TGIF: On the Importance of Undesigned Order

Carl Menger, the founder of the Austrian approach to economics, was not the first or last thinker to see similarities between a society and a living organism, suggesting the existence of undesigned, spontaneous order. The names Adam Ferguson and Adam Smith, before Menger, and Herbert Spencer and F. A. Hayek, after Menger, come to mind.

Ferguson wrote in An Essay on the History of Civil Society (1767), "Every step and every movement of the multitude, even in what are termed enlightened ages, are made with equal blindness to the future; and nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design." (Emphasis added.) 

The result of human action, but not human design. The importance of this idea cannot be overstated. More than a century after Ferguson's book, Menger elaborated this unappreciated phenomenon in his Investigations into the Method of the Social Sciences (1883). 

Undesigned order may be the most counterintuitive idea around, but it is crucial to understanding how free societies work. Trump and his gang don't get it. Observe that he thinks he knows when the Federal Reserve should cut interest rates or how national trade statistics should look. The price system, of which interest rates are a part, is generated, not by a central plan, but by the countless daily decisions of buyers, sellers, and abstainers acting according to their articulated, unarticulated, and even inarticulable personal information, know-how, preferences, and purposes. That "data" cannot be recorded in a central and accessible place for use by anyone, bureaucrats included. So attempts at conscious government planning will only muck up the price system, along with everything else. A bull in a china shop is an apt image.

If you don't get this, you don't get freedom. Unfortunately, unplanned order is, as noted, counterintuitive. People construct some order in their lives, so it's natural to think that social order must have been designed by the government. That's a mistake.

But it shouldn't take much thought to overcome this incorrect intuition. After all, to use one of Menger's cases, no one thinks everyday languages were consciously designed. (How's Esperanto doing?) It's only a short leap from language to other spontaneous orders: custom, law, markets, and money. Menger made a lasting contribution to this subject. (See Lawrence H. White's Introduction in the Menger volume.)

Menger wrote (pp. 130ff):

The normal function and development of the unit of an organism are thus conditioned by those of its parts; the latter in turn are conditioned by the connection of the parts to form a higher unit; and finally the normal function and development of each single organ are conditioned by those of the remaining organs. 

We can make an observation similar in many respects in reference to a series of social phenomena in general and human economy in particular. Here, too, in numerous instances, phenomena present themselves to us, the parts of which are helpful in the preservation, the normal functioning, and the development of the unit, even conditioning these.... It is obvious that we have here a certain analogy between the nature and the function of natural organisms on the one hand and social structures on the other.

The same is true with respect to the origin of a series of social phenomena. Natural organisms almost without exception exhibit, when closely observed, a really admirable functionality of all parts with respect to the whole, a functionality which is not, however, the result of human calculation, but of a natural process. Similarly we can observe in numerous social institutions a strikingly apparent functionality with respect to the whole. But with closer consideration they still do not prove to be the result of an intention aimed at this purpose, i.e., the result of an agreement of members of society or of positive legislation. They, too, present themselves to us rather as "natural" products (in a certain sense), as unintended results of historical development.

Menger gave an example, for which he is justly famous:

One needs, e.g., only to think of the phenomenon of money, an institution which to so great a measure serves the welfare of society, and yet in most nations, by far, is by no means the result of an agreement directed at its establishment as a social institution, or of positive legislation, but is the unintended product of historical development. One needs only to think of law, of language, of the origin of markets, the origin of communities and of states, etc.

However, Menger warned that the analogy has limits:

Natural organisms are composed of elements which serve the function of the unit in a thoroughly mechanical way. They are the result of purely causal processes, of the mechanical play of natural forces. The so-called social organisms, on the contrary, simply cannot be viewed and interpreted as the product of purely mechanical force effects. They are, rather, the result of human efforts, the efforts of thinking, feeling, acting human beings. Thus, if we can speak at all of an "organic origin" of social structures, or, more correctly, of a part of these, this can merely refer to one circumstance. This is that some social phenomena are the results of a common will directed toward their establishment (agreement, positive legislation, etc.), while others are the unintended result of human efforts aimed at attaining essentially individual goals (the unintended results of these).... In the second case social phenomena come about as the unintended result of individual human efforts (pursuing individual interests) without a common will directed toward their establishment. [Emphasis added.]

