiat, or “token” money. Of late, the leading advocates of the reinstitution of a gold standard have included Murray N. Rothbard, Henry Hazlitt, and Hans F. Sennholz.

Of related interest is the concept of a “commodity reserve” currency convertible not into coin but into a wide “basket” of standardized goods. Unlike a gold coin standard, a commodity reserve system would necessarily have to be the technical creation of a few expert advisers. This proposal has been discussed by Friedrich Hayek and Milton Friedman among others.

Although much has been written on the pros and cons of a return to gold as the solution to the chaos of politically controlled fiat money, this classic debate will not be considered in further detail here. Instead we turn to reform proposals not based on re-establishment of convertibility for government-issued currencies. In this context, two alternative means of preventing continued government mismanagement of currency production have been suggested: imposing legislated constraints on the behavior of the monetary authority or, more radically, abolishing the government’s monopoly in currency production. An extremely significant literature has grown up in recent years out of the debate between these two camps concerning the most appropriate structure for a purely token money system. The first group supposes continued government monopolization, while the second argues for a free market in the issue of private currency.

B. Monetary Rules:

C. A Free Market Money System:
The Competing Currencies Alternative

For decades, programs for a rule-restrained government monopoly had no serious rivals in the area of proposals for reform of the existing, politically dominated monetary system. In the literature of monetary policy, the constitutionalists’ suggestions were the only seriously proposed alternative to thestatus quo —the gold standard aside—that promised to insure stability in the circulating medium’s exchange-value. Then, in 1976, F. A. Hayek published a short but professionally shocking book entitledDenationalisation of Money: An Analysis of the Theory and Practice of Concurrent Currencies. Hayek seriously proposed the exciting, challenging possibility of a spontaneous monetary order providing for its own token currency needs, without the involvement of government. The result was a major explosion of research into this new—free market—alternative to the state’s historically exclusive right to issue currency for the economy.

The argument for competition rests on the belief that people are likely to be wrong…. In the end, the case against an authoritarian system of resource allocation rests on the same principle as the case against an authoritarian structure in any discipline: part of the case…is that no person or body of persons is fit to be trusted with such power; the (other) part…is that no one person or group of persons can say for sure what new knowledge tomorrow will bring. Competition is a proper response to ignorance.

Comments and suggestions from Gary Anderson, James Buchanan, Robert Tollison, Gordon Tullock and Daniel Orr on earlier drafts of this essay are gratefully acknowledged. Of course they are absolved of responsibility for any errors or omissions that remain. Lawrence H. White contributed extensive editorial services to the final draft.