ISSN 2291-5079 Volume 7 | Issue 5 + 6 2020 COSMOS + TAXIS Studies in Emergent Order and Organization

Symposium on ’s F. A. Hayek: Economics, Political Economy and Social Philosophy COSMOS + TAXIS COVER ART: Studies in Emergent Order and Organization F. A. Hayek VOLUME 7 | ISSUE 5 + 6 2020 Attribution unknown

EDITORIAL BOARDS IN THIS ISSUE HONORARY FOUNDING EDITORS EDITORS Joaquin Fuster David Emanuel Andersson* Introduction to Symposium on Peter Boettke’s University of California, Los Angeles (editor-in-chief) National Sun Yat-sen University, F. A. Hayek: Economics, Political Economy David F. Hardwick* The University of British Columbia Taiwan and Social Philosophy...... 1 Lawrence Wai-Chung Lai William Butos University of Hong Kong (deputy editor) Mikayla Novak Trinity College Frederick Turner University of Texas at Dallas Laurent Dobuzinskis* A Galbraithian Perspective on Epistemic (deputy editor) Institutionalism and True ...... 5 Simon Fraser University Giovanni B. Grandi Theodore Burczak (deputy editor) The University of British Columbia Hayek’s Appreciative Theory and Social Justice. . . . .10 Leslie Marsh* Nick Cowen (managing editor) The University of British Columbia Before Kahneman and Tversky, Nathan Robert Cockram (assistant managing editor) There Was ...... 20 The University of British Columbia Roger Frantz CONSULTING EDITORS A Branch on the Mainline: Hayek’s Analysis Corey Abel Peter G. Klein of Complex Adaptive Systems ...... 32 Denver Baylor University Gerald Gaus Thierry Aimar Paul Lewis Sciences Po Paris King’s College London F. A. Hayek, Gemeinschaft and Gesellschaft, Nurit Alfasi Ted G. Lewis Ben Gurion University Technology Assessment Group and Digitalization ...... 42 of the Negev Salinas, CA Stefan Kolev Theodore Burczak Joseph Isaac Lifshitz Denison University The Shalem College Epistemic institutionalism: Rules and Order, Gene Callahan Jacky Mallett New York University Reykjavik University Complexity, and Liberalism ...... 50 Chor-Yung Cheung Alberto Mingardi Paul Lewis City University of Hong Kong Istituto Bruno Leoni Francesco Di Iorio Stefano Moroni You Can Take Hayek Out of Vienna… ...... 61 Nankai University, China Milan Polytechnic Adam Martin Gus diZerega* Edmund Neill Taos, NM New College of the Humanities Two Contrasting Views of People and Institutions Péter Érdi Mikayla Novak Kalamazoo College Australian National University in the Philosophical Anthropologies of Evelyn Lechner Gick Christian Onof Hayek and Marx ...... 69 Dartmouth College Imperial College London Peter Gordon Mark Pennington David L. Prychitko University of Southern California King’s College London Lauren K. Hall* Jason Potts A Problem of Knowledge for Hayek ...... 75 Rochester Institute of Technology Royal Melbourne Institute Jeremy Shearmur Marek Hudik* of Technology University of Economics Prague Don Ross Response ...... 82 Sanford Ikeda University of Cape Town and Purchase College Georgia State University Peter J. Boettke State University of New York Virgil Storr Editorial Information...... 87 Andrew Irvine The University of British Columbia Stephen Turner Byron Kaldis University of South Florida The Hellenic Open University Gloria Zúñiga y Postigo Ashford University

*Executive committee http://cosmosandtaxis.org COSMOS + TAXIS

COVER ART: F. A. Hayek Attribution unknown Introduction to Symposium on Peter Boettke’s F. A. Hayek: Economics, Political Economy and Social Philosophy MIKAYLA NOVAK

Australian National University Email: [email protected] Web: https://mikaylanovak.com

INTRODUCTION tions of several property, relative prices and profit-and-loss signalling, is well canvassed in the book, which gradually Since his formative studies during the late 1980s, including builds into a most insightful discussion concerning the po- under the supervision of , Peter Boettke has be- litical, social and cultural prerequisites and supports for the come widely recognised as an intellectual standard-bearer fullest exercise of human liberty that fallible-yet-capable for classical liberal political economy, not to mention a tire- human beings can muster. less public champion of liberty for all peoples irrespective of As praising to the contributions to political economy and their station in life. The scope of Boettke’s contributions to philosophical liberalism as Hayek was, and continues to be, our understanding of the nature and consequences of lib- Boettke duly recognises that no single person can unshroud 1 erty are both profound and widespread, illustrating a great all the mysteries that pervade humanity in one lifetime. sense of care and devotion to his intellectual craft as well as Hayek most certainly left some relatively under-explored flexibility necessary to remain relevant in a changing world. elements of a research agenda behind, and some elements Among Boettke’s many contributions are his studies of of his work had left questions with which we moderns con- comparative institutional analysis and institutional transi- tinue to grapple with today. One of the more important COSMOS + TAXIS + TAXIS COSMOS tions, economic calculation and market process, economic questions is covered on page 26 (Boettke 2018), referring to methodology, and the history of economic thought. A most famed correspondence between Hayek and his main intel- notable feature of his decades of scholarship is his unflinch- lectual rival, Keynes over the “drawing of the line” between ing interpretation of specific research questions through the free enterprise and planning. Austrian, Bloomington and Virginian strands of political There can be no doubt that in our time we, likewise, con- economy, all of which affirm the contributions of market tend with this key question. The boundaries of freedom economic coordination, social openness and limited-but- and coercion are, for many classical liberals of today, being effective political action toward the well-being of humanity. keenly tested with regard to confronting major challenges An endearing trait of Boettke is his preparedness to pub- such as inequality, climate change and, more recently, po- licly nominate his heroes and heroines, be it in the realm of larising socio-political tendencies and geopolitical tensions. political economy and liberal activism or even with regard As a matter of generic principle there seems little doubt that to his favourite sports of tennis and basketball. There are an efficacious way to drawing an acceptable line would rest no prizes for surmising that Friedrich Hayek ranks highly in playing an intellectually constructive, even adventurous, amongst Boettke’s intellectual heroes and role-models, and role as Hayek (1949) once put it, with the proviso of keeping his deep appreciation for Hayek’s legacy is wonderfully re- with cherished liberal principles such as (but not limited flected in his latest book,F. A. Hayek: Economics, Political to) autonomy, diversity, equality, experimentation, freedom Economy and Social Philosophy. and justice, as properly understood. Boettke provides a thematic investigation of the main Boettke’s name has been prominent among the voices of contributions of Hayek to twentieth (and, now, twenty-first) contemporary classical liberals prepared to wrestle with century political economy. The appreciation of Hayek’s major issues as they emerge. Two examples springing to economic contributions, with decentred plan-coordina- mind, even during the past year or so, are his joint works tion amongst the multitudes effected by underlying condi- with Paul Aligica and Vlad Tarko (2019) and with Henry

Introduction to Symposium on Peter Boettke’s F. A. Hayek: Economics, Political Economy and Social Philosophy ------Ger Nick Nick . As does , Hayek (1988) sharp (1988) , Hayek Homo economicusHomo The FatalThe Conceit regards Hayek not merely as a “proto” be as regards merely a “proto” not Hayek , such, matters increasingly attracted at Hayek’s ’s essay the about potential ’s rectification for of social In his last book, Roger Frantz Evolutionary and complexity themes been have amply The versatility The of Hayekian thought, as distinct(in from dination, broadening into questions out political of and so cio-cultural persistence and change. Gaus suggests a more meaningful this appreciation of strand thought Hayek’s of potentially brings a radical, robust, lib yet more of defence eral principles. drewly distinctiona between small scale, associational, life and the large-scale extended economic and of politi order tendant disadvantages, remains distinctly Hayekian in its character. havioural economist as but a suitably-qualified candidate membershipfor amongst theof behav “firstgeneration” ioural economists, sitting alongside the likes Herbert of Si andmon Harvey Leibenstein. The connection with behav iouraleconomics is seen with works regard on Hayek’s to theprimacy “patternof predictions”in social science, the distributed and tacit nature knowledge, of and the depar ture and from complete global rationality commonly as sociated with the model of Boettke, Frantz draws the out implications these of themes the publicfor policy of conduct which, the at risk simpli of fication, call for maintenancethe “simple rulesof a com for plex world” (Epstein 1995). reflected in the growingnumber of Hayekian analysesof Whitman decadesrecent (e.g. Rubin 1998; and Gick 2004; As shown 2009). Boettke, by Koppl and in the essay by ald Gaus especiallytention during the latter parts his of career. In sights from evolutionary and complexity sciences informed non-equilibriumHayek’s interpretation economic coor of Galbraithian according tension, Burczak, to concerns the effectsoppressive organisationof economic which, inciden tally,is hintedwith Hayek by at respect trade-off a to be tween firm-based proprietor employment and independent 2011). [1960] ship (Hayek own Hayek’s thoughts, senses) some is inpresented Cowen injustices. is well-knownHayek his for denigration the of linguistic and philosophical bases social of justice, howev illustrateser Cowen that there is ample within room civil societyrectify to solutions emergent for the social injustic es racism,of sexism, and thelike, in ways which preserve the market-oriented and economic order the As rule law. of indicates,Cowen such a frame thinking of social about jus tice, and the means non-coercive with which address to at ------So . In ad , it is my is, it my F. A. Hayek: F. CosmosTaxis + have organised have an invited (Burczak 2006). In his symposium es Cosmos Taxis + is noted for his is for noted constructive critical) (and Ted Burczak On behalf the of editorial team of Boettke’s book has publicity generated much and interest century economics. potential One flashpoint Hayekian-for into the discussion legacy Hayek’s about and, in doing so, highlights previously under-explored complementarities and between tensions these two figures major of twentieth erodox politicalerodox approaches, as economy attested his by Hayek cialism After Burczaksay, brings the John Kenneth of work Galbraith gage in cross-disciplinary reflectionsof Boettke’s book. withengagement from the work Hayek’s standpoint het of amongst the participants are specialists in economics, po litical A distinctive and economy philosophy. feature the of contributionsis the preparedness each of participant en to essay). The The participantsessay). are drawn a from range of social science disciplines, aptly reflecting breadth the of investi gations undertaken during Hayek by his lifetime. Included The The symposium contributions presented are in this issue in alphabetical (with the order exception Boettke’s of response hort studies of in the Hayekian frame. CONTRIBUTIONS OF SYMPOSIUM OVERVIEW a delight the for editorial team with work to all participants. I trust that this issue will serve as an enduring contribution, a catalysingof nature, toward the the generation of next co I amI grateful that such world-leadinga cohort scholars of hasto offered invest their time energyand providtoward ing their reflectionsof Boettke’s important book, it was and from Boettkefrom himself. andhonour privilege edit to this special symposium issue. Economics, and Social Economy dition the to contributions from symposium participants, this special issue includes a response the to contributions group of academics,group of both well-established and emerging, in a symposium critically to discuss features of withinthe academic community, and even beyond, and so isit fitting that provides a useful potential of map” “road future research to Hayekian deploy insightsin the service rendering of liberal thinking both fertile and relevant. what he seeswhat he are the strengths and limitations Hayek’s of (including withwork respectsocial to ethi epistemology, cal philosophy and political Ineffect, science). the book Thompson (2019). What is particularly(2019). Thompson efficacious about Boettke’s established book for and aspirant scholars in the Studies” “Hayek of field is his even-handed explicationof VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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cal affairs, warning against cross-contamination of distinct of Hayekian and Marxian thought, Prychitko recommends (and, seemingly, divergent) values that underpin both fea- building upon Boettke’s book with regard to philosophical tures of society. This intriguing feature of Hayek’s sociol- anthropology and the history of economic thought. ogy is the central theme of Stefan Kolev’s essay, who con- As paradigmatic as Hayek’s thought has been in the so- siders the twin effects of globalisation and digitalisation on cial sciences there remain many unanswered questions con- the perception of balance between the micro- and macro- cerning the applicability of his stated ideas (or those more cosmos. Kolev invites readers of Boettke’s book to addition- recent ones, of Hayekian persuasion) for economic, political ally consider the impacts of significant reform and change and social reform. The political philosopher, and exponent upon the integrity of the varied, intersecting orders com- of PPE (politics, philosophy, and economics), Jeremy Shear- prising civil society. mur contends that Hayek’s (and, by extension, Boettke’s Paul Lewis has made important inroads into the interpre- liberalism) is reliant on key theoretical claims potentially tation of Hayekian ontology and epistemology for well over translatable into practical acceptance. As recent trends in a decade, and his symposium contribution continues in this public administration worldwide have illustrated, explica- vein. Lewis identifies an “epistemic institutionalism” theme tion of theory (e.g. liberal primacy of rule of law in political in Hayek’s work, which is likewise identified by Boettke, ordering) does not necessarily equate with its practical im- providing correspondence between lego-political rules and plementation. Shearmur pleads with scholars to reconsid- the socio-economic order. Economic productivity and ma- er the value of Hayek’s intellectual contributions to address terial prosperity is contingent upon decentralised plan co- contemporary political challenges. ordination within markets, but is also contingent upon the quality of legal and similar frameworks necessary to sus- CONCLUSION tain it. Lewis invites readers to consider possibilities for 3 using Boettke’s book as a suitable platform to reinvigorate As have other luminaries of political economy, such as Hayekian thought in addressing contemporary challenges Adam Smith, and , Hayek to liberalism. continues to speak, to our extended present, in a variety of In his contribution, Adam Martin interprets Boettke’s instructive fashions (Boulding 1971). The Hayekian influ- book through the prisms of, first, the history of economic ence on political economy is fundamentally propounded COSMOS + TAXIS + TAXIS COSMOS thought and, second, economic methodology. There is a cer- by a burgeoning research literature produced by modern tain tendency amongst modern Hayekians to affiliate Hayek academics, as mentioned previously. It is also important to with any number of schools of economic thought, but Mar- note the engagement with Hayek’s ideas by staffers of think- tin provides us a timely reminder that Hayek’s scholarship tanks, economic and financial media commentators, blog- sits firmly within the Mengerian-Misesian realm of Aus- gers and social media users. We consider that the contribu- trian economics. Martin also invites a deeper reflection of tions to this symposium most capably stand with the best the (oftentimes, fuzzy) distinctions between method, theo- examples of Hayek scholarship of recent years. ry and application, and what this entails for the future of Within the academic realm Peter Boettke has been a pri- Hayek studies. Identifying the versatility of Hayek, amply mary exponent in promoting an understanding of, and re- reflected in Boettke’s book, Martin underlines Hayek’s sta- fining, Hayek’s work for modern audiences. Boettke’s book tus as a genuine, cross-disciplinary “student of civilisation” F. A. Hayek: Economics, Political Economy and Social Phi- (Dekker 2016). losophy continues his fine record in these respects, and is a One of the key figures in the modern resurgence of Aus- necessary addition to the collections of those interested in trian economics, David Prychitko, critically compares the the fundamental bases of material betterment, social har- works of two giants in political economy: Hayek and Marx. mony and effective public governance. In the view of Prychitko, a fundamental basis of difference between Hayek and Marx concerns the conception of the person—either as alienated-yet-helpless “prisoners of soci- ety” (Marx) or creative adapter to (and even reformer of) constraints (Hayek). As noted previously, Boettke expresses the sentiment that humans are fallible, yet capable, beings, in effect siding with Hayek. In his comparative examination

Introduction to Symposium on Peter Boettke’s F. A. Hayek: Economics, Political Economy and Social Philosophy . , Vol. 17. 17. , Vol. . . Cambridge: . In: Bartley, W. . New York: . New York: TheUniversity of , Vol. 1. Chicago: 1. , Vol. Public Governance Governance Public 9 (1): 45-66. 9 (1): 7: 79-100. . Ann Arbor: University of 3 (2): 225-237. 3 (2): (forthcoming), doi: https://doi. The CollectedWorksF. Hayek A. of 16 (3): 417-433. (3): 16 afterHayek Simple Rules for a Complex World Handbook of Research on Complexity . London: Palgrave Macmillan. F. A. Hayek:F. Economics, Political Economy and The Constitution Liberty:of The Definitive Edition The Viennese Students of Civilization: The Meaning Public ChoicePublic . New York: Oxford. New York: University Press. The CollectedWorksF. Hayek A. of TheFatal Conceit: The Errors of Socialism Constitutional Economy Political Advances in Austrian in Advances Economics . 1988. . [1960] 2011.