Menger was implying that the rough analogy between society and living organisms can in no way be used to justify ideologies that view society as the body (corpus) of an organism, with the state or strongman as the head. Since a society is distinguished from an organism by its separate conscious, acting, choosing human beings, it follows that freedom is indispensable to the “health” of society, which cannot be conceived apart from the “health” of the individuals who comprise it.

Score another point for Carl Menger.

TGIF: Where the Socialists Go Wrong

Since socialism is "in" today -- even though many people who say they favor it have no idea what it is -- F. A. Hayek's last book, The Fatal Conceit: The Errors of Socialism (1988), is worth checking out. Hayek, the late great Nobel-laureate economist of the Austrian school, begins this way:

This book argues that our civilisation depends, not only for its origin but also for its preservation, on what can be precisely described only as the extended order of human cooperation, an order more commonly, if somewhat misleadingly, known as capitalism. To understand our civilisation, one must appreciate that the extended order resulted not from human design or intention but spontaneously: it arose from unintentionally conforming to certain traditional and largely moral practices, many of which men tend to dislike, whose significance they usually fail to understand, whose validity they cannot prove, and which have nonetheless fairly rapidly spread by means of an evolutionary selection -- the comparative increase of population and wealth -- of those groups that happened to follow them. The unwitting, reluctant, even painful adoption of these practices kept these groups together, increased their access to valuable information of all sorts, and enabled them to be 'fruitful, and multiply...' This process is perhaps the least appreciated facet of human evolution.

Socialists take a different view of these matters.

Well, that last sentence is quite an understatement. By socialism Hayek didn't mean the welfare state or continuing government efforts to manipulate market outcomes according to some notion of equity. That would be interventionism or the mixed economy. No, socialism is the abolition of the market order and its necessary condition, private property: the replacement of free private enterprise with centralized bureaucracy. Let's cut to the chase:

The main point of my argument is, then, that the conflict between, on one hand, advocates of the spontaneous extended human order created by a competitive market, and on the other hand those who demand a deliberate arrangement of human interaction by central authority based on collective command over available resources is due to a factual error by the latter about how knowledge of these resources is and can be generated and utilised. As a question of fact, this conflict must be settled by scientific study. Such study shows that, by following the spontaneously generated moral traditions underlying the competitive market order (traditions which do not satisfy the canons or norms of rationality embraced by most socialists), we generate and garner greater knowledge and wealth than could ever be obtained or utilised in a centrally-directed economy whose adherents claim to proceed strictly in accordance with 'reason'. Thus socialist aims and programmes are factually impossible to achieve or execute; and they also happen, into the bargain as it were, to be logically impossible.

Hayek is saying that once we understand how information about resources is produced and transmitted, we realize that central planners can't deliver the goods. Socialism can't keep its (earlier) promises of plenty. (Nor of justice, but that's for another time.)

Here Hayek extended Ludwig von Mises's fatal critique of socialism; namely, that

1. without tradeable private property in the means of production, markets for resources and producers' goods don't exist;
2. without such markets, true prices can't exist; and
3. without prices, rational economic calculation is impossible;
4. therefore, socialism is impossible; it's "planned chaos."

By impossible Mises meant that without genuine money prices resulting from free exchanges, the millions of disparate resources and goods could not be accorded a common unit of account, and therefore rational decision-making about what ought to be produced, how much should be produced, and the best methods of production is foreclosed. In a world of scarcity with a growing population, that is bad news indeed.

When the socialists responded to Mises that planners could simulate market prices with computers and bureaucratic trial and error, Hayek said, No, they can't because what makes true and informative prices happen -- producer and consumer free choice in an environment with widely dispersed and ever-changing local and often tacit knowledge about resources and preferences -- is beyond any central planner's reach. In what Hayek called "the great society" -- which is marked by extended cooperation with countless strangers rather than the earlier, primitive face-to-face tribal relations -- spontaneous coordination via the price system is the name of the game, literally a matter of life and death.

Thus Mises identified the "calculation problem," and Hayek the complementary "knowledge problem." The Mises-Hayek tag team was triumphant. When the Soviet Union dismantled itself, the American socialist economist Robert Heilbroner declared, "Mises was right."

As a result, newer generations of socialists gave up their goal of outproducing the market in favor of the "era of limits." In effect they said: "It's good that socialism can't outproduce the market. Affluence is bad for the planet, so the last thing we should want is for the people of the developing world to achieve our sinfully high living standards. Better that we should produce far less according to the instructions of trusted, saintly, and omniscient bureaucrats, who will distribute the output more caringly than profit-driven impersonal and spontaneous market forces could ever do."

