THE FATAL CONCEIT The Errors of Socialism A paperback of Volume I of The Collected Works of F.A. Hayek F. A. Hayek studied at the University of Vienna, where he became both a Doctor of Law and a Doctor of Political Science. After several years in the BIBLIOTEKA AUSTRIACKA Austrian civil service, he was made the first director of the Austrian Institute OSTERREICH - BIBLIOTHEK for Business Cycle Research. In 1931 he was appointed Tooke Professor of UNIWERSYTETU WROCLAWSKIEGO Economics and Statistics at the London School of Economics, and in 1950 he went to the University of Chicago as Professor of Social and Moral Sciences. He returned to Europe in 1962, to the chair of Economics at the University of 4234 Freiburg, where he became Professor Emeritus in 1967. The holder of numerous honorary doctorates, and a member of the British Academy, Hayek was awarded the Nobel Memorial Prize in Economics in 1974. He was created Companion of Honour in 1984. He is the author of some fifteen books, including Prices and Production, The Pure Theory of Capital The Road to Serfdom, The Counter-Revolution of Science, The Sensory Order, The Constitution of Liberty, and Law, Legislation and Liberty. He died in 1992. The editor, Professor W. W. Bartley, III, was at the Hoover Institution, Stanford University until his death in 1990. PLAN OF THE COLLECTED WORKS Founding Editor: W. W. Bartley, III Editor: Stephen Kresge THE COLLECTED WORKS OF * Volume I The Fatal Conceit: The Errors of Socialism Volume II The Uses and Abuses of Reason: The Counter- Friedrich August Hayek Revolution of Science, and Other Essays Volume III The Trend of Economic Thinking: Essays on Political VOLUME I Economists and Economic History Volume IV The Fortunes of Liberalism: Essays on Austrian Economics and the Ideal of Freedom Volume V Nations and Gold THE FATAL CONCEIT Volume VI Money and Nations Volume VII Investigations in Economics The Errors of Socialism Volume VIII Monetary Theory and Industrial Fluctuations Volume IX Contra Keynes and Cambridge: Essays, Correspondence, and Documents Volume X Socialism and War: Essays, Correspondence, and Documents Volume XI Essays on Liberty Volume XII Essays, Debates, and Reviews Volume XIII The Pure Theory of Capital EDITED BY Volume XIV The Road to Serfdom Volume XV The Constitution of Liberty W. W. BARTLEY, III Volume XVI Philosophy, Politics, and Economics Volume XVII Law, Legislation, and Liberty Volume XVIII The Sensory Order and other Essays in Psychology Volume XIX John Stuart Mill and Harriet Taylor: Their Friendship and Subsequent Marriage The plan is provisional. Minor alterations may occur in titles of individual books, and several additional volumes may be added. * available in paperback THE COLLECTED WORKS OF F. A. HAYEK Founding Editor: W. W. Bartley III First published in 1988 by Routledge General Editor: Stephen Kresge 11 New Fetter Lane, London EC4P 4EE Reprinted 1989 Assistant Editor: Gene Opton New in paperback 1990 Reprinted 1990, 1992 Set in Baskerville by Columns of Reading Published with the support of and printed in Great Britain by T.J. Press (Padstow) Ltd. Padstow, Cornwall The Hoover Institution on War, Revolution and Peace, Stanford University © F. A. Hayek 1988 Anglo American and De Beers Chairman's Fund, Johannesburg Cato Institute, Washington, D.C. All rights reserved. No part of this book may be The Centre for Independent Studies, Sydney reproduced or utilized in any form or Chung-Hua Institution for Economic Research, Taipei by any electronic, mechanical, or other means, now Earhart Foundation, Ann Arbor known or hereafter invented, including photocopying Engenharia Comercio e Industria S/A, Rio de Janeiro and recording, or in any information storage or Escuela Superior de Economia y Administracion de Empresas retrieval system, without permission in writing from (ESEADE), Buenos Aires the publishers. The Institute for Humane Studies, George Mason University British Library Cataloguing in Publication Data Instituto Liberal, Rio de Janeiro Charles G. Koch Charitable Foundation, Wichita Hayek, F.A. (Friedrich August), 1899- The Vera and Walter Morris Foundation, Little Rock The fatal conceit : the errors of socialism. Verband der Osterreichischen Banken and Bankiers, Vienna (The collected works of Freidrich August Hayek). The Wincott Foundation, London 1. Socialism. Philosophical perspectives I. Title II. Bartley, William Warren III. Series 335'.001 ISBN 0-415-00820-4 ISBN 0-415-04187-2 (Pbk) 4234 CONTENTS Editorial Foreword X Preface 5 Introduction Was Socialism a Mistake? 