Cheltenham: Edward Elgar, 393-408. pp. Theory. Systems. In: Hamowy, R. (ed.) Chicago: University Chicago of Press. III (ed.) W. University Chicago of Press. (ed.) Rosser, J. Jr. and Contextand Austrian of Economics Reconsidered Cambridge University Press. Harvard University Press. Chicago Law Review how permanenthow winning coalitionsdestroy democratic governance. org/10.1007/s11127-019-00683-7. Economy History Political of Press. and the Classical-Liberal Perspective: Political Economy Foundations Social Philosophy Whitman, G. 1998. D. Hayek contra Pangloss Evolutionary on Koppl, R. 2009. Complexity and Austrian Economics. In: Barkley H. andRubin, Gick, P. E. 2004. Hayek and Modern Evolutionary

Epstein, R. A. 1995. A. The Hayek, 1949. Intellectuals F. and Socialism. Dekker, E. 2016. Boulding, K. E. After 1971. Samuelson, Needs Who Adam Smith? Burczak, A. 2006.T. Boettke, J. andIdentity Thompson, H. P. A. 2019. and off-diagonals: Boettke, J. 2018. P. REFERENCES Aligica, 2019. Boettke, D., J. and V. P. Tarko, P. VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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A Galbraithian Perspective on Epistemic Institutionalism and True Liberalism THEODORE BURCZAK

Denison University Email: [email protected] Web: https://denison.edu/people/theodore-burczak

Near the end of his book on F. A. Hayek, Peter Boettke advocates for a “true liberalism” growing out of Hayek’s the institutional framework that best enables epistemically thought that is “most conducive to human flourishing” limited individuals to strive and flourish. (Boettke 2018, p. 252). A consistent theme in Hayek’s oeu- This is a seriously truncated vision. A “true” liberal rec- vre is a careful investigation of what Boettke calls “epis- ognizes that a “valid image of the modern economy” is not temic institutionalism.” For Boettke, it is Hayek’s explora- one where most individuals are responding to price signals tion of epistemic institutionalism that helps produce this that emerge from competitive markets (Galbraith 2001, p. true liberalism. This short paper sketches a counterargu- 118). People shaping tin are not typically working in a small ment that Hayek’s epistemic institutionalism is hobbled, shop, buying raw material from and selling their product 5 making Hayekian liberalism itself truncated and “false,” directly into the global market. Much more likely, the metal more akin to a species of . A genuine liberal- worker is employed by a large organization with production ism based on a more thoroughgoing epistemic institution- units spread around the globe, where flows of sheet metal alism is far more progressive than the typical Hayekian is are directed by administered prices and decisions of pur- likely apt to accept. chasing managers. A “true” liberal embraces the reality that COSMOS + TAXIS + TAXIS COSMOS For Hayek, the primary problem for social theory is to un- we live in an organization economy more than we live in a derstand how societies can be organized to best coordinate market economy (Simon 1991). the actions of diverse and dispersed individuals, each of Hayek’s “Use of Knowledge” essay emphasizes individu- whom is epistemically limited with partial, tacit, potentially al market actors with specific knowledge about the circum- unique, and often erroneous knowledge. In his famous “The stances of time and place. In his book The New Industrial Use of Knowledge in Society” essay, Hayek ([1945] 1948) State, Galbraith starts by asking how scientific knowledge modernizes the defining insight of Scottish enlightenment is applied in modern, large-scale production processes. thinkers that diverse, dispersed, creative, and bumbling in- However, this difference in knowledge types—contextual dividuals can be led by price signals in competitive markets, knowledge versus scientific knowledge—is not crucial since when lured by profit and repelled by losses, to take actions successful application of scientific knowledge necessar- that will coordinate their separate behaviors to yield wealth, ily depends upon the context of time and place. The criti- innovation, and a rising standard of living. Under the right cal point for Galbraith is that scientific knowledge grows by institutional framework, market prices serve as a “system of educating separate individuals narrowly but deeply about telecommunications” (Hayek 1948, p. 87) serving a coordi- some specific aspect of reality, whether it is the adhesive nating function. In a nutshell, the right institutional frame- qualities of different paint types or the weight and durabil- work requires private property, freedom of contract, a legal ity of different kinds of metal. “Technology means the sys- and enforcement system constrained by the rule of law that tematic application of scientific or other organized knowl- secures property and enforces contracts, and democratic edge to practical tasks. Its most important consequence … —limited in scale and also in scope by the rule is in forcing the division and subdivision of any such task of law—to change rules when they evolve in a wealth-reduc- into its component parts” (Galbraith 2007, p. 14). “Technol- ing manner, to provide public goods, and to limit externali- ogy requires specialized manpower,” (Ibid, p. 18) both in ties when doing so has greater benefits than costs. This is terms of people educated in particular scientific fields and

A Galbraithian Perspective on Epistemic Institutionalism and True Liberalism ------Galbraith coins the term technostructure all to refer to Galbraith argues that the coordination fragmented of sistsin assigning the talent appropriate committees, to in tervening occasion on a decision, and force to asthe case be, may announcing the decision carrying or as it infor yet further mationfor decision yeta higher by committee” planning The 78). (Ibid, p. that takesplace in the large firm is thus centralized, not entrepreneurial planning a type but decentralizedof planning the by technostructure in which of which of they are in charge, managing hierarchicala struc tureunder their when firma authority, beginsat to grow, pointsome the knowledge requirements organization of centralby authority become too large. The firm slips from the the of control entrepreneur initiated who the firmto the technostructure. the knowledge inside workers the large firm, as distin guished from the engaged production workers in routine laborrelying primarily physical on effort. The technostruc ture includes thescientists, engineers, designers, legal and financial analysts, marketers,human resource managers, etc., sort some apply who skilled, of scientific, techniand cal knowledge in the production process. Galbraith empha sizes thatthe members of technostructuretypically work in teams; groups or “is it an apparatus group decision- for making—for pooling and testing the information provided numerous individualsby reach to decisions that are beyond the This knowledge 96). any (Ibid, dynamic of one” p. group cannot be orchestrated from and, above be to effective,“re quires…a In high a nutshell, (Ibid.). measure autonomy” of Galbraith proposes that large firms make useof knowledge committees.by As describes he it, “business organization hierarchya committees. of [is] Coordination, in turn, con considerable room for bothconsiderable for room and buyers sellers engage to in opportunistic which behavior, can threaten the ultimate re alization consumption of goods that can be profitably sold, whenever specialized labor and capital must be coordinat ed in a time-consuming, sequential production process. Organization reduces these market uncertainties, making roundabout, technically demanding production increasing ly possible and desirable. technological knowledge in time-consuming production processes requires dialogic forms communication, of not just transactional forms communication, of inwhich in dividuals can test through their conversation how separate ideas might These together. work dialogues facilitatedare organization,by market not exchange. While Galbraith agrees that entrepreneurs are create to able new enterprises ------2007, p. 28, p. fn. 1). 2007, While Galbraith focuses the on difficulties that change terials,and components labor is inelastic. So is the demand highly for technical products. In the first in stance punishing) large (and increases in prices will, in the relevant time period, bring added no supply. Inthe second case equally large (and punishing) de creases will bring added no customers (Galbraith [T]he short-run price highly of supply [T]he specialized ma Very much like much Galbraith Hayek, Very maintains that increases For Galbraith,For organization and organization specialists ized talent and tools, Williamson emphasizes that there is and uncertainty pose market for coordination special of the possibility strategic of bargaining. Galbraith appeals to what Oliver was Williamson call later to “asset (1985) speci ficity:” for specializedfor capital and talent are competitive not and are thus subject uncertainties to arising partly from the changing circumstances time of and place and partly from ently unlike Galbraith Hayek, believes that there are often difficulties associatedwith coordinatingthe various stages productionof through market exchange. markets one, For in productivity require time-consuming, roundabout pro ductionmethods, which large involve investments in spe cialized, heterogeneous tools and human capital. appar But the time-consuming production a car of through se a long ries sequential of exchanges? selling knowledge, her and various so to on, painters and metalfabricators, then who in turn sell the their product of activities orchestrates who an to entrepreneur, automobile viduals, with incentives profit and threatsloss,of to act in a coordinatedfashion? Why build not cara with the paint en gineer selling his knowledge, and the metallurgic engineer 426). But why is that why it But markets426). are always not com to able bine the fragments information of guiding by separate indi “[f]ragments information, of each associated with a person, areresulta combined produce to which is far thebeyond capacity the any of of one constituent individuals” (Ibid, p. nization. This bringsis what of specialists work the to a co As Galbraith result” herent 19). (Ibid, his in of it puts p. one Hayekian what moments, happens inside a largefirm is that exist precisely perform to a function that markets are not always realize: to able the coordination dispersed of knowl edge. “The inevitable counterpartof specialization orga is people who are who people expert organizing at and planning the ac tivities the of scientists. VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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the entrepreneur’s production ideas are no longer govern- man behavior that Hayek argues must be suppressed for a ing. liberal social order to be possible, what he calls the emo- While Galbraith argues that the technostructure makes tions of tribal society (Hayek 1976).1 most of the relevant production decisions, those individuals Hayek sees the success of capitalism growing out of the are not generally profit recipients. Because members of the discovery that men could live “together in peace and to technostructure have little monetary incentive to use their their mutual advantage without having to agree on com- knowledge to produce maximum profit for someone else’s mon concrete aims … bound together only by abstract rules benefit, Galbraith believes it is not accurate to describe large of conduct” (Ibid, p. 136). For Hayek, capitalist success is firms as profit maximizing. As Herbert Simon expresses the contingent upon moving people away from the habits of issue, in a manner congruent with Galbraith’s perspective, a tribal society. theory of organization “with an unrealistic utility function does not provide a basis for understanding real organiza- [W]ithin an extended order, solidarity and altruism tions” (Simon 1991, p. 30). Instead of profit maximization, are possible only in a limited way within some sub- Galbraith asserts that what most interests the technostruc- groups, and that to restrict the behavior of the group ture is to “maximize its success as an organization” (Gal- at large to such action would work against coordi- braith 2007, p. 153). Organizational success from the tech- nating the efforts of its members [via the spontane- nostructure’s perspective is better ensured by growth in ous ordering forces of market exchange]. Once most sales and security of employment. Bankrupt firms achieve of the productive activities of members of a cooper- neither, so Galbraith does not deny that the technostruc- ating group transcend the range of the individual’s ture must be concerned with achieving accounting profits. perception, the old impulse to follow inborn altruistic But an accounting profit-making constraint does not pro- instincts actually hinders the formation of more ex- 7 hibit the technostructure from pursuing other objectives, tensive orders (Hayek 1988, pp. 80-81). while having to maximize the economic profits accruing ul- timately to stockholders gives no such degrees of freedom. Hayek believes tribal commitments lead to a socially cor- In their willingness to pursue organizational success, rosive desire for social justice, and they must be minimized the technostructure is motivated by something other than for people to accept the unpatterned outcomes of the mar- COSMOS + TAXIS + TAXIS COSMOS strict self-interest, which by itself could lead opportunistic ket process. Yet Galbraith’s point is that the effective use of individuals to exercise as little effort or to convey as little knowledge in large organizations requires the instincts of knowledge as possible consistent with continued employ- the small band. Effective use of knowledge in society neces- ment. Such opportunistic behavior would especially be sitates, in some contexts, self-interested, profit-seeking mar- problematic for successful organization when the relevant ket exchange that adheres to end-independent rules and, in knowledge guiding the activities of the technostructure is other contexts, solidaristic emotions that check self-interest not accessible to high-level management. Following James and encourage individuals to participate enthusiastically as March and Herbert Simon (1958), Galbraith argues that part of a team, even though they may not be the direct ben- fortunately for organizational success a member of the tech- eficiaries of the product of their efforts. nostructure is in large part motivated by identification, not These conflicting perspectives, each tied to contrast- self-interested monetary calculation: “he finds the goals of ing views about the kinds of human motivation necessary the group superior to his own previous purposes and so he for the effective use of knowledge in society, lead to di- joins” (Galbraith 2007, p. 165). Good organization creates a vergent proposals about the role of government in creat- culture to which knowledge workers seek to belong, to con- ing the conditions for human freedom. Galbraith asks his tribute, and to improve. Simon argues similarly: “authority readers to question “a doctrine that celebrates individual- and organizational identification should help explain how ity,” like Hayek’s classical (“false”) liberalism, when it ul- organizations can be highly productive even though the timately “provides the cloak for organization” (Galbraith relation between their goals and the material rewards re- 207, p. 270). His point is that in a technologically complex ceived by employees, if it exists at all, is extremely indirect world, limiting government to the roles of protecting prop- and tenuous” (Simon 1991, p. 14). If Galbraith, March, and erty rights and facilitating exchange does not best serve the Simon are correct, the successful use of knowledge in large expansion of individual freedom. In this world, many peo- organizations paradoxically depends upon an aspect of hu- ple spend comparatively little time in markets relative to

A Galbraithian Perspective on Epistemic Institutionalism and True Liberalism ------and . Perhaps . Perhaps F.A. Hayek The Road to Serfdom to do what do couldI to reverse to that train

Government policy should thus unim be to a slave not People read F.A. Hayek’s Hayek’s read F.A. People similar rescriptsagainst the state. became It part of popular thinking that there was a conflict between in dividual liberty and the function the of state, that the state I set quite was out Well, a menace liberty…. to deliberately… thoughtof (Galbraith 2004, 49-50). pp. Modern productive organization uses marketingand ad vidual liberation requires, the to extent that is it possible, freedom fromorganization reducingby in itsrole shaping modern life. peded corporate growth andinstead act as a countervail ing organization to force encouraging by individualist more formspersonal of Galbraith development. argues social for policy harness to themodern productive apparatus liber to educated lives usate flexible, leisure; more for of more for fulfilling experiences;work more cultivated, a for and aes thetic individual sensibility and social environment. Gal braith policy government would have take an extensive role in advancing the arts and liberal education and in the ex pansion leisure of and socially provided goods. A liberal ism based a thoroughgoing upon epistemic institutional ism should take Galbraith’s Simon goes position seriously. so far as suggest to that a theory organizations, of like the Galbraith one builds epistemic foundations,using Simon’s “calls reexaminingfor the of some classical questions po of Galbraith’s But 43). epis p. litical 1991, economy” (Simon temic institutionalism and corresponding liberalism does appearnot even as a foil in Boettke’s vertisingcast to the good life in terms expansive of con sumption and requires tribal commitments from employed individuals make to best use their of knowledge in produc tion satisfy to this consumption Galbraith, imperative. Yet like also Hayek, seeks liberate to modern from people the tribe. this Hayek For liberation happens through market ex change and freedom from the Galbraith state, for but indi organization in play facilitating the use knowledge of in so ciety better were understood. it wouldit be considered if Galbraith’s perspective the on es sential that roles organization and tribal motivations inside ------For Galbraith,For the on other hand, the predominant ten In liberalism, Hayek’s there is a constant between tension To use scientific To knowledge effectively in society re often sion is betweension individual and organization, and be he lievesthat the state can possibly serve as mediatinga force. Galbraith is explicit this: about allowed influence to the useof gov of the coercive powers 143). p. ernment” 1976, (Hayek rules has been achieved in a continuous struggle against those feelings personal of loyalty which provide the basis tribalfor society which but in the Society Great be must not individual use knowledge of and the spontaneous coordina tion self-interested of action through competitive exchange. “The riseof ideal the of impersonaljustice basedformalon al urges distributive for justice and defenses special of in terests. The rule of is,law in Hayek’s the view, linchpinof individual freedom and the basic framework promote to plicable, impartially enforced, and well announced—i.e., therule law—are consistent of with protection private of property and its free exchange and incompatible with trib threaten this spontaneous when they order are expressed through governmental mechanisms. Government policies that areindependent any of particular ends, universally ap market and state, between self-interested exchanges among individuals that spontaneously and order tribal produce attachments solidarity, to fairness, and social justicethat organizational and autonomy individual are autonomy not identical. questionedacceptance economic growth of as the primary social purpose and public policy that organiza promotes tional pursue to freedom a growth and autonomy path. But pressed individuals in for order be to willing make to mer itoriouscontributions the to team. Identification with the goals organizational of survival and growth leads an to un taps into and requires a type tribal of orientation from the knowledge in workers the firm, in which self-interest is sup or her own. her or Galbraith us helps see to that organization alsuccess in a capitalist inasmuch as depends it economy, individualupon conveyance knowledge of in production, quires large-scale organization and the individual’s adop the organization’s goals submission to) as histion(or of society thus has limited applicability in of the development a political theory freedom—a of true liberalism—when or ganization is ubiquitous. the time in which they are engaged in organizations. The Hayekian an of metaphor all-encompassing market as tele communications system facilitating the use knowledge of in VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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NOTES

1 Albert Hirschman’s (1970) analysis of the role that “loy- alty” plays in coordinating human behavior is a cousin of Galbraith’s and March and Simon’s arguments for the im- portance of identification as a motivating factor in human action.