And would you like to buy a bridge cheap? Back to Hayek.

The demands of socialism are not moral conclusions derived from the traditions that formed the extended order that made civilisation possible. Rather, they endeavour to overthrow these traditions by a rationally designed moral system whose appeal depends on the instinctual appeal of its promised consequences. They assume that, since people had been able to generate some system of rules coordinating their efforts, they must also be able to design an even better and more gratifying system. But if humankind owes its very existence to one particular rule-guided form of conduct of proven effectiveness, it simply does not have the option of choosing another merely for the sake of the apparent pleasantness of its immediately visible effects. The dispute between the market order and socialism is no less than a matter of survival. To follow socialist morality would destroy much of present humankind and impoverish much of the rest.

Many people with whom I share a deep loathing of war and surveillance apparently get a warm cozy feeling from the word socialism. I suspect it's because they've never encountered Hayek's point, much less examined it. That's a shame. They have nothing to lose but their self-forged chains.

TGIF: Why Freedom Is the Goal

In online interviews and conversations I'm hearing intellectuals in the national conservative movement say that the liberal Enlightenment "project" has mostly failed because people need more in their lives than freedom. I've also heard this from a few people who have lately become disillusioned with leftism but yet are uneasy about libertarianism.

My first response is to wonder whom these critics of classical liberalism, or libertarianism, its modern-day form, have in mind. Which important and widely influential liberal political, economic, or, social thinker even implied that freedom is the only thing worth valuing? Let's name names, please. I can't think of one, but perhaps I'm overlooking someone.

Those conservatives will also insist that freedom without virtue is not just worthless but a clear and present danger. But again, which past and present of genuine liberal stalwarts would disagree? I've always understood liberalism to be distinct from libertinism. I see no grounds for confusing the two.

Classical liberalism, in its consequentialist, deontological, and eudaemonist forms, has been concerned with what makes for a proper society by some articulated standard or other, starting with the most fundamental unit of analysis, the individual. The literature is saturated with positive observations about society, the division of labor, association, and rich communities -- in a word, cooperation.

One way or another, all of that is related to values in addition to freedom; it all is related to virtue. Far from embodying an atomistic, licentious, to-hell-with-everyone-else (pseudo)individualism, libertarianism extols what I call Adamistic (Smith, that is) individualism, in which human beings "selfishly" flourish through mutually rewarding relationships of all kinds. I've also dubbed this "molecular individualism. Of course, some people will engage in vice and aggression (those aren't the same things), but as long as the state is unavailable for social engineering, free individuals using private property in association with others can peacefully protect themselves and their children from what they find abhorrent. Live and let live is the rule.

For liberals, freedom was never just an end in itself. Freedom means freedom from aggression, whatever the source, but at least implicit in the liberal vision -- and indispensable to truly understanding it -- is the freedom to produce material and nonmaterial values in a social context. We want freedom so we may live fully as human beings and enjoy fruitful lives among other people. Successful long-term participation in the market and society more widely encourages honesty, justice, and conscientiousness -- virtues by any reckoning. To understand the value of society is to understand the need for -- yes -- order, but it is specifically the bottom-up, emergent, spontaneous order that F. A. Hayek and other liberals have emphasized. (You find this in Adam Smith, Thomas Paine, Herbert Spencer, Carl Menger, Ludwig von Mises, and countless others.)

The critics of liberalism are right of course when they say that freedom is not enough to properly address the social problems we observe today. But again, which libertarian ever said it was? The libertarian point is that freedom is the condition in which people have the best chance of dealing with problems. Liberalism doesn't promise a rose garden; it's not utopian. In fact, freedom is not the answer to any problem. Rather, it -- along with the resulting decentralization and competition -- is essential to the discovery process that enables people to deal with problems as best they can. Since no one is omniscient, that discovery process is indispensable both for the good life and the good society.

Freedom is not some magic ingredient that when sprinkled on a problem miraculously produces a solution. It's the political, legal, and social environment in which people can act to make their lives better. In the process of virtuously pursuing their rational self-interest, they make others better off too. No central coercive authority, conservative or progressive, can hope to deliver the equivalent, no matter what theory of virtue it seeks to impose. For one thing, they could never know enough.

Thus those who reject libertarianism as unequal to modern challenges show themselves to be boxing with a strawman. But worse, they deceptively pose as the guardians of virtue when they are not.

When conservatives say politics is downstream from culture, they mean that for freedom to be a good thing, people must first be virtuous. But that suggests the conservative program is to change things around and put culture downstream from politics. It's a justification for limits on freedom of speech, religion, commerce, association, etc., until the state's subjects have been prepared to live freely. But who is qualified to tutor the people or to say when the people are ready for freedom? How are their overlords to be chosen?

Liberals have long asked those questions, but not because they thought virtue is unimportant. It is because they knew how important virtue is. They also asked how people can be virtuous without being free to make choices.

Albert Jay Nock, the quirky libertarian writer of the 20th century, wrote about this in his 1924 essay "On Doing the Right Thing," Nock wanted to see human beings free precisely so that they "may become as good and decent, as elevated and noble, as they might be and really wish to be.” (See my essay "Nock Revisited.") He elaborated:

The point is that any enlargement [of state authority], good or bad, reduces the scope of individual responsibility, and thus retards and cripples the education which can be a product of nothing but the free exercise of moral judgment.... The profound instinct against being "done for our own good" ... is wholly sound. Men are aware of the need of this moral experience as a condition of growth, and they are aware, too, that anything tending to ease it off from them, even for their own good, is to be profoundly distrusted. The practical reason for freedom, then, is that freedom seems to be the only condition under which any kind of substantial moral fibre can be developed. [Emphasis added.]

That's the answer to the paternalists of all parties.

In contrast, conservatism wants the government to control the culture in the name of building virtuous people. How can they overlook the perils of this program? Once political officials assert control over culture, where does it stop? And how can they be sure that the people whose values they despise won't eventually grab hold of the muscular state they've fortified?

TGIF: Utopianism May Be Hazardous to Your Health

Beware those who claim to have a detailed blueprint for the ideal society. If such a person thinks you stand in the way, you may get run over. That's how it is with utopians. They want everything just so, and woe betide those who disagree.

The repeated attempts at creating ideal societies haven't gone so well. To name just a few, see France 1789, Russia 1917, Italy 1922, Germany 1933, Eastern Europe 1945, China 1949, Cambodia 1976, Venezuela 1999.

The problem is that the architects of utopia have little tolerance for those who aren't wholeheartedly with the program. Any departure from the plan is a move away from the ideal. Dissenters must be dealt with.

In The Road to Serfdom, which still belongs on everyone's reading list, F. A. Hayek pointed out that a big problem with socialist or fascist central planning -- which is another way of saying utopianism -- is that regular people will assuredly upset the plan just by attending to their own lives -- so they cannot be left free to do so.

Hayek also noted that even if everyone agreed in principle that some kind of top-down social plan was desirable, they certainly would not agree on its details. In a world of scarcity, that would be a problem because everyone's preferences couldn't be accommodated. Moreover, Hayek went on, the endless debates over the plan could well give rise to a dictator who promised to stop the idle chatter and act decisively. So much for the promise of democratic planning.

Not everyone aspires to design their whole society. But some want to do something similar on a smaller scale. They seek to shape their local social environment (including their social-media environment) by expecting and insisting that everyone with whom they come into contact affirm their view of themselves and of how the world should be. One way to do this is to demonize and marginalize dissenters. While such micro-planning may seem largely harmless, it could have its risks as it gains momentum. Politics professor Eric Kaufmann, the author of Whiteshift, writes that the "principal threat to liberalism today is an emergent authoritarianism, not a top-down form of the kind we find in China or Turkey."

Intolerance toward dissenters can manifest itself in demands that we use language in novel and loaded ways favored by an interest group. This is often part of a utopian strategy to change government policy in oppressive ways. These days people can lose their jobs or access to online communities for using words (or having done so years before) in a newly forbidden manner.

But controlling language, which really means language users, is like herding cats. Language is a decentralized institution under no one's control. The meanings of words can change in their own time, but meanings are not determined by diktat. Most people will continue to speak as they are accustomed to speaking regardless of the activists' strident demands that we not only say, to use Orwell's example in Nineteen Eighty-Four, that 2+2=5 but also believe it.

Today's equivalents of 2+2=5 include: "The signs of a climate disaster are all around us and beyond debate"; "Sex is changeable or nonbinary or a social construct"; "Straight-white-cis-male supremacy explains all you'll ever need to know about Western civilization and contemporary American society"; and "Those who disagree with [name a group] are deplorable."

People should be free to believe those things if they want to, but they should also be free to disbelieve them and say so without fear of harassment, physical threats, or legal penalties. Those who know that 2+2=4 should inform the utopians that they have the burden of proving why anyone should pretend otherwise. "Gaslighting" needs cooperative victims.

A society, like a language, can't really be centrally planned, although the attempt will be lethal. The contrary idea gets encouragement from a misapplication of enlightenment principles. That the hard sciences can furnish the means to control natural forces, i.e., inanimate things, for the betterment of all is no reason for thinking that the social sciences can or should furnish the means to control social forces, i.e., people. Hayek called this misguided conviction scientism. No one has put the point better than Adam Smith in his other book, The Theory of Moral Sentiments:

The man of system [i.e., the central planner] ... is apt to be very wise in his own conceit; and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests, or to the strong prejudices which may oppose it. He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess–board. He does not consider that the pieces upon the chess–board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess–board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it.

The alternative to utopianism, then, is Smith's "system of natural liberty" with its emergent, undesigned, and bottom-up order. Or in other words: individual sovereignty, free association, cooperation, competition, and contract.

So, people, believe what you want and recognize everyone else's right to the same freedom. Replace your divots! Don't be fragile -- be antifragile; in order for someone to give offense it is necessary that someone else take it. Don't be that someone. Don't look for your identity or life's meaning in what you take offense at.

Finally, let's each of us agree not to turn to the state to support "my tribe."

My Kind of Candidate...

...would support polycentric law and spontaneous order.

That would be a real law-and-order candidate.

TGIF: Patience and Empathy: Keys to Presenting the Freedom Philosophy

It goes without saying -- I hope -- that we libertarians should be patient and empathetic when we talk political economy with nonlibertarians. Patience and empathy are generally virtues, of course, but libertarians have an additional reason to practice them in their political lives: they are keys to effectively presenting new ideas.

We ask a lot of people when we ask them to appreciate the merits of our political philosophy. (I’m assuming the goal is persuasion and not mere self-gratification.) We should think back to when we first encountered the philosophy. None of us started out understanding it. We had to read, think, and talk with people more advanced in their understanding than we were. Even a fledgling libertarian who starts out favorably inclined intellectually and emotionally to the philosophy needs time to digest the ideas. I can recall running newly acquired, but not-yet-well-understood, libertarian ideas by friends, parents, and siblings -- only to be stumped by their questions and objections. I had to go back to the books or my libertarian teachers for further study and contemplation. The process takes a long time. Leonard Read used to say it takes a lifetime, and I believe him. Keeping this truth in mind will help shape our approach to nonlibertarians. Don’t underestimate the persuasive power of empathy.

The Importance of Spontaneous Order in Teaching Libertarianism

The good folks at Libertarianism.org dug up this 1981 video of my after-dinner talk on spontaneous order from back in my Libertarian Party days.
   

Missing the Point

Reporting on this year's Nobel Prize winners in economics, Elinor Ostrom and Oliver Williamson, the New York Times said:

Neither Ms. Ostrom nor Mr. Williamson has argued against regulation. Quite the contrary, their work found that people in business adopt for themselves numerous forms of regulation and rules of behavior — called “governance” in economic jargon — doing so independently of government or without being told to do so by corporate bosses.

Note the key equivocation over the word regulation. Most people use that word to mean government interference with private market activity. So the Times at first seems to be saying that Ostrom and Williamson do not oppose such government interference. Maybe they don't, but that's not what the Times goes on to say. Instead, it says that both have shown that people often generate their own efficient rules -- governance -- independent of the State (and corporate authority).

It's as though the reporter said, "Neither has argued against taxation. Quite the contrary, they found that people use market prices to pay producers for their efforts."

What the Times reporter misses is that spontaneously evolved bottom-up rules are to be distinguished from top-down government regulation, which statists believe is indispensable. The former results from voluntary interaction by people on the spot, the latter from coercion by a central elite. The reporter seems more interested in getting in a subtle dig at the free market, which is alleged to be "unregulated." Of course it isn't, as I point out here.

TGIF: Liberty versus Social Engineering

So David Brooks, the New York Times‘ resident conservative intellectual, must think he’s a pretty clever fellow. In trying to characterize “the choices we face on issue after issue,” he presumes to enlist the aid of philosophers Jeremy Bentham (1748-1832) and David Hume (1711-1776). Considering that Bentham believed human beings could consciously design society and Hume did not, this might have been a worthwhile approach. Unfortunately, Brooks got Hume wrong — unforgivably so — and missed a chance to present a fresh alternative in the stale political debate.

The reset of TGIF is here.