6 One Between Instinct and Reason I I Biological and Cultural Evolution I I Two Moralities in Cooperation and Conflict 1 7 Natural Man Unsuited to the Extended Order 1 9 Mind Is Not a Guide but a Product of Cultural Evolution, and Is Based More on Imitation than on Insight or Reason 21 The Mechanism of Cultural Evolution Is Not Darwinian 23 Two The Origins of Liberty, Property and justice 29 Freedom and the Extended Order 29 The Classical Heritage of European Civilisation 31 `Where There Is No Property There Is No justice' 33 The Various Forms and Objects of Property, and the Improvement Thereof 35 Organisations as Elements of Spontaneous Orders 37 Three The Evolution of the Market: Trade and Civilisation 38 The Expansion of Order into the Unknown 38 The Density of Occupation of the World Made Possible by Trade 41 Trade Older than the State 43 The Philosopher's Blindness 45 Four The Revolt of Instinct and Reason 48 The Challenge to Property 48 Our Intellectuals and Their Tradition of Reasonable Socialism 52 Morals and Reason: Some Examples 55 A Litany of Errors 60 vii CONTENTS CONTENTS Positive and Negative Liberty 62 Appendices `Liberation' and Order 64 A. `Natural' vs. `Artificial' 1 43 B. The Complexity of Problems of Human Interaction 1 48 Five The Fatal Conceit 66 C. Time and the Emergence and Replication of Structures 1 51 Traditional Morals Fail to Meet Rational D. Alienation, Dropouts, and the Claims of Parasites 152 Requirements 66 E. Play, the School of Rules 154 Justification and Revision of Traditional Morals 67 F. Remarks on the Economics and Anthropology of Population 1 55 The Limits of Guidance by Factual Knowledge; G. Superstition and the Preservation of Tradition 1 57 The Impossibility of Observing the Effects of Our Morality 71 Editor's Acknowledgements 158 Unspecified Purposes: In the Extended Order Most Ends of Action Are Not Conscious or Deliberate 75 Bibliography 159 The Ordering of the Unknown 83 Name Index 1 73 How What Cannot Be Known Cannot Be Planned 85 Subject Index 1 76 Six The Mysterious World of Trade and Money 89 Disdain for the Commercial 89 Marginal Utility versus Macroeconomics 94 The Intellectuals' Economic Ignorance 100 The Distrust of Money and Finance 101 The Condemnation of Profit and the Contempt for Trade 104 Seven Our Poisoned Language 106 Words as Guides to Action 106 Terminological Ambiguity and Distinctions among Systems of Coordination 110 Our Animistic Vocabulary and the Confused Concept of `Society' 112 The Weasel Word `Social' 114 'Social Justice' and `Social Rights' 117 Eight The Extended Order and Population Growth 120 The Malthusian Scare: The Fear of Overpopulation 120 The Regional Character of the Problem 124 Diversity and Differentiation 126 The Centre and the Periphery 127 Capitalism Gave Life to the Proletariat 130 The Calculus of Costs Is a Calculus of Lives 132 Life Has No Purpose But Itself 133 Nine Religion and the Guardians of Tradition 135 Natural Selection from Among the Guardians of Tradition 135 viii ix EDITORIAL FOREWORD moralities of socialism and the market order; he recounts the EDITORIAL FOREWORD extraordinary powers that `the extended order' of the market, as he calls it, bestows on mankind, constituting and enabling the development of civilisation. Hayek also weighs - in a manner occasionally reminiscent of Freud's Civilisation and Its Discontents, yet reaching very different conclusions - both the benefits and costs of this civilisation, and also the consequences that would ensue from the destruction of the market order. He concludes: `While facts alone can never determine what is right, ill-considered notions of what is reasonable, right and good may I change the facts and the circumstances in which we live; they may destroy, perhaps forever, not only developed individuals and buildings The Fatal Conceit, here published in paperback, is a new work by Hayek. and art and cities (which we have long known to be vulnerable to the It was first published in 1988 as the first volume to appear in The destructive powers of moralities and ideologies of various sorts), but Collected Works of F. A. Hayek, a new standard edition of his writings. also traditions, institutions, and interrelations without which such The reader who is struck by the pace and freshness of the argument creations could hardly have come into being or ever be recreated.' of this new book, its vigorous application to specific cases, and its occasionally polemical thrust will want to know something of its background. In 1978, at the age of nearly eighty, and after a lifetime of II doing battle with socialism in its many manifestations, Hayek wanted to The Collected Works of F. A. Hayek attempts to make virtually the have a showdown. He conceived of a grand formal debate, probably to entire Hayek corpus available to the reader for the first time. The chief be held in Paris, in which the leading theorists of socialism would face organisation is thematic, but within this structure a chronological order the leading intellectual advocates of the market order. They would is followed where possible. address the question: `Was Socialism a Mistake?'. The advocates of the The series opens with two closely-related books on the limits of market order would argue that socialism was - and always had been - reason and planning in the social sciences - The Fatal Conceit, a new thoroughly mistaken on scientific and factual, even logical grounds, and work, and The Uses and Abuses of Reason: The Counter-Revolution of Science, that its repeated failures, in the many different practical applications of and Other Essays, a work never previously published in Britain.