REFERENCES

Boettke, P. J. 2018. F. A. Hayek: Economics, Political Economy and Social Philosophy. Basingstoke: Palgrave Macmillan. Galbraith, J. K. 2001. The Essential Galbraith. New York: Houghton Mifflin. . 2004. Interviews with John Kenneth Galbraith. Stanfield, J. R. and Stanfield, J. B. (eds.). Jackson: University Press of Mississippi. . 2007. The New Industrial State. Princeton: Princeton University Press. Hayek, F.A. [1945] 1948. The Use of Knowledge in Society. In: Hayek, F. A. (ed.) and Economic Order. Chicago: University of Chicago Press, pp. 77-91. . 1976. Law, Legislation and Liberty: A New Statement of the Liberal Principles of Justice and Political Economy, Vol. 2, The Mirage of Social Justice. London: Routledge. 9 . 1988. The Fatal Conceit: The Errors of Socialism. In: Bartley, W. W. III (ed.) The Collected Works of F. A. Hayek, Vol. 1. Chicago: University of Chicago Press. Hirschman, A. 1970. Exit, Voice, and Loyalty. Cambridge: Harvard University Press.

March, J. and Simon, H. 1958. Organizations. New York: Wiley. + TAXIS COSMOS Simon, H. 1991. Organizations and Markets. Journal of Economic Perspectives. 5 (2): 25-44. Williamson, O. 1985. The Economic Institutions of Capitalism. New York: Free Press.

A Galbraithian Perspective on Epistemic Institutionalism and True Liberalism ------(2012, pp. 20- pp. (2012, Political Philosophy: a Hayek (1976), by contrast, by claims that social(1976), Hayek justice is meaningless, atavistic an product of intuitive, old (the in deed religious, conception morality), of unfeasible, and in withcompatible Swift a market concentrates economy. his critique argument Hayek’s on treating for social justice as a category mistake, that one imputes responsibility an to amorphous ‘society’ individual no where can agent be held responsible. Swiftresponds it is that trivial we that can be I outline a positive research how program might combine Hayekian insights with the pursuit social of justice, the at or very least the progressive amelioration the of conditions of the disadvantaged. relatively JUSTICE ON SOCIAL OF HAYEK CRITICS Students political of philosophy might often encounter not has tended be to treatedas the ade Hayek. (2013) Nozick quate representative “right-wing” political of philosophers does Hayek make However, (Schmidtz and Brennan 2012). animportant appearance in Swift’s beginner’s guide for students and politicians as the paradigmatic23), skeptic social of justice in who spired British Prime Minister Margaret free- Thatcher’s market agenda the of 1980s. disagree Proponents the on social of theycontent justice. agree However, that political institutions should be evaluated the on they way distribute essential resources, status and opportunities individu to als and groups in a community. This could be a narrow de mand that everyone has enough resources live to reasonable lives;claim broader a or distributive for equality; pre a or sumed baseline equality for that permits inequalities some only under specific conditions. epistemology that establishes deep quite the how problem coordinationof goes. I explain the necessary that role ap preciative theory in plays our understanding of way the re lationship between social morality and society. I then ex plain appreciative theory how goes answering to way some critics. Hayek’s This highlights between overlap the possible Rawlsian and Hayekian Finally, public policy. to approaches ------(2018) is an impressive synopsis and (2018) F.A. Hayek: Economics, Hayek: F.A. Economy Political

My aim,My therefore, in this essay iscontribute to to Boettke focuses with engagement Hayek’s on and recep I add Boettke’s to resources context some around Hayek’s matively committed theorists and philosophers. I begin by summarizing cases inter-related some proposed politi by cal theorists rejecting for critique Hayek’s social of justice. Boettke’s bridging project by the between gap the Hayeki an critique social of justice and its reception among nor ly successful, integrate to Hayekian insights into normative political philosophy (Schmidtz and Brennan Tomasi 2012; 2012a, 2012b). al commitments cannot who but participate in the same establishingproject of a truly just society (Griffiths2014). Nevertheless,there been have several attempts, increasing who have engaged with have who Hayek. Scholarspolitics of theon generally left have Hayek as conceived an ‘enemy’ intelligent canwho clarify help the feasibility their of some of mor tion among economists. However, examplestion among economists. these of diffi However, cultiesin translation also among cropup political theorists tion for economic decision-makingtion for can only bediscovered through processestrial of and error (Boettke Boettke 1997; and O’Donnell 2013). timesclaimed build to Hayekian on insights inquiry. or But in the process formalization of they lost the have essence discovery: Hayek’s of that a great deal relevant of informa of anof appreciative perspective explains the various ways that insights Hayek’s been have misconstrued. As Boettke documents, 97) p. neoclassical(2018, economists at have 108; Boettke108; and Coyne and Nelson 12; 2009, Winter p. 2004, This 47). interpretation p. is important, not be but thecause only reading of it’s way Hayek. the Rather, lack ening is that offers Hayek appreciativean theoryof market institutions, in opposition the to formal descriptions and mainstream of proofs economics (Boettke 107- pp. 2018, powerful scholarship defense Hayek’s of framed as a project epistemicof institutionalism Boettke (cf. 2002; Boettke and claim One thatCandela I find 2017). particularly enlight Peter J. Boettke’s J. Peter andSocial Philosophy NICK COWEN Lincoln of University Email: [email protected] Hayek’s Appreciative Theory and Social Justice Theory Appreciative Hayek’s VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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collectively responsible for the outcomes produced or per- gence between Rawls and Hayek is collapsed, contemporary mitted by political decisions. Shared responsibility does not Hayekians are left defending their position based on con- mean no responsibility. troversial empirical claims about the contribution of com- Swift’s summary reflects a common starting point of sev- petitive markets to improving the condition of the least eral criticisms of Hayek in political thought. Gamble (2013) well-off. suggests that Hayek’s insistence that only intentional acts The overall appraisal of Hayek is that he voices reason- are capable of injustice ends up impoverishing his broader able concerns about some peripheral arguments of social theory. Thus, with only a negative notion of liberty and a justice theorists. But his fundamental and aggressive rejec- narrow definition of coercion (only possible through delib- tion of social justice is unwarranted due to his own position erate acts), Gamble suggests that people’s choices and op- on what may do and his explicit support for a portunities within a Hayekian framework can end up sys- Rawlsian approach. This characterization is plausible when tematically restricted just as long as the process producing reading Hayek’s rather polemical attacks on social justice it is unintended. Johnston (1997) argues that Hayek fails in isolation. Indeed, as Boettke (2018, p. 2) acknowledges, to recognize that the ends of social justice can be pursued there are moments where Hayek’s stridence undermines through indirect means rather than brute interventions his aims, and this is arguably one of those moments. Nev- and that he underestimates the contribution of market in- ertheless, there is a Hayekian response once his position is stitutions themselves to generate oppressive social environ- understood within his broader project of epistemic institu- ments. tionalism. This account can explain why some minimal, in- Tebble (2009) points out that the claims of meaningless- deed arguably quite substantial, provisions of a welfare state ness and atavism may make some sense against those im- can be supported wholeheartedly from within Hayek’s ap- puting justice to market outcomes alone but that correcting proach while still ruling out more systematic forms of in- 11 them after the fact to bring the results into line with social tervention in the economic realm. It can also help us un- justice can still be meaningful. Moreover, Tebble claims derstand in a more positive fashion how exactly to pursue that Hayek falls into contradiction by permitting a minimal successful public policy reform. welfare state but on moral grounds that he dismisses else- where (cf. Plant 2010, p. 218). To avoid contradicting him- MORAL THEORIZING, SPONTANEOUS COSMOS + TAXIS + TAXIS COSMOS self, Hayek would have to pursue a much a more radical ar- ORDERS AND APPRECIATIVE THEORY gument for laissez-faire involving rigorously competitive and decentralized solutions to welfare. A key part of the challenge of bridging the gap between Lukes (1997) similarly turns aspects of Hayek’s critique Hayek’s epistemic institutionalism and theories of social on itself. He suggests that just because a moral norm, like justice comes from a different method to normative theo- social justice, has non-rational, even religious, origins does rizing. Many scholarly proponents of social justice, espe- not render it meaningless. Indeed, it could be its very an- cially those working within or influenced by analytic phi- cient origins and enduring attraction among people’s sense losophy, take the task of political philosophy to be a subset of morality that explains why you need a conception of of what they describe as applied ethics. Generally, the task social justice for minimal political legitimacy to obtain. of applied ethics is to refine moral judgements and intu- Moreover, he argues that insisting on abstract, general rules itions in order to establish and defend coherent moral prin- based on formal equality in the place of social justice is ciples based on rational justification (Knight 2017; McDer- hardly a sure escape from de facto coercion and restraints mott 2008). on basic liberties (Lukes 1997, p. 77). Williams (1997) ar- For some theorists, famously Cohen (2003), guiding mor- gues that Hayek never successfully separates his account of al principles can be established without much (if any) refer- the rule of law from his undefended but controversial theo- ence to empirical facts. Other theorists are more motivated ry of economic rights. to include sociological facts, however they tend to arise as Lister (2013, 2017) draws attention to Hayek’s and Raw- feasibility constraints on moral theories (Swift and White ls’s (1971) common inspiration in Knight (1921) about the 2008). Normative theorists treat the intuitions, judgements ineliminable uncertainty of economic life. Both, as a result, and principles that we find deployed in ordinary language avoided making distributive claims with regards to des- as the building blocks of more systematic moral philosophy. ert. Lister argues that once a supposed conceptual diver- It is presumed that ordinary ethical discussion, analytically

Hayek’s Appreciative Theory and Social Justice ------From a Hayekiana From recognition standpoint,the of however, is worthIt emphasizing fundamental how the epistemic lize andeffectively use knowledge that is dispersed throughout the economic system. Although perfect, never the this of outcomes market pro to this of Some plausible) account is conceivable (even simplifiedmodels relevant out pick help that us and salient features phenomenal reality. of Because they cannot ever knowledge complete reality, represent of they are constantly error-correctionopen to and adaptation in the face novel of Anphenomena. interesting feature this of account isthat human minds themselves bear a resemblance sponta to neous orders. Cognition our of surroundings emerges not through systematic reflectionon individuated sense-da the ‘allocative’ function markets of (while contesting their The distributiveimplication is that role). the institutionsof the market can economy be established, and indeedfine- tuned,in achieveto order must commonbe endscare but fully constrained instability. so too as generate much to not beneficial impactof activity takingplace within markets is only the beginning account broader social of a much of thatorder includes many other institutions, including law, language, social norms and morality itself 2017, (Albrecht this From radical more cf. Ostrom 1993). social 357; p. evo lutionary standpoint, the description spontaneous of order onlydoes the apply to not results activity of within a frame rules, of work the to the but of emergence rules themselves. Norms and institutions are principally developed as a result humanof action design not but individual or intention. challenge Hayek. argues is He for that our basic sensory faculties are constitutionally incapable accessing of puta tivereal entities in anobjective physicaluniverse (Caldwell Instead, make we 2004;sense irreducibly of 1952). Hayek that orders’ constitute ‘concrete complex our holistic raw sensory experience through the generating, testing and re finingThese of abstract categories1964). are (Hayek orders cess, that also Hayek calls catallaxy, and are complex more makebetter use resources of than any conceivablecentral ized arrangement developed through rational planning. theorists social of justice when applied narrowly eco to activitynomic itself. Like the neoclassical economists who soughtformalize to explanatory Hayek’s framework, they can recognize the informational challenges that market institutionsleast at appear in overcome to the able supply Miller They canpro private 1990). of goods 1981; (Carens marketspose for a role that a sufficiently informedcitizen did 240) when lauding p. ry would endorse, as Rawls (1999, ------

tion in which the is the key component abilityre to veal error and motivate the discovery new knowl of edge economic about opportunities… superiority The theof market process lies in not its ability produce to optimal results, rather but in its ability mobi to The economic process The economic neitheris an evolutionary nat uralselection process that assures the survival the of “best” a it chaoticnor is “fittest,” or and random walk. The discovery of the competitive market learning a is process- a process trial of and error and experimenta The result The is an identifiesexample of Hayek what as a For Hayek, the Hayek, For departure point of is different. His theo ducing socially desirable, though assuredly not optimal, describes: 189) outcomes. As p. Boettke (2018, ry their out own plans within a framework established of legal rules with the aggregate necessarily result not (if the thoseintention of working within the framework) pro of spontaneous order (D’Amico 2015; Hayek 1945; Menger Menger 1945; Hayek 2015; spontaneous (D’Amico order Market institutions 146). p. permit1985, individuals car to ous feedback, through the realization loss, profit and of al lowing them continuously to adjust their activity chang to ing availabilities resources of and consumer preferences. efforts makingare genuinely a productive contributionto a community are or wasting valuable resources. With such institutions in place, individuals and firmsreceive continu to be throughoutto conveyed an entire society 1986). (Lavoie suchWithout a regime in place,individuals engaging in economic activity knowing of way no have whether their tivemarket and price system that emerge to allows local knowledge scarcities of and demands goods, for services and, critically, intermediate factors production of (capital) this generating by the social circumstances people whereby can make use knowledge of that their is not own (Hayek These Kieslinginstitutions 2015). permit1937; a competi vate property and voluntary contract under the rule law of permits economic coordination. Liberal institutions achieve able capacityable humanity for engage to in cooperation the at scalepoliticala of community despite widespread, manifest ignorance. answer Hayek’s is that liberal institutions pri of reality (McDermott 2008, 16). p. retical is chiefly endeavor to explainpuzzle: a remark the ontological status moral of principles and rath judgements er than their necessity, moral Out of content. philosophy precedes the on assumption that they underlying some have refined through philosophical deliberation and reflection, will eventually point meaningful, to principles. coherent It is the a different of role kindof theoristto inquire about the VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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ta but through adapting our categories to observable pat- improving their subjective conditions (and that of others) terns of phenomena through constant trial and error. What while maintaining their autonomy. eventually takes the form of reason and logic is an emer- How exactly can this emergent account of a coopera- gent property resulting from the mind interacting with the tive social order gain credibility? This is the peculiar role world and incrementally developing more refined abstract that appreciative theory plays. One of Hayek’s recurring categories and understanding of the temporal and structur- themes is to make use of reason to identify the limits of al relationships between phenomena. reason. From Hayek’s standpoint, we have limited, defea- On this epistemically austere account, there is no reason sible knowledge of our immediate environment that can to expect a direct correspondence between the concepts we become more refined through trial and error learning. We use, especially ordinary language, and an objective reality. have even more constrained access to other relevant infor- Instead, our conceptual frameworks are inter-subjective: mation about our wider social environment and must rely patterns, categories and rules constituted through social almost completely on the indirect knowledge. We can nev- interaction and the resulting practices (Boettke and Storr er be well-situated to understand society with precision. We 2002). Our theoretical frameworks for morality are no ex- cannot rely on applying proofs of systematic relationships ception to this general description. From this perspective, between well-defined social conditions and factors, because exploring morality without inquiring as to its relations the way we conceptualize those factors is necessarily sim- with other features of social reality is unlikely to be fruit- plified and unable to contain all the complex social phe- ful. The concepts that make up our moral frameworks are nomena we are trying to explain. forged through continuous interaction and adjustment be- What we have instead are informal models (or ana- tween mind and culture (Boettke 2018, p. 190). Unlike so- lytic narratives), often ones with various kinds of empiri- cial interaction and exchange within an established market cal evidence and thick description to motivate them. The 13 framework where people have some assurance of individ- conclusions of appreciative theory emerge out of the care- ual security, there can be no expectation that the results of ful, open-ended observation of patterns of relations seen human interaction in general will be broadly beneficial (cf. in comparisons between contemporary and historical so- Leeson and Boettke 2009). There is no teleology in Hayek’s cieties that show in which conditions theories are likely to account of institutional emergence and a Hobbesian state be applicable and when they are not (Boettke et al. 2013). COSMOS + TAXIS + TAXIS COSMOS of nature is historically more common than a liberal social One inspiration for this kind of method is the conjectural order. Nevertheless, the role of social institutions, and ex- history that characterizes the Scottish Enlightenment en- planation for their emergence and stability in the absence of terprise (Höpfl 1978). This certainly does not imply ignor- a single determining agent, must be established before their ing systematic empirical data when it is available or formal performance for facilitating wellbeing can be evaluated. models, especially as ‘foils’ to establish the limit conditions Social morality and law are part of our abstract order- of particular claims (cf. Albrecht and Kogelmann 2018). It ing that, once it emerges, allows us to impose some predict- merely proposes that any theorizing about reality begins ability on our own conduct and the expectations we have of with the contestable division of subjective phenomena into others. This is what makes the liberal institutions of private categories that are subject to revision, especially about the property under the rule of law different from other kinds of domain in which the theory applies. social rules. These institutions take the complex, variegat- ed social and natural phenomena we encounter and catego- IMPLICATIONS OF APPRECIATIVE THEORY rizes them in such a way that we can make general predic- FOR SOCIAL JUSTICE tions about what we may or may not do in social situations. It makes the social world more modular, allowing us to un- Appreciative theory is not a Panglossian enterprise. It is a derstand what sort of conduct counts as legitimate in our realistic perspective that recognizes the pervasive limits of own protected sphere of activity and areas of competence our own knowledge as individuals and political actors, our (Cowen forthcoming). Once baseline expectations are set- necessary reliance on social institutions to comprehend re- tled in an environment where experimentation is permitted ality on a fundamental level, and, as a result, the marvel of and the results of successful productive experiments pro- the complex extended order that liberal institutions facili- tected, individuals can occupy themselves in continuously tate but no single person can fully comprehend. I now brief-

Hayek’s Appreciative Theory and Social Justice

------moral The rule of law, especiallyThe ruleof law, when used in of defense indi withinHowever, an appreciative framework, the rule of with a parallel that has been discussed several on occasions Systemsin traffic of this debate (Schmidtz 2010). rulesand management include various general, formal rules that ap in ply all circumstances and all to participants. Others vary depending the on kind is vehicle driving one of if or one is a pedestrian. In addition rules, to traffic systems involve building physical infrastructure that make safer it trav for elers and make as it clear as the possible how rules will ap one. The The one. insistenceon the otherrule above of law substan tivemoral goals can best, at appear, be to necessary a feasi bilityconstraint poor governance, often prevent more to but likely an represent to unhealthy obsession with formality or process consequences. over vidual property rights, might appear be to based a moral on principle an that should individual’s avoid one reasonable expectationsbeing disappointed because presumably that interferes with individual underlying (the autonomy Of 79). p. 346; p. Plant 2010, value 2013, stake) at (Gamble course, only is it not governments that disappoint individ ual expectations. Expectations are disappointed natural by accidents, as well as through ordinary competitive market behavior and decisions taken individuals by in civil society. A Hayekian emphasis the on rule restrict to law of state ac tion alone seems, the on hand, one excessively stern and, on theother hand remarkably partial since fails it address to other forms uncertainty of and disappointment that hu mans encounter. purely is formallaw not is justified but on a substantive in carve to tention activity of spheres out are people where free from the arbitrary will others. of This can be illustrated veloped economies,veloped everyone but has who made any kind of productivecontribution markets inside of outside or them selves (Boettke 268; p. McCloskey 2007). Within 2018, a averredframework a liberal of even people’s where order, reachintentions not the do summit social of justice, nev ertheless traditional moral conduct, including commitment respect, hard-work, to civility and deferred gratification benefits broad people for produce throughout society. Rule of law Withinthe framework applied of ethics, technical legal principles like the formal rule and law of secure property rights seem a direct not do have to connection withthe fun damentalinterests rights or individuals. of They appear to anplay instrumental political or rather role than a moral ------

It is not chiefly is not ourIt personal participation formalin polit What appreciative theory offers is a kindof symmetry be munity, and munity, their normally expected annualincrease inde ily members and contributors civil to example, society. For distinct or a government isit not group that is responsible thefor annual production goods of and services a com of ical processes that the is responsible for good that bring we others to our actions but the as for producers market, fam collectiveproduced beneficence outcomes of through the various spontaneous processes cooperation of in which we participate. institutions, in which participate. we the From appreciative standpoint, if bear we responsibility some collectively for poorproduced outcomes, then must also we share in the we are ourwe personal responsible for a consider to conduct also we degree.able share in However, the responsibilities thefor injustices disadvantages or those by produced social tweenthe intended and unintended consequences indiof vidual action. the From social justice theorists’ standpoints, of pervasive of ignorance harder is much grasp to and yet fun damental liberal Hayek’s to political (Furton economy and Martin 2018). critic. radicallymore The skepticalnotion government, that ultimatelyset a individuals of acting within institutional rules, has limited capacity act to and does so in the midst cial must ultimately outcomes be subject rational to justi fication.notion The government notthat actionmay align withintentions is easily benevolent imagined anyby social cial are outcomes the result a set of dominant of interests thewinning assumption However, a competition power. for is also in present any political theory that presumes all so This assumption is explicit in conflicttheories of society which precedethe on basis that social struggles underlie even comparatively peaceful social orders, and that all so that any feature society of that lacks clear rational justifica tion is likely 414). be to normatively p. unjust (Lister 2013, lacy—a trap into whichclassical liberal theories can occa sionally fall. Nevertheless, there is a kind anti-naturalistic fallacy that normative shadows presumes much theory. It thatjust because a state affairs of has arisen by unguided processesdoes mean not is it normatively justified. That would be commit to something akin the to naturalistic fal Individual contributions aggregate to outcomes A valuable social point that of proponents justice make is ly suggest this how perspective answers concerns some with account.Hayek’s VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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ply in each case through both road design and standardized to determine in detail the outcomes of economic exchange signs. The system does involve some substantive changes and political activity. The best institutions governing a to the environment to make it easier to follow the rules, whole political community can do is facilitate generally though limited to the road network. Such systems are es- beneficial patterns of cooperation. Hence, evaluating rela- tablished with the common, public (but relatively thin) goal tive distributive shares between groups, which Rawls makes of allowing people to travel safely throughout a community. a key part of the content of justice, is too epistemically am- Similarly, Hayek’s commitments to the rule of law in- bitious. volves both formal generality and substantive content, with Both Rawlsian and Hayekian approaches also make use the common goal of generating circumstances in which of comparative analysis (Cowen 2017). In Rawls’ (1999) people are capable of both experimenting and planning to case, his procedural approach to identifying principles of discover how to make a positive contribution to social co- justice involves representative agents reasoning back and operation. When denied this structure of liberty, individ- forth between various alternative conceptions to see which uals are rendered dependent on the arbitrary will of those are most plausibly compatible with our intuitions and par- with political authority to have their basic needs fulfilled ticular concrete problems (Kukathas and Pettit 1990, p. 8). (cf. Trantidis and Cowen 2019). From this standpoint, the The principles of justice are not deduced from logical axi- rule of law, especially as applied to economic life, has pri- oms but argued to be the ones that would be selected from a marily social rather than individual value because it allows menu of plausible options. individuals to avoid imposing burdens on others, while So there is overlap between Rawlsian and Hayekian ap- also making a productive contribution to their betterment. proaches. Yet Rawls ultimately decides that the compari- Thinking back to our traffic management illustration, -gen son of institutional arrangements points decisively against erally applicable rules are vastly superior for preventing capitalism and in favor of either socialism or a property- 15 traffic accidents than arbitrary commands because only owning democracy (an idealized regime type not yet seen general rules empower individual travelers to act appropri- in reality). What really makes the difference is the approach ately based on their situated knowledge. to economic inquiry. Pace Knight’s early influence (Lister 2017), Rawls endorses a static formal approach to econom- Rawls and Hayek ic modelling that characterizes the neoclassical approach- COSMOS + TAXIS + TAXIS COSMOS es of Meade (2012) and Samuelson (1947). This account ex- Hayek acknowledges that justice is an important criterion plains the success of market economies in terms of a general for legitimizing formal political institutions. As a result, his equilibrium under conditions of perfect competition. How- criticisms of social justice, in general, avowedly do not ap- ever, as its proponents often assert, this perfect competi- ply to the Rawlsian framework because it distinguishes be- tion model is rendered irrelevant when faced with exter- tween a basic structure where justice applies and the rest of nalities, public goods and other collective action problems. civil society: The model purporting to explain the efficiency properties of markets ends up serving to highlight the scant cases in there unquestionably also exists a genuine problem which we would expect markets to work in practice. of justice in connection with the deliberate design of Hayek begins instead with the appreciative observation political institutions, the problem to which Profes- that many needs are met through individuals, guided by sor John Rawls has recently devoted an important market prices, making incremental improvements to their book. The fact which I regret and regard as confusing productive activities. This observation cannot be adequate- is merely that in this connection he employs the term ly explained by a model of perfect competition which, of “social justice” (Hayek 1976, p. 100). course, no one believes obtains realistically given human actors with limited knowledge. It is this realistic epistemic Hayek quotes Rawls’ explanation of justice applying challenge that indicates the comparative performance of not to “specific systems or distributions of desired things” private-property markets against state-owned or state-di- (Ibid.) but as applying to constraints on a basic structure. rected alternatives. Hence, Rawls’ reliance on formal mod- Nevertheless, Hayek and Rawls disagree on the contours of els that lack salient features to explain realistic observations that basic structure. From Hayek’s appreciative standpoint, of economic activity explains his practical divergence from this is because it is impossible for institutions to coordinate Hayek.

Hayek’s Appreciative Theory and Social Justice ------Thisreason one is contemporarywhy theorists drawing resourcefulness The of market institutions is currently ronmental and problems especially climate the of problem justice in the wake anthropogenic of climate change. A common argument is that capitalism is intrinsically incom patible with maintaining an environment suitable con for tinued human life Earth on 2008, (Geuss xii-xiii). Here pp. thecomparative institutional analysis underpinning appre ciative theory comes the to While fore. climate change (a paradigmatic global externality) presents a great difficultly tion, should reformers aim introduce to those that are re negativesponsive to feedback and can be rolled reformed or back should they fail. theon Hayekian tradition federal prefer institutions and national over problem from The power policy. of devolution the perspective a static of conception social of justice is that anyvariation in policy inducing different distributiveout comes within a national community appears be to a source arbitraryof inequality allows living people (it some within sub-national some political units better do to than others) a dynamic From perspective,(Bennett 2016). these inequal ities are acceptable if they result from legitimate rule-bound institutions that respect personal liberties (allowing free exit of dom from district one and another) to contribute to social knowledge that allows better policy and emerge to spread. Indeed, is it theorized conjunction (in with histori cal that evidence) federal institutions are those most likely encourageto the preservation market of institutions them North et 1939; al.selves (Hayek 2009; 1995). Weingast widely acknowledged across the . Few theorists activists or propose upending them. However, an exception is sometimes comes envi to when found it fulness liberal of commercial societies, can we be confident that losing market institutions undermining or them would be harmful the to interests the of disadvantaged. Many of politicalHayek’s views translate into injunctions against kindsaction of in rather public policy, than positive pro posals. and indeed does know, can He not one no really know with certainty, what positive poor to solutions social willoutcomes in work each case. can Hayek But say with greaterconfidence what interventions will or impede un dermine the workings Hayeki The the of market economy. an theorist puts impediment markets to the on cost of side the ledger when considering new policy and takes care that markets will still be permitted function to despite the in tervention. Thisto suggest not is is Hayek that against any and all deliberate policy interventions. because But the of uncertainty associated with the any of interven outcomes

------preservation

What can a Hayekian perspective offer the committed so Meade (2012) also makes strongMeade (2012) predictions the about au of the market economy. Given appreciation of the appreciation of Given the resourceof market economy. Preservation heuristicOne is placing substantial weight on tivists could when trying adopt achieve to their stated mor al objectives, which of some I suggest here. cial justice Rather reformer? than an explicit manifesto, we can derive heuristics broad some that policymakers ac or ognize them as requiring those urgent reform. But reforms willonly be successful if they an follow analysis appropriate theirof causes. losophy does need there stop to not losophy and should not, because there are many persistent patterns injustice of that mani fest, can even under liberal rec We regimes (Novak 2018). cacy are trivial.would That appreciationbe apologetics.as Indeed,resources offers some Hayek a conservativefor the orist making that sort argument. of social Hayek’s But phi are enormously fortunate live to in a developed commercial society compared any to alternative regime, past present; or andthat theconcerns contemporaryof social justice advo At thisAt point, a conservative theorist might concluding stop, that whatever class income find or groupourselves we we in, results individual of action (Boettke et al. 2005). PROGRESS FOR PRINCIPLES observing changes in wealth holdings, arewe looking for other some less abstract explanation than capital accumu lation,something that is with compatible the compositive would not expectwould not such variegated exhibit to phenomena a structural tendency accumulate to independently hu of man When action and institutional 2018). context (Cowen believe be to valuable as part intermediate of stages pro of We Kirznerduction Delmotte (cf. 2012; and 2019). Cowen not explainnot economic history particularly well (Acemoglu a Hayekian From standpoint, and whatRobinsonwe 2015). call capital is a loose category goods of that entrepreneurs it themselvesit under these market conditions. pre However, dictions are based strong on assumptions the about growth capital. of These follow neoclassical the frameworkdo but justifies Rawls’ insistence either on state-control signifi of cant means production constant of or measures disperse to citizens to such control cannot who be expected acquire to tomatic accumulation and growth capital, of a claim that has subsequentlyPiketty re-asserted. This (2014) is what VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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for market institutions, neither history nor contemporary Public choice and democracy evidence suggest that non-market economies are capable of overcoming them (Shahar 2015, 2017). Given the other ben- A third heuristic is alertness to the dynamics of interven- efits of markets as they stand for human wellbeing, dispos- tionism, or unintended consequences emerging within po- ing of them now based on a purely theoretical connection litical processes (Boettke and Leeson 2002). The key prem- between market activity (as opposed to productive human ise is that just as spontaneous orders emerge within market activity in general) and climate change is unwarranted. settings, so too does competition in the political sphere pro- duce outcomes that are the result of human action but not Diagnosis of any single intention (Hebert 2018; Wagner 2016). What makes the beneficial outcomes produced through market A second heuristic is diagnostic. Given appreciation of the processes ordinarily resilient is that market institutions are remarkable resilience of market processes to deal with epis- both incentive compatible and have compelling epistemic temic and incentive barriers to beneficial co-operation, properties. People participate in them because they receive policymakers should look on a poor social outcome with a positive feedback in terms of income and profit when they strong theoretical prior that something is preventing peo- produce marketable value. The reason why markets gener- ple from finding voluntary means to improve it. For ex- ally display these responsive features is that they are based ample, it might be that a minority or disadvantaged group on exchange and contract within a framework of secure lack formal or effective access to standard legal protections property rights. Voluntary consent against a background and remedies, a failure of equality before the law. It could of established rights has a strong tendency to lead to incre- be that law enforcement is discriminatory or predatory to- mental improvements in modes of cooperation. wards the group constituting a failure of the rule of law. It In contrast, the political process, by design, allows con- 17 might turn out that responsibility for a bad outcome lies in trolling majorities, or organized minorities, to determine a a regulatory intervention that (intentionally or not) ends up direction of policy (Congleton 2003; Tullock 1959). This al- imposing prohibitive costs on those who might supply a so- lows political processes to overcome some collective actions lution. problems when it comes to the provision of public goods A contemporary illustration can be found in the problem and addressing externalities. Nevertheless, it means there COSMOS + TAXIS + TAXIS COSMOS that rental and purchase costs for homes in areas of high are always opportunities to force people to accept con- employment have risen above what workers can reason- ditions that are worse than their status quo as part of the ably afford. A common way of looking at this problem is decision-making process. This can spontaneously produce that it is an example of market failure caused by the quasi- socially unjust outcomes just as surely as the unintended monopolistic nature of land ownership and a speculative fi- consequences of some market activities. Moreover, contin- nancial system. But if the underlying reason for expensive uous use of such processes can normalize the use of coer- housing is that the ordinary workings of the market have cion as a means for powerful groups to achieve their ends been stymied in that sector then regulatory interventions (Boettke and Thompson 2019; Meadowcroft 2014). could introduce more costs without solving the underlying The implication of the dynamics of politics is that state problem, and in some cases exacerbating it (Diamond et al. institutions are not a neutral toolkit that can be directed to 2019). There is empirical evidence that land-use planning any given ends, including a model of social justice. Instead, regulation or restrictive zoning, often popular with existing there are internal logics to state action that can spontane- homeowners, is the most important explanation for the rise ously direct policymakers to coercive, or otherwise damag- in housing costs (Cheshire and Sheppard 1989; Glaeser and ing, solutions to social problems even when that is not any Gyourko 2018; Rognlie 2016). An appreciative perspective individual’s intent. There are some well-established mecha- suggests giving that explanation a stronger weight than al- nisms within democracies that help constrain the author- ternatives because it coheres with a broader understanding itarian tendencies of state action (Boettke et al. 2016), in- of the typical epistemic properties of the market process. cluding competitive elections, federal institutions and constitutional constraints that ensure due process and that laws are applicable to all. The pursuit of social justice must be compatible with this liberal institutional framework lest

Hayek’s Appreciative Theory and Social Justice .

. 26 The . 109 (9): (9): . 109

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how permanenthow winning coalitionsdestroy democratic governance. relevance F.A. of Hayek’s political economy. Economics Institutional Economics The Epistemic Dimensionof Comparative Institutional Analysis. Austrian in Advances Economics Order. Essay in Utopian Politico-Economic Theory Chicago Press. Access to Housing: Some Empirical Estimates. (5): 469-485. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3276897. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3276897. Accessed 5 September 2019. 363. University Press. Housing Supply. Rowman & Littlefield. 31 (3): 211-245. Decision Making. In: C. Rowley, K. and (eds.) Schneider, F. Choice Public Encyclopedia of theory to the Robust Political Economy research program. In: Boettke, J., Coyne, H. (eds.) P. C. J., and V. Storr, Studies of the Market Order: New Applications of Market Process Theory political economy progress: of John Stuart Mill and modern radicalism. (forthcoming). McIntyre, K. (eds.) Palgrave Macmillan. J. (eds.) P. Oxford University Press, 115-142. pp. distributive justice and alternatives to capital taxation. Review of International Social and Political Philosophy 10.1080/13698230.2019.1644585. Control Expansion Tenants, on Landlords, and Inequality: Evidence from San Francisco. 3365–3394. Appreciative Theory, Market Design, and OpenSystems. Boettke, J. andIdentity Thompson, H. P. A. 2019. and off-diagonals: Boettke, J., Coyne, P. C. 2005. J. and Leeson, T. The continuing P. and Aligica,Boettke, Why V. Hayek 2016. J., Tarko, Matters: P. P. Caldwell, B. 2004. Some ReflectionsF.A.on Hayek’s The Sensory Carens, J. H. 1981. Cheshire, and Sheppard, P. British S. 1989. Planning Policy and Cohen, G. A. 2003. Facts and Principles. Gamble, Hayek A. and 2013. Liberty. Geuss, R. 2008. Glaeser, E. and Gyourko, The Economic J.2018. Implicationsof Griffiths, 2014. S. Congleton, R. 2003. D. Generality and the Efficiency ofGovernment Why be robust? The contributionCowen, N. 2017. of marketprocess Spontaneous 2015. D. D’Amico, In: Order. Coyne, C. J. and Boettke, Delmotte, C. and The mirage Cowen, N. 2019. of mark-to-market: Diamond, R., McQuade, The and Effects Qian, T. 2019. of F. Rent Furton, G. and Martin, A. What G. 2018. Can Economists Do? - - - . 5 . 32 . 32 . 15 (4): (4): . 15 American . 25 (3-4): . 25 (3-4): . 29 (1): 3–28. . 29 (1): . 11 (1): 11-64. (1): . 11 Critical Review . 61 (1): 161–191. (1): . 61 Journal of Public Finance and Critical Review TheJournal of Private Enterprise The ReviewAustrian of Economics . 28 (3-4): 461-483. . 28 (3-4): Journal of Economic PerspectivesJournal of New York UniversityNew York Journal of Law and Foundations and Trends in Entrepreneurship in Foundations Trends and . 20 (1): 10-20. . 20 (1): . London: Palgrave Macmillan. F. A. Hayek:F. Economics, Political Economy and Social Critical Review . 11 (1): 346–370. (1): . 11

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Bennett, Experiments M. 2016. in Distributive Justice and Their Boettke, Where did J. 1997. economics P. wrong? go Modern Albrecht, B. C. and Kogelman, Coase, B. 2018. the Austrians, and Albrecht, The Breakdown B. C.of Spontaneous 2017. Order: Smith REFERENCES Acemoglu, and D. Robinson The J. 2015. Rise and Declineof General engaging in productive social of reform injustice within a society. justice theorists with insight. Hayek’s Once established, an appreciative theory can furnish a useful set heuristics of for error in people’s attempts cooperate to error in the at people’s scale a of political community. argued I have that this lack an of ap preciative lens also limits social the some of engagement sical perspective can easily misunderstand a key theme of work: anHayek’s informal market appreciation of institu tions as capable ameliorating of pervasive ignorance and CONCLUSION that shows economistsBoettke adopting a neoclas (2018) the political process cease be to responsive the to needs of those participating in it. VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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Hayek’s Appreciative Theory and Social Justice ------Boettke says that ac Hayek 1 Boettke also indicates that “the institutional framework, thanthe costs then life will be as Hobbes suggested: “nas brutish,ty, and Boettke short” (Ibid.). continues, saying that the economics’ focus the on institutional framework, institutionalism,or short, for was lost economics to during the because period 1900-1950 economics’ of increased for malism. Classical (political) economists economists, were historians, philosophers, and scholars in legal theory. They cared their about arguments being logically sound, rather presented inpresented a technically These manner” competent (Ibid.). two statements are important paper because my for the ex cessive formalism and aggregation, and the empty style of thought even two if competent, way the were it of character istics neoclassical of economics that behavioral economics rejected. and Long Kahneman, before Thaler, be Tversky, first fore generation behavioral economists,Simon, Leiben stein, and Katona, and others, was Hayek writing the about shortcomings in neoclassical theory, which of some became known as behavioral the be clear, writings economics. To theof firstgeneration behavioral economists and those who came Thaler, later—Kahneman,and fol those who Tversky, them—dolowed the look not same. topics The mostly are the not same. underneathBut these“superficial” character istics, theyare very similar.Both critiqueneoclassical eco nomics and so do in part critiquing by economic man. social life either may Adam follow Smith’s that comment humans a tendency have “truck, to barter, exchange,”or statement humans that Hobbes’s Thomas a tendency have The dif “rape, pillage,for (Boettke plunder” 159). p. 2018, inference behavior the to is due fact that is it the institu tional framework which determines benefits and costsof specific behaviors. If the benefits of cooperation are less century” 47). p. (Bruni 2013, centuated institutions because during the period 1930-1950 economic theory was becoming characterized its by “exces formalismsive and excessive aggregation” (Boettke p. 2018, Both excessive285). formalism and excessive aggregation characterize an style “empty thought, of even when this is - - , ------Fiddler on the Roof

tutions and traditions—economic, legal, and moral into whichourselves fit we obeyingby certain rulesof thatconduct made, never we and which never have we understood” 14) 1988, p. (Hayek which satisfy we the nor sources the of things which get.we Almost all us of serve not do we whom people and whose even of know, existence are we ignorant; and in we turn constantly live the on services oth of know we nothing. whom of er people All this is pos becausesible stand we in a great framework insti of —Tevye, the lead character—Tevye, in talking community a group to of members tra about ditions) “In our economic activities know not do the we needs … we have traditions have … we everything for ask, may … You did this how tradition getstarted? I’ll tell you. don’t I a tradition. it’s But Andknow. because our of tradi tions, every us of knows one is he who and what God expects him do” to “And how do we keep we do our balance? how That I “And can tell Because Tradition! in word! ouryou of one tradi kept ourtions, balance we’ve many years many, for in its greater part—from the 1930’s to the 1990’s—Pareto’s in its the greater to part—from 1990’s—Pareto’s the 1930’s the concepts hedonist of utility and ophelimity. A reformu lationwhich replaced cardinal utility with ordinal utility. xxth says thatLuigino century “[t]he Bruni has been (2013) twentieth century.call Some theit “Paretian turn,” refer reformulation which theory,ring choice one of Pareto’s to eliminated psychology and unempirical elements, including TAKES, IT DOESN’T EASILY GIVE UP EASILY IT DOESN’T TAKES, say thatSome neoclassical theory took a wrong turn in the INTRODUCTION: WHAT THE PARETIAN TURN TURN THE PARETIAN WHAT INTRODUCTION: Web: https://economics.sdsu.edu/faculty/frantz.html Web: ROGER FRANTZ University San Diego State Email: [email protected] Before Kahneman and Tversky, There Was Friedrich Hayek Hayek Friedrich Was There and Tversky, Kahneman Before VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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than simply logically valid, which was the concern of stan- es led to Hayek’s institutional economics. The third phase, dard non-institutional neoclassical economics. Classical c. 1960-1980, and fourth phase, 1981-1992, will not be dis- political economy was also concerned that their theories cussed here. have a modicum of realism which guided their empirical The second phase, 1940-1960, is of particular interest be- analysis. They did not shy away from verbal reasoning. cause that covers Hayek’s writing on rationality and the first Non-institutional neoclassical economics cared not about beginning of behavioral economics. Behavioral economics realism but only about their theories’ ability to predict. had two beginnings. The famous beginning, the second be- Mathematical precision substituted for verbal reasoning. ginning, the truly beginning, was 1974 and Simplifying assumptions replaced abstract reasoning and 1979. 1974, was when Tversky and Kahneman published realism. As Richard Thaler quipped, ECONS replaced HU- their article in Science, and 1979, was when Kahneman MANS in economic theories and models. And, he added, and Tversky (1979) published their article in Econometrica. studying ECONS for fifty years, economists might as well The first beginning started in the 1940s with several pub- have been studying unicorns. lications by George Katona and Herbert Simon, followed Boettke says that “[t]hus, modern neoclassical economics in 1950 (and then 1966) by Harvey Leibenstein. There were was born, and classical political economy was discarded” other first generation behavioral economists who were writ- (Boettke 2018, p. 161). And, “[t]hus, early twentieth-century ing in the 1940s and 1950s. There can be two beginnings in thinkers who resisted formalism continuously stressed the behavioral economics because the first one, the one begin- lack of realism of assumptions as a problem” (Ibid.). It was ning in the 1940s, has been discounted by those ginning in to no avail. But, what goes around, comes around. Just as the second beginning. political economy was discarded it now seems that neoclas- The first generation behavioral economists did many sical theory is being discarded in favor of behavioral eco- things, but perhaps the most important was their attack on 21 nomics. In fact, Erik Angner’s (2019) recent article is titled, economic-man, Homo economicus, the 24/7, 100 per cent ra- “We Are All Behavioral Economists Now.” While some say tional (fictional) person. Behavioral economics was not pos- that neoclassical economics will absorb behavioral eco- sible if economic-man was the model for human decision- nomics, thus ending its academic life, Angner believes that making because economic-man lacked free will: he could behavioral economics will absorb neoclassical econom- only maximize. Even if he tried not to maximize, neoclas- COSMOS + TAXIS + TAXIS COSMOS ics, thus ending its academic life. Just as neoclassical the- sical economic theory would explain why not maximizing ory discarded psychology, sociology, and institutions from is simply a misunderstanding. A misunderstanding on the economics, behavioral economics with its inclusion of psy- part of the person who doesn’t understand the constraints chology, sociology, and institutions is replacing neoclassi- and environment in which economic-man operates. If those cal theory. The earlier writers of what became behavioral things were understood then the objector would realize that economics, those who began writing before Kahneman and s/he is maximizing. It gets exhausting very quickly. Tversky, and Thaler, included Harvey Leibenstein (Ph.D. in Hayek’s second phase and constructivist rationality is im- Economics), Herbert Simon (Ph.D. in Political Science), and portant here. Constructivist rationality expressed through George Katona (Ph.D. in Psychology). In several instances rational choice theory, maintains that practical rationality Hayek wrote about topics and came to similar conclusions in independent of circumstances. Regardless of institution- before Leibenstein, Simon, or Katona. al surroundings, rationality means equating at the margin. By contrast ecological rationality maintains that rational- The Four Stages of Hayek’s Work ity depends on the circumstances in which the decision tak- en place. What is rational under one set of circumstances is Boettke discuses four phases of Hayek’s work, but says that not rational under a different set. distinct boundaries among the four phases is not possible. The dependence of rationality on circumstances was il- The first phase, c. 1920-1945, Boettke calls Economics as a lustrated by Herbert Simon who used an analogy with a pair Coordination Problem. The second phase, c. 1940-1960, he of scissors. One blade is the cognitive limits of the individu- calls The Abuse of Reason Project. During this phase Hayek al, and the other is the “structures of the environment.” The spoke about “rational constructivism of the administra- psychological and the rational or economic are part of the tive state” (Boettke 2018, p. xvi), and the “constructivist ra- same process. This is one reason why Herbert Simon was a tionalism of legislation” (Ibid., p. 175). The first two phas- (first generation) behavioral economist. Hayek’s discussion

Before Kahneman and Tversky, There Was Friedrich Hayek , ------, Leiben He simply did He not 3 Individualism and the Economic Order General X-Efficiency and Economic Development On page 170 of his of book, BoettkeOn page 170 says that moved “Hayek The Net The and the Classroom In uses the compare a net to of a model metaphor stein (1978) perfect of competition, and “realistic”a the model of econ In the perfectomy. competitionmodel the net has neither tears rips innor it. Thus, commoditiesflow unimpeded to and formalism (Ibid., p. 172). The former has The for room the and formalism 172). (Ibid., p. effectslocalof culture,rejected but only“one and one the interpretationX-efficiency Leibenstein’s data of events.” or theory included an important local for role culture the of firm and industry competition.But, Leibensteinrejected andthe only interpretation one “one human of i.e., action,” all human action is everywhere and always fully rational. X-efficiencytheory violated almostevery formalnorm of istic economic theory, including the use mathematical of reasoning, the search equilibrium for solutions, and the as rationality.sumption complete of the At same time, Leiben steinwas a trained neoclassical economist,and considered himself be to a neoclassical economist. believe that neoclassical economics ex offered a complete planation all of human and Boettke economic phenomena. from Hayek quotes “Nothing is assume solved when we everybody know to ev erything and that the real is rather can it problem how be that about brought the as of much available knowledge as Leibenstein, For the aspossible for is used” (Ibid., p.178). vast majority the of human race, can one no know every ifthing. there is an However, increase in competitive pres sure, then individuals will theuse of more available knowl edge than they did before. generationbehavioral economist. virtue by Hayek, his of writing the about same and topics having a similar philoso as Leibenstein,phy is also considered a firstgeneration be havioraleconomist. In fact, wrote other Hayek before first generation behavioral economists. Thus, before wasthere Kahneman there was Hayek. and Tversky, the conversation from the technical arguments concern ing the price system and the allocation scarce of resources theto institutional environment that wouldneed compli thatment planning Likewise task” 170). (Boettke p.. 2018, canit be said Leibenstein of that the attempted he move to conversation from the technical arguments surrounding al locative efficiency toenvironmentthe insidethe firm the – firm is an institution - non-allocative, to and X, efficiency. Boettke says that was Hayek “trapped” between historicism ------(Vol. , before , before Homo economicusHomo I am going try to not equate to 2 Law, Legislation,Law, and Liberty

Section 2 will discuss features some institutions of and material objects the produce to intended result. But the success action of in society par depends more on ticular facts than can anyone possible know (Hayek, cited in Boettke Ibid.). 2018, First generation behavioral economists, writers or of Complete rationalityComplete action of in the Cartesian sense demands knowledge complete all of relevant facts. A designer engineer or needs all the data and full power manipulate or control to them if is he organize to the Hayek preferred the preferred Hayek ecological concept of rationality to ing Hayek but it has it ing been but avail. no to Hayek Leibenstein is a first the two men. What is I want that show to both wrote men similarabout topics. In most cases wrote Hayek them about Leibenstein.before Leibenstein looked for I have referenc Letbe me very overall clear. Leibenstein’s vision was asnot as Hayek’s. comprehensive nomics. Section 4 is a summary and conclusions. LEIBENSTEIN AND HARVEY HAYEK, knowledge and common Hayek, to Harvey Leibenstein. Section 3 will aspects some show behavioral Hayek’s of eco or any theor of synonyms it, i.e., for substantive rationality, objective rationality, perfect rationality, maximization, or optimization. the terms selective rationality and procedural rationality. Boundedand selectiverationality areidentical not with they but each are other, both critical global of rationality, becausethey rejected the knowledge complete idea of and global rationality. Simon the preferred terms bounded ra tionality and procedural rationality. Leibenstein preferred “old” behavioral economics, rejected Cartesian rationality from Hayek’s 1973 book, from 1973 Hayek’s Rules1: and Order): should be seen as an reason attempt defend to against its abuse under the guise scientism of Cartesian or rational Boettke (Boettke 186). ism” then p. includes a quote 2018, of reason, of trying use to reason consciously to design civi lization.Constructivist rationality isassociated most with Descartes.Rene work Hayek’s of Boettke says that “[m]uch that of constructivist Constructivistthat of rationality. rationality means, in part, designingsociety ourby will. is the It abuse of rationalityof and his rejection of pen paper to theSimonabout put same, reason is one to behavioralgeneration) a (first Hayek consider economist. VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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firms and households, and all firms are treated equally with Leibenstein says that when you assume that production all other firms. There is no need for entrepreneurs. In the and cost functions are complete, and markets and prices realistic model the net has tears and rips in it. The net is function well, then there is little if any use for entrepre- “impeded, incomplete and ‘dark,’ in contrast to unimped- neurs. In the real world the former are not complete and the ed and ‘well lit’ net that represents the competitive model” latter do not function as they do in textbooks. The net has (Leibenstein 1978, p. 45; italics added). tears and rips in it, and the entrepreneur is a gap-filler and In, “The Meaning of Competition,” Hayek uses a meta- “input completer. phor of a well-lit and a darkened classroom, to discuss the ability of markets to serve as a tool for learning. Boettke ex- BEHAVIORAL ECONOMICS plains that: Before Kahneman and Tversky, and Thaler, Hayek, in Markets, in Hayek’s rendering… become learning Chapter 9 of his 1952 book, The Counter- of Sci- mechanisms, and how effective they are at teaching ence: Studies on the Abuse of Reason, wrote about the lim- is a function of the institutional environment with- its of human rationality (or reason): “It may indeed prove in which they operate. To introduce perhaps a useful to be far the most difficult and not the least important task metaphor, think of a well-lit classroom with a white for human reason rationally to comprehend its own limita- board, and black marker—a student… will be able tions” (Hayek, cited in Frantz and Leeson 2012, pp. 4-5). to easily read the information on that white board I know, Hayek is an Austrian economist and they are not and add to their knowledge base. On the other hand, related to behavioral economics. But, in tracing the history imagine that same student finds themselves in a dark of the ideas which led to the “behavioral revolution,” Hayek classroom with no lights, with a white board and has a central role. Consider some of these ideas: bounded 23 white marker. The information may in fact be writ- rationality, the role of the unconscious in decision-making, ten up on the white board, but the student cannot read tacit knowledge, human interactions, time and complexity, it, and thus they cannot add to their knowledge base” natural and social sciences, and the role of explanation and (Boettke 2018, p. 236). prediction. Here I will discuss three ideas: prediction and explanation, knowledge, and, last but not least, rationality. COSMOS + TAXIS + TAXIS COSMOS Leibenstein metaphor of a net as the economy contains two important parts: nodes and pathways. The nodes are Explanation and Prediction where two or more strands or pathways come together. The nodes represent firms and/or industries which receive in- The Hayekian research program extends the spontaneous puts, and households which receive consumer goods. The order approach beyond the realm of economic explanation pathways are the carriers of the inputs and goods and ser- to all realms of social interaction, including science, law, vices to firms, industries and households. In a neoclassical and history (Boettke 2018, p. 185). model with cost minimizing firms, all of the strands are in Hayek did not believe that predictions about specif- perfect condition without any tears or rips which would ic events, “point predictions,” were possible. This is due to hinder the workings of the markets. The nodes are also in “complexity” which means that the amount of necessary in- good working order, dealing equally with all other nodes. formation needed to make point predictions is beyond our In the “real world” the strands contain tears and sometimes abilities. He did believe that “pattern predictions” were pos- it is torn and hence there are gaps in the nets. Inputs and sible. Pattern predictions are predictions about generalities goods do not flow to the persons and/or firms willing to pay of a situation as a whole, but not about specific elements of the highest price. Some inputs, such as knowledge, cannot a situation. Similarly, Hayek distinguished between expla- be traded. Hence the need for entrepreneurs. In Leiben- nations from which we can make predictions, and expla- stein’s model entrepreneurs are “gap fillers” and “input nations which explain the principles responsible for the completers” (Leibenstein, 1978). If some inputs are not mar- creation of phenomenon. Because of the nature of our ma- keted, Leibenstein mentions knowledge as one such input, terials, “explanations of the principle are often the best that and if markets contains imperfections, i.e., torn or ripped we can do in the social sciences” (Caldwell 2004, p, 247). In strands of the net, then the entrepreneur must fill-in the other words, we are not perfectly rational. gaps and complete the inputs in the net.

Before Kahneman and Tversky, There Was Friedrich Hayek ------4 Boettke spends a fairly large amount space of discussing the knowledge that is relevant the to the to solution is given never economic a single to problem mind, is widelybut dispersedthroughout society as of bits Amongmid-twentieth century economists, only enabled us understand work to Hayek’s what I found truly astonishing. in market my People experiments quickly discovered theequilibrium efficient outcomes hidden in their dispersed knowledge individual of valuesitem that I had assigned them privately. The problem, knowledge the difficulties caused by “dis Why doesLeibenstein the reject the view,” “romantic Hayek’s theory Hayek’s knowledge. of Drawing from “The Hayek’s Knowledge of publishedUse in in Society,” Boettke 1945, that: says In Boettke’s his of endorsement book, Laureate Nobel Ver Smithnon theory says Hayek’s of dispersed of knowledge: persed” knowledge is that knowledge is possessed indi by viduals, each knows whom of only a miniscule amount of available knowledge.“on the Thoseground”work who have the knowledge time of and place. Policy makers theo have retical knowledge. the Bothground,” and “on people poli be Hayek cy makers a knowledge have However, problem. lieves that the policy maker/central planning socialist has added In problems. addition a knowledge to they problem alsosuffer (Boettke problem “abusefrom of power” an 2018, They abusereplace privatepower and 120). marketsp. with political decision making. private markets work However, allowingby the price system correctly to allocate dispersed knowledge. prediction is all that counts view? rejectionLeibenstein’s is similar rejection Hayek’s to the of same. Economics deals with with complexity, a large number observations of and variablesand relationships among the variables. Economic events are because complex they are affectedby economic and variables, non-economic and these numerous non-eco variablesnomic be “can accounted the not on for basis of There existing knowledge” 14–15). (Leibenstein pp. 1976, aresimply too many possible interactions (known of and unknown) factors influencing economic behavior and the economic system “prediction for engine” be to the “be all and all” end economic theory. of PROBLEM THE KNOWLEDGE ------Simoncom

, the molecular; and An EmpiricallyAn Based Microeconomics

Leibensteinthe to held belief thatprediction the isnot By comparison and contrast, X-efficiency Leibenstein’s In People with People expertise such as chess grandmasters express is subsidiary the to explain. to power Explanation without prediction isprediction sufficient, but without explanation consequencesis no of from a scientific standpoint”(Ibid.). explanatory capacity is worthless. Only ... predictive capac ity that arises having of out and communicable coherent explanations has scientific standing.predict to power The p. 13). Leibenstein believed 13). thatp. an important maybe is the abilityexplanations “obtain to coherent and phenomena of goes say that to He on “predictiveevents.” capacity without onlythe or most important criterion evaluating for thea the to refers He idea thatory. prediction is the only criteria as the faith a “matter of view, “romantic” taste” of or (Ibid., efficiency is aboutelements atomic the Leibenstein calls micro-micro it theory (Leibenstein 1976). omistic are elements individual consumers and members anof organization.molecular The elements households are and firms. Micro theory is about molecular the X- elements. knowledge and cognitive abilities. theorycontains atomistic and molecularat elements.The posed a method testing of this direct by proposition obser problem The cited in 143). (Simon, Augiervation” p. 1982, with if” “as assumptions is that they ignore the limits our of 173). Do maximize? people has, one 173). Simon says that “[n]o in fact, observed whether theactual positionsbusiness of firms are profit-maximizing the ones; norpro hasanyone equations the of billiard board; they rules involve thumb, of andis it these practical guidesaction to are we trying to discover in explain to order p. the 1965, behavior” (Simon want a theory what heuristics of a human billiard player usesin plan to quiteorder and not accurate) make (often a shot. Theseheuristics solvingnot do involve the differential that “[i]f we want we a theory explainingthat “[i]f bil play people how liards,want not do theorya we perfect of billiard balls; we ics psychology of and limit economics a theory’s to ability predict. to As opposed perfect Friedman’s to billiard player (Friedman and Simon says Savage, 1948; Friedman, 1953), stored instored the unconscious, make to a reasonable move. use Friedman’s if” “as on of ments in rid to econom order have thehave time choose to the best which possible move in cludestheir reaction opponents their to reaction theirto reaction,opponents etc, so they use their expertise, largely their expertise through (largely pattern unconscious) rec ognition. According Herbert to Simon grandmasters don’t VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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incomplete, subjective knowledge, much of it tacit in government planners cannot possible know what in- nature and only pertaining to the particular time and dividuals know, simply because they lack that dis- place (Boettke 2018, p. 85). persed knowledge. The multiply failures of plans and the omnipresence of unintended consequences can be For Hayek, the most important aspect of knowledge is attributed, in large part, to the absence of relevant in- “unorganized,” or tacit: the knowledge of “particular cir- formation… How can they possibly obtain the knowl- cumstances of time and place.” It is the “contextual na- edge that would allow them TO compare costs and ture of knowledge” (Boettke 2018, p. xiv). This knowledge benefits? Often they cannot (Ibid., p. 79). is widely distributed among the population and can’t be known or communicated by a central planning board. How Boettke says something similar, that “[a]ctors on the do we make use of tacit knowledge? Boettke says that the ground do not possess the theoretical knowledge of the pol- answer given by the is that it is a “function icymaker, but the policymaker does not have access to the of property, prices, and profit-and-loss to structure incen- “on the ground” knowledge of the particular circumstances tives, mobilize information, discover and utilize the knowl- of time and place that economic actors are in possession of” edge that is dispersed throughout the economy, and provide (Boettke 2018, p. 204). the spur for innovation and the feedback on bad decision- The problem is more than simply dispersed knowledge. making that is necessary for economic actors to coordinate In, The Ethics of Influence, Sunstein has a section titled, “Ig- their plans” (Ibid., p. xv). norant and Biased Officials.” He says that choice architects The Austrian School goes further than simply using tacit —regulators, planners, politicians, bureaucrats, public offi- knowledge. Boettke quotes Hayek who said that “the task of cials—are “emphatically human and fully subject to behav- economic theory was to explain how an overall order of eco- ioral biases; they may be unreliable for that reason” (Sun- 25 nomic activity was achieved which utilized a large amount stein 2016, p. 75). They suffer from, among other things, the of knowledge which was not concentrated in any one mind present bias, overconfidence, the availability heuristic, and but existed only as the separate knowledge of thousands or loss aversion. Thus, “In a democratic society, public officials millions of different individuals” (Hayek, cited in Boettke are responsive to public opinion, and if the public is mistak- 2018, p. 5). en, officials might be mistaken as well” (Sunstein 2016, p. COSMOS + TAXIS + TAXIS COSMOS One implication of tacit knowledge is that the institutions 76). Sunstein says that a “remarkable passage” from Hayek of Western society, including the market system, are “the is that “the awareness of our irremediable ignorance… is result of human action but not the result of human design.” the chief basis of the argument for liberty” (Ibid. p. 56). But The economy and society are too complex to be the product there is one other consideration. Citing (behavioral) public of human design. The information requirements for creat- choice theory, Sunstein says that public officials may sim- ing a rational social order is not possible for a single mind ply be self-interested rather than primarily interested in the or for a relatively few minds. The knowledge required to social good. They may have sufficient knowledge to make create a rational social order can be the product only of de- great decisions for the public good, but they don’t. centralized human interaction through trial-and-error, uti- Sunstein finds a passage from Hayek’s “The Use of lizing tacit or unorganized knowledge. Knowledge in Society” to be another “remarkable” pas- sage. It is where Hayek says that the type of knowledge Sunstein he is most interested in cannot be part of a table of statis- tics, and hence cannot be useful to central planners. This Chapter 5 of Sunstein’s (2018) The Cost-Benefit Revolution is the knowledge of “time and place” (Hayek 1948, p. 83). is titled “The Knowledge Problem.” In it Sunstein says that One suggestion Sunstein makes which could help with the there are two “indispensable” ideas surrounding regula- knowledge problem is the process by which the public can tion. One is the need to measure the effects of regulation on comment on the proposed rule(s), i.e., on the consequences social welfare. The other, “attributed above all to Friedrich and/or the costs and benefits of the proposed rule(s). Sun- Hayek” (Sunstein 2018, p. 79), is that “knowledge is widely stein comments that ”[i]t is important to acknowledge that dispersed in society” (Ibid.). The latter has important im- even in its most ambitious forms, the public comment pro- plications. Sunstein explains that: cess might fail to solve the knowledge problem” (Sunstein 2018, p. 89). For one thing, most citizens who could contrib-

Before Kahneman and Tversky, There Was Friedrich Hayek ------is not a HUMAN isnot , originally published in 1969, doesn’t have free have will. doesn’t S/he must Homo economicus Homo then behavioral economics could not does make not mistakes and does not Homo economicusHomo Sciences the of Artificial Homo economicusHomo Homo economicus Homo yet this be may the critical a sufficient Given element. inducement, can he search its nature out in detail and a stage to get it can he where normal use it. People ly operatewithin thebounds great a of deal intel of lectual slack. Unlikeunderutilized capital, this is an thatelement isvery difficult to observe” (Leibenstein 405). 1966, p. usesHayek the incomplete,Leibenstein word uses the In a good deal our of knowledge is vague. A man may nothinghave than more a sense itsexistence, of and succumb cognitive to errors. Hence, their behavior is vir tually predictable. completely On the other hand, Richard Thalerquipped that studying HUMANS is akinto studying unicorns. HUMANS needed were in economic theories and models and behavioral economics has been doing just that. word vague.word Knowledge is vague, knowledge is incomplete. Maybe vague and are incomplete (good) synonyms, not but they are good enough: I am a satisficer. RATIONALITY is that contention asMy so assume long we the existence of exist.This is because being. accordingbehave preordainedto rules Psychol behavior. of ogist the founder of James psychological B. Watson, school behaviorism,of even suggested that if observe you a rat in a maze, then could you learn human about a lot psychology (Pomoroy 2014). Simon includes article, two from quotes 1945 Hayek’s long “TheUseof about one real Knowledge the in Society,” eco and the problem nomic other the about price system. About pointsthe … Hayek out, price system, Simon says that “[a]s its most striking characteristic is the reduces it and way lo calizes informational and computational requirements” (Si 42). p. 1982, mon Leibenstein Inhis seminal article in 1966, Efficiency ‘X- “Allocative vs. LeibensteinEfficiency,” says that: ------: Administra observation , originally says he that is it published in 1947,

did they as economics do, my not books suggest, sim balanceply off marginalthe return of activityone the against 500). p. that the of 1979, other? (Simon Although the heads the of two agencies appeared to agree as the to objectives the of recreation program, and did appear not be to competing empire, there for was continual disagreement and between tension them with respect the to allocation funds of Why . ... in instead way one through another… of unlimited stretches time, of unlimited reaches space, of and un 78). p. 1976, limited sets values of [1947] (Simon Simon did argue not against economic-manusing the complete descriptioncomplete the of consequences follow ing fromeach alternative strategy and to would have compare those consequences. know to would have He the would be changed… how world his by behaving (Simon 1955, p.99). (Simon 1955, Simon did accept not the that notion a high degree ra of [t]raditional economic theory[t]raditional postulates an ‘econom in who, man,’ theic course being of economic is also This‘rational.’ man is assumed to have of knowledge therelevant aspects his of environment… and skill a in that computation enables him calculate to … the alternative courses action of that are available him to Austrian method. a-priori offered He an tive Behavior tive “inconceivable” that a person can act with perfect rational so do to In requires order ity. that the person has a: tionality is a human possible for being. In his In Simon’s article, “A Behavioral article, Rational Modelof In Simon’s “A Choice,” sayshe that: the 93). (Ibid., public” p. Simon of new rules,of an analysis with the of rule(s) respect how to they are actually working is undertaken. important One fo cus the of is E.O. the existence “dispersed of information of ute theirute knowledge would, various for reasons, partici not inpate the process. Obama President Still signed in 2011, Executive which required 13563, Order that after passage VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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One of the purposes of psychology is to change or im- ity and his rejection of Homo economicus is one reason to prove behavior. Why would anyone need to change or im- consider Hayek a (first generation) behavioral economist. prove the behavior of ECONS? They wouldn’t. You want Hayek believed that humans are far from being perfectly to change or improve the behavior of a being who doesn’t rational, i.e., “deliberative and foresighted.” However, delib- make mistakes in judgement? Getting an ECON, or homo erative and foresighted is one type of rationality. Another economicus “on the couch” would be hilariously boring. form is the rationality which characterizes the social pro- One of the purposes of economics is to understand human cess and social institutions as a whole. This form is not the behavior in an economic setting. Once you state the con- same as the conscious and logical mental activities of the straints humans face, their behavior is predictable. On the Descartes rationalist school of thought. Be that as it may, other hand, the problem is, as Hayek and Leibenstein be- Hayek (2014) sees humans as being “lazy, … improvident, lieved, the constraints we face are subjective, known mostly … and short-sighted.” We are rule-following as much as we by ourselves. Hence economists know about as much of the are rational. Humans succeed not by being rational but by constraints humans face as we know about – unicorns. being guided by “evolved rules and practices.” In Chapter 1 of Boettke book he lists misconceptions Acquiring and communicating rules is affected by obser- about Hayek. The first misconception is that Hayek’s meth- vation and imitation, both which Hayek refers to as non-ra- odological individualism was based upon atomistic ac- tional. The non-rational may be unavoidable because “rea- tors who were perfectly rational. The second misconcep- son, like science and like civilization itself, advances only by tion is that Hayek saw the price system as perfectly efficient. grappling with the unknown and the unpredictable. Con- Hayek’s rejection of perfect rationality and perfect efficien- sequently, “the only environment wherein reason can grow cy is central to behavioral economists, especially the first and operate effectively … [is the] indispensable [realm] of generation behavioral economists. the uncontrolled and non-rational” (Ibid.). 27 In his book, The Counter-Revolution, Hayek ([1952] 1979) Using reason properly means recognizing the limits of gives a history of “rational constructivism” and “scientism” reason, recognizing that “reason is not omnipotent—that it in the social sciences. Hayek follows in the footsteps of is a tool, not an author; a servant, not a judge” (Ibid.). And the Scottish Enlightenment philosophers and economists it means facing the “implications of the astonishing fact . . who believed that modern civilization is threatened by . that order generated without design can far outstrip plans COSMOS + TAXIS + TAXIS COSMOS the “abuse of reason” mandated by the rational construc- men consciously contrive.” (Ibid.). Reason deals with the tivists who want to design civilization. Hayek sees this at- “abstract” and not with the ability to make concrete pro- tempt as placing mankind in the “chains of his own mak- posals about specific actions for complex societies. Hayek ing” (Boettke 2018, p. xiv). also maintains that behavior guided by habit, custom, and Boettke uses the terms “rational constructivism of the tradition is rational in the sense that such behavior is not administrative state” (Ibid.), and the “constructivist ratio- contrary to intelligent action. It seems to be a puzzle or a nalism of legislation” in order to emphasize the influence paradox that Hayek sought to show the limits of reason by of the state on the definition and use of the term rationality. using rational analysis. (Ibid., p. 175). Constructivist rationality expressed through rational choice theory, maintains that practical rational- HAYEK AND THE FIRST GENERATION ity in independent of circumstances. Regardless of institu- BEHAVIORAL ECONOMISTS tional surroundings, rationality means equating at the mar- gin, period. By contrast ecological rationality maintains I use this term to include economists and others writ- that rationality depends on the circumstances in which the ing about rationality before 1974 (and in most cases after decision taken place. What is rational under one set of cir- 1974). This group includes, in addition to Katona, Simon, cumstances is not rational under a different set. Herbert Si- and Leibenstein, Ken Boulding, James March, Richard Cy- mon used an analogy with a pair of scissors. One blade is ert, Tibor Scitovsky, G. L. S. Shackle, Richard Nelson, Sid- the cognitive limits of the individual, and the other is the ney Winter, James Duesenberry, Rheinhard Selten, and “structures of the environment” (Simon 1990, p. 7). The French sociologist Gabriel Tarde. Here I will briefly discuss psychological and the rational are part of the same process. the thoughts on rationality by some of the first generation This is one reason why Herbert Simon was a (first genera- behavioral economists mentioned above.5 tion) behavioral economist. Hayek’s discussion of rational-

Before Kahneman and Tversky, There Was Friedrich Hayek ------, Income, he says he that , Shackle ([1972] 2009) dis , Shackle ([1972] Epistemics and Economics Tibor ScitovskyTibor said that “rational behavior as pictured InDuesenberry’sChapter of 3 classic 1949 work In not at all the same thing” (Scitovsky, [1976] 1992, p. 65). Are 65). 1992, all p. at not the same thing” [1976] (Scitovsky, everpeople rational in the sense? economist’s Scitovsky says that are we selectively rational, meaning are we rational sometimes,other at times not. “Economists usually picture the consumer as rationally weighing the merits the of avail alternativesable making before a choice. . . Sometimes that is what happens, sometimes but is it not” 72). (Ibid., p. cusses the rationality” “paradox of On the 246). one (p. hand,rational decision making is limited things to which knowledge. complete have Onwe theother hand, perfect knowledge requiresthe impossible, that is, knowing both the past and the future in their entirety. Thus paradoxthe make- to a rational must transcend we choice the grasp of choice. Unknowledge Shacklesays that a shortageknowledge of is permanent a part live the we in. of world Unknowledge also includes the existence “unknown of unknowns.”Economics assumes that are people ask rational know. can’t what we doesn’t but Shackle says that economics, instead asking of these ques tions asks only the questions which are “allowed” be to asked.resultA is that economists separated have economics from other aspects life of a “wall by rationality” of (Ibid., p. important Hence knowledge4). is neglected. assert Hayek ed that “soft” neglectedknowledge is of “technical” in favor knowledge. the by economist and actual behavior as observed and ex plained in terms the of motivating psychologist’s are forces fer to it as information-processing it to a “severe fer constraints” 66). (Ibid., p. Saving and the Theoryof Consumer Behavior savings is our the of dual-selves: outcome “Theof level sav ing actually achieved represents anyone the of by outcome the conflict between his desire histo improve current stan dard living of and his desire obtain to future welfare sav by Duesenberrying” (Duesenberry 22). p. uses data 1949, from the Office of PublicOpinion Research showswhich that desired income is a functionpeople’s income of aspirations, maximumnot are income. satisficers, People to useSimon’s term. Finally, Duesenberry argues that consumption behav asior being habits, the of genetics, outcome and learning, rational not but planning 24). (Ibid., p. ------(1902). He He (1902). , James March (2010), , James March (2010), La Psychologie Economique The Ambiguities of Ambiguitiesof The Experience

Nelson andNelson Winter state matter-of-factly that models of Kenneth Boulding the saw future economics, of and it In Gabriel Tarde (1843-1904) wassociologist French a and (1843-1904) Gabriel Tarde of time,of limited communications channels, and limited as sistance“organizing, for analyzing, and thinking the about available and Nelson Winter information” re 67). (Ibid., p. nal. Why bounded selectively or rational? Because the en vironment relative is our too to knowledge complex level of and other constraints. Theseother constraints are scarcity use decision rules which are maximizing not (Nelson and Do therules 441). ever lead maximiz to p. Winter1973, Yes.Humans ingare selectively behavior? They say, ratio be perfectly rational 82). (Ibid., p. maximization reflect not do reality. economic Firms often causegravity’s behavior was soperfect that, ineffect, it did any Likewise,have behavior. not economists reallynot have been interested in human behavior because is it assumed to are more relevant to economic decisions” (Boulding [1958] are relevant more economic to decisions” (Boulding [1958] Boulding says that Einstein, before 21). p. astrono 1961, attentionmers did pay the to not behavior gravity of be Research” will toward be said he be movement that “[t]here havioraleconomics... which involves study those of aspects images, cognitive or men’s of and affective structures that another future about preferences. wasbehavioral economics. In“Contemporary Economic In article, his 1978 “Bounded Rationality, Ambiguity, and theEngineering March says Choice,” that of rational choice involvestwo guesses, future about one consequences and cisions based future on consequences. is an It omnipresent mythin stories management, of and the the of core answer 57). the to p. question that?” did do “why you (March 2010, talksstories about and mythsorganizational of experience. Of the four main mythic themes, is the one myth ratio of nality.myth The of rationality is that humans the make de behavior. the spiritual. believed He that the economic-man was a a real of “mutilation” human. And considered economic- he man as neither necessary sufficient to nor explain economic tional behavior excludes emotions, devotion, or passions. rejectedHe the idea that a single have we unified self,pre ferringthe duala idea of self, the materialistic-egoistic and wrote herding about imitation or in decision making. He rejected the economic concept man. of rejected He the idea that humans possess “unrestricted” rationality, and that ra Judge who coined who Judge the psychology” term “economic in his two book volume VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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Simon skill which could be better utilized ... the shipper ... using empty or half-filled journeys of tramp-steamers” (Hayek Simon’s theory, which I have already discussed, is that of 1945, p. 522). The converse is also relevant. Hayek notes the bounded rationality, rationality limited by the cognitive consequences of “an inefficient manager to dissipate the dif- limits of a person and the complexity of the environment. ferentials on which profitability rests, and that it is possible, with the same technical facilities, to produce with a great Leibenstein variety of costs” (Ibid., p. 523). Leibenstein could not have stated it any better; X-inefficiency raises costs above the The History of Economic Thought website6 says that technological minimum. Before Kahneman and Tversky, Leibenstein was most famous for X-efficiency theory, and there was Hayek. fertility theory. Leibenstein tried but did not succeed in re- placing allocative or Pareto efficiency with X-efficiency. Yet, SUMMARY AND CONCLUSIONS he is “hailed as a pioneer of behavioral economics.” Why is Leibenstein hailed as a pioneer of behavioral econom- There are many good books about Hayek. Some areHayek’s ics? Maybe the most important reason is he theorized that Challenge, by Bruce Caldwell; Hayek’s Journey by Alan Eb- Homo economicus did not express the behavior of humans enstein; Friedrich Hayek. A Biography, by Alan Ebenstein; all of the time. Theorizing thatHomo economicus was more Hayek in Mind: Hayek’s Philosophical Psychology, by Leslie Fredo Corleone than Michael Corleone. Of the approxi- Marsh, and Keynes-Hayek. The Clash That Defined Mod- mately 20 (in)efficiency empirical studies consistent with ern Economics, by Nicholas Wapshott. To this list we add X-efficiency theory, Harvey authored none of these studies. Peter Boettke’s, F. A. Hayek. Economics, Political Economy Most of the 200 studies measured X-, non-allocative, (in) and Social Philosophy. Boettke discusses among many oth- 29 efficiency as the distance an organization is from the (cost er things, Hayek’s theory of money and prices, institution- or production) frontier. The average deviation of these 200 al economics, the market system, market socialism and the studies is approximately 20 percent. failures of socialism, epistemics and institutional change. It Leibenstein rejected the view that a “reasonable” human is a powerful book about one of the great thinkers of the is necessarily logical. A reasonable man lives in a dynam- past one-hundred years, and probably longer than that. One COSMOS + TAXIS + TAXIS COSMOS ic world characterized by states of disequilibrium. Habits, of the most important parts of the book for my purposes conventions, subjective and incomplete perceptions of the is Boettke’s discussion of constructivist and ecological ra- external world, and his internal world of felt pressures are tionality, and Hayek’s criticism of constructivist rational- reasons why humans usually cannot and do not maximize. ity. This is important because, first, behavioral economics For whatever reasons humans don’t maximize. Leibenstein rejects the idea that people are 100 per cent (constructivist was not interested in “fitting” the reasons we don’t maxi- or substantive) rational. Second it is important because the mize into a maximizing model to make it appear that they rejection of the assumption of 100 per cent rationality is a are maximizing. However, increase pressure on individuals necessary condition for the development of behavioral eco- up to a point, and humans move towards maximization. nomics. Third, Hayek spoke about rejecting the assumption Human rationality varies from perfect rationality to of 100 per cent human rationality before most behavioral something less. The degree of rationality exists along a con- economics, making him, in my opinion, a first generation tinuum. The degree of rationality depends on the decision- behavioral economist. There are several concepts which are making processes used. It is about procedural rationality central to behavioral economics, and in this paper I focused and not substantive rationality. on three of them – prediction vs understanding in theories Before Leibenstein wrote about selective rationality, be- and models, knowledge, and rationality. The discussed the fore Simon wrote about bounded rationality, Hayek wrote overlaps between Hayek’s ideas and those of first generation about the limits of human rationality. Before Leibenstein behavioral economists. I noted that Hayek wrote about his wrote about X-efficiency, about 20 years before, Hayek ideas before the others wrote about their ideas which over- wrote about something so similar almost to be identical. lapped those of Hayek. I am not saying that, for the most Hayek did this when he wrote about tacit or unorganized part, they acknowledged Hayek in their own development. knowledge. Unorganized knowledge includes knowing how Therefore, I cannot show that there was an evolution of eco- “to put to use a machine not fully employed, or somebody’s nomic thought from Hayek to the others. What I am saying

Before Kahneman and Tversky, There Was Friedrich Hayek .

. https:// Journal of . San Diego: . In: Bartley, W. American American Rules and Order , Vol. 1. Chicago: 1. , Vol. . Chicago: University . 56 (4): 279–304. . 56 (4): . New York: Routledge,. New York: . New York: Philosophical. New York: , Vol. 1, 1, , Vol. 47 (2): 263-292. (2): 47 European Journal of Social . 117 (516): 146-173. (516): . 117 Friedrich Hayek and Behavioral The QuarterlyJournal of . Chicago: University of . Cambridge: Harvard University Econometrica . 26 (3): 195-207. . 26 (3): Income, Saving and the Theory of Consumer Essays in Positive Economics The Counter-Revolution of Science. Studies in the . 56 (3): 392-415. . 56 (3): . 35 (4): 519-530. (4): . 35 . London: Palgrave Macmillan. F. A. Hayek.F. Economics, Political Economy and . Indianapolis: Liberty Fund. Hayek’s Challenge: An Intellectual Biography of Journal of Political Economy Political Journal of Trends inTrends Social Science The Economic Journal The Economic /. Accessed/. July 27 2019. The Beginnings of Behavioral Economics Chicago: University Chicago of Press. The CollectedWorksF. Hayek A. of . 64 (2): 183-207. . 64 (2): . New York: Palgrave. New York: Macmillan. Law, Legislation,Law, and Liberty TheFatal Conceit: The Errors of Socialism General X-Efficiency Theory and Economic Development Beyond Economic Man . Cambridge: Harvard University Press. . 51 (2): 47-64. (2): . 51 Cognitive DevelopmentsCognitive Economics in . 1966. Allocative Efficiency “X-Efficiency.” vs. . 1976. . 1978. . 1948. TheMeaning of Competition. (ed.) F. In: Hayek,A. (1979). . [1952] . 1973. . 1988. Hayek the on . 2014. role reason of in human affairs.

the Theoryof Consumer Demand. Economics Economic Review Press. London: Oxford University Press. F. A. Hayek.F. Behavior Elsevier. Economics Chicagoof Press. Involving Risk. Economic Review Individualism Economic Order and Chicago Press, 92-106. pp. Abuse of Reason Chicago: University Chicago of Press. III (ed.) W. University Chicago of Press. isi.org/intercollegiate-review/hayek-on-the-role-of-reason-in- human-affairs Decisionof under Risk. Economic Methodology Simon and the Evolution Bounded of Rationality. In: Rizzello, S. (ed.) pp. 133-157. Social Philosophy (ed.) P. D. Ray, Library, 9-26. pp. Rational Choice, and Its Discontents. Sciences Psychology Removed Economics, From Was And Might It How Be Brought Back.

Caldwell, B. 2004. Duesenberry, J. 1949. Frantz, R. 2019. Frantz, R. and Leeson, R. 2012. (eds.) Friedman, M. 1953. Friedman, M. and Savage, L. 1948. Utility Analysis Choices of A.Hayek,Use 1945. The of F. Knowledge in Society. Kahneman, Prospect A. and 1979. D., Tversky, Theory: An Analysis Leibenstein, H. 1950. Bandwagon, Effects Snob, and Veblen in REFERENCES All BehavioralAngner, We’re E. 2019. Economists Now. Augier, M. 1982. The Makingof a Behavioral Economist:Herbert A. Boettke, J. 2018. P. Boulding, Contemporary 1961. K. E. economic [1958] research. In: Bruni, L. The Paretian 2013. Turn.foundation The of the Theory of Bruni, L. and Snugden,Taken: R. The Road 2007. Not How ------

at theat results the of market experiments producing equilib rium prices and outputs? Because mother my was a socialist and I wasa student Harvard.” at The writingson these first generation behavioral economists can be found in Frantz (2019). See http://www.hetwebsite.net/het/ profiles/leibenstein.htm. tance of understanding and prediction in economic theories and models, and; subjective rationality vis-à-vis objective rationality. A personal communication with Harvey Leibenstein. a behavioralAt economics conference in Reno, Nevada, Ver Smithnon said, and I paraphrase, “Why would I be surprised Sugden (2007). Sugden Leibenstein’s Princeton at mentor where receivedhe his was Oscar in Ph.D. 1951 Morgenstern. is thus It surpris not ing that incorporated he several ideasfrom Austrian eco nomics into his own works. These include the importance theof individual, methodological individualism; the impor The “origin”The of Bruni the 2013 paper is a paperBruniby and

6 5 4 3 1 2 NOTES isthat there was And, an hence, the overlap. Hayek, Austri an economist, was a firstgeneration behavioral economist. VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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March, J. 1978. Bounded Rationality, Ambiguity, and the Engineering of Choice. Bell Journal of Economics. 9 (2): 587-608. . 2010. The Ambiguities of Experience. Ithaca: Press. Nelson, R. and Winter, S. 1973. Toward an Evolutionary Theory of Economic Capabilities. The American Review. 63 (2): 440-449. . 1982. An Evolutionary Theory of Economic Change. Cambridge: Harvard University Press. Pomeroy, R. 2014. This May Be One of the Most Important Rat Studies. Here’s Why You’ve Never Heard of It. https://www. realclearscience.com/blog/2014/02/the_rat_experiment_you_ dont_know_about_but_should.html. Accessed 26 July 2019. Scitovsky, T. [1976] 1992. The Joyless Economy. The Psychology of Human Satisfaction. New York: Oxford University Press. Shackle, G. L. S. [1972] 2009. Epistemics and Economics. Cambridge: Cambridge University Press. Simon, H. 1955. A Behavioral Model of Rational Choice. The Quarterly Journal of Economics. 69 (1): 99-118. . [1947] 1976. Administrative Behavior: A Study of Decision- Making Processes in Administrative Organization. New York: The Free Press. . 1979. Rational Decision Making in Business Organizations. American Economic Review. 69 (4): 493-513. . 1982. The Sciences of the Artificial. Cambridge: MIT Press. . 1990. Invariants of Human Behavior. Annual Review of Psychology. 41: 1-20. 31 . 1997. An Empirically Based Microeconomics. Cambridge: Cambridge University Press. Sunstein, C. 2016. The Ethics of Influence. Government in the Age of Behavioral Science. New York: Cambridge University Press. . 2018. The Cost Benefit Revolution. Cambridge: MIT Press. Tarde, G. 1902. La Psychologie Economique. Paris: Alcan. COSMOS + TAXIS + TAXIS COSMOS

Before Kahneman and Tversky, There Was Friedrich Hayek ------Rules self-interested and (1988) and, believeI his (1988) liberalism could not only men, Smith men, demonstrat knavish Fatal Conceit . Under liberalism,. Under man is “led an by invisible hand promote to (1973), the (1973), harnessed self-interested man’s motivation for the ben efitof everyone rapacious anthat end was part no the inter his of intention”—to est society. of two have I hesitations this about important passage: (1) Even in Even the of world ed that economic liberalism enabled peaceful social cooperation that leads increases to in productivity. Indeed, that pointed he out deal with a world selfish of individuals, but actually the claim apparent that markets can successfully function Nobel lecture of the “Pretense of Knowledge” ([1975] 2014). 2014). lectureNobel the of “Pretense Knowledge” of ([1975] On this aspects view, thought Hayek’s of that are rather pe ripheral Boettke’s to analysis—such as the theories cul of tural center to and phenomena—move evolution complex stage.followingof upshot The out this second lineof inter pretation, I shall argue, is a somewhat different view than generally (though with) compatible the analysis Hayeki of an economic methodology Boettke. by presented Howev suggests it sharplyer, a more contrasting understanding of place inHayek’s mainline political a place that is economy, obscured view when we his primarily work through the lens economic thinking.of SMITH WITH ADAM BEGINS IT USUALLY Boettke’s mainline idea of economics begins, course, of with Adam Smith. 134, emphasis added) p. Boettke (2018, writes: ticipated. In the and 1950s 1960s developed his Hayek theo ries systems complex of and social which, evolution as I see it,deeply informed allhis most obviously later work, Order and ------It is anIt F. A. Hayek: EcoF.

Of course even a perspective such as Boettke’s, includ

inwhich Sewell leadingWright,a group selectionist, par in the early conducted a seminar Hayek 1950s the at Univer sity Chicago—which of called he the greatest “one experi life”—onences my levels of organization of in the sciences, stressesindebtedness Hayek’s the to biological sciences, both directly in the his form of evolutionary thought, and methodologically. As Bruce Caldwell tells (2004, 299) us, p. traordinarily and Boettke broad complex, nevertheless un derstandssystem Hayek’s through the economics. lens of Analternative perspective, which shallI investigate here, though, also entails that will it fail issues on up pick to that well fit not do withits categorizations backgroundand models. Although, as an economist, his perspective is ex ing such a wide range knowledge of and tools, has its lim its.By its very nature, a perspective categorizes and frames andproblems solutions—that enlightens it is how us. That, petencies and interests, making Boettke’scontribution uniquely valuable. ing from Adam Smith, through Coase Hayek, ,North, Bu chanan and Ostrom (Boettke, Haeffele-Balch Storr and is rare It that an has author this2016). wide array com of economist.knows He only not mainstream economics but describeswhat he as “mainline” political economy—the body thinking of social about and extend economic order eral program—and a guide system Hayek’s to ideas. of A great strength Boettke’s of book is his distinctive toolkit: he knows the history, the texts, and is a highly accomplished sies with contemporary debates, fundamental reflectionson the nature economic thinking, of the critical importance information of in the of statement a the lib market order, nomics, Political Economy and Social Philosophy. nomics, and Social Economy Political Philosophy. impressive feat: Boettke a close together weaves biography, examination the of history critical of economic controver I cannot imagine any serious scholar will who come not enlightenedaway Boettke’s from J. Peter University of Arizona of University Email: [email protected] gaus.biz www. Web: Systems Systems GERALD GAUS A Branch on the Mainline: Hayek’s Analysis of Complex Adaptive Adaptive Complex of Analysis Mainline: Hayek’s on the A Branch VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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with a majority of truly selfish individuals, or even rapa- This division of labour, from which so many advan- cious ones, and (2) the implication that the heart of Smithi- tages are derived, is not originally the effect of any hu- an liberalism is the invisible hand. I believe these two wor- man wisdom, which foresees and intends that general ries are reinforcing. opulence to which it gives occasion. It is the necessary, though very slow and gradual, consequence of a cer- Reciprocity Rather Than Selfishness tain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, As Boettke (Ibid., p. 227) acknowledges, self-interest is not and exchange one thing for another. … [M]an has al- the same as selfishness. Yet in the above passage he rather most constant occasion for the help of his brethren, slides between them (“liberalism could not only deal with and it is in vain for him to expect it from their benev- a world of selfish individuals, but actually harnessed man’s olence only. He will be more likely to prevail if he can self-interested motivation for the benefit of everyone”). I interest their self-love in his favour, and shew them infer that Boettke thinks that, while they are different, a that it is for their own advantage to do for him what he largely selfish population could populate functional mar- requires of them. Whoever offers to another a bargain ket orders. Thus he (Ibid., p. 172) repeats James Buchanan’s of any kind, proposes to do this: Give me that which I dictum: “same players, different rules, produce different want, and you shall have this which you want, is the games.” The difference between Hobbes and Smith, it would meaning of every such offer; and it is in this manner seem, is simply the institutional framework, not the under- that we obtain from one another the far greater part lying motivational structure. Put selfish, rapacious folks in of those good offices which we stand in need of. It is the normless state of nature and they pillage; put them in not from the benevolence of the butcher, the brewer, the market and they trade (Ibid., p. 159). or the baker, that we expect our dinner, but from their 33 On my reading of the evidence, I’m skeptical. Despite the regard to their own interest. We address ourselves, not best efforts of economists (say, drawing on direct reciproci- to their humanity but to their self-love, and never talk ty and the folk theorem in iterated games) to show that such to them of our own necessities but of their advantages individuals can cooperate, the results are not robust: as (Ibid., pp. 17-18). soon as opportunistic cheating is profitable, selfish or “ra- COSMOS + TAXIS + TAXIS COSMOS pacious” individuals will defect.1 In contrast, evolutionary Now as I read it, nothing in this canonical passage entails theorists explaining the rise of cooperation have focused on that individuals are selfish, or even allows selfishness, much humans as “strong reciprocators.”2 While we do not coop- less possible rapaciousness. Smith’s individuals are recipro- erate out of benevolence or altruism—our aim is not typi- cators playing cooperative games—“Give me that which I cally to help non-kin others—we willingly return benefit for want, and you shall have this which you want.” This is not a benefit in lieu of the threat of punishment. We thus tend to promise selfish players can reliably make. Selfish individu- stably play cooperative games, and so exchange flourishes. als get caught in Prisoner’s Dilemmas, in which they each seek to defect on each other’s cooperation, and so their con- Exchange Rather than the Invisible Hand tractual promises3 are notoriously worthless: “Give me that which I want, and if I can’t get away with cheating, you shall This brings me to my second concern. Although many in- have this which you want.” As Hobbes recognized, only by sist that the invisible hand is the heart of Smith’s econom- keeping the selfish in “awe” can they be sufficiently intimi- ics or his liberalism, we must remember that the phrase ap- dated to play according the rules. But reciprocators natu- pears only once in The Wealth of Nations, and then only rally and easily play the exchange game. There is, I think, in Book IV, in the case against restrictions on imports in no greater mistake in interpreting Smith than to think that the second chapter of his relentless criticism of Mercantil- the absence of benevolent motivation implies simple selfish ism (Smith 1976, vol. 1, p. 477). What Smith himself clearly motivation. There is a large space between being willing to stresses in the first three chapters ofThe Wealth of Nations be a sucker (benevolence) and preferring to play others for a is that the tendency to exchange is at the core of markets sucker (selfishness). Smith denies that the market supposes and the resulting division of labor. Let us consider the fa- the former but never says it embraces the latter. mous passage more fully:

A Branch on the Mainline: Hayek’s Analysis of Complex Adaptive Systems : ------Highly ac heterogenous 4 TheoryPolitical Economy of Thus in his Nobel Prize lecture, Hayek ([1967] 2014, p. Thus2014, in Nobelhis Prizelecture, ([1967] Hayek was, course, of important abuse reason Hayek’s to of proj The line here is between naturalthe ect 2010). (Hayek and moralsciences. In the Prize Nobel Hayek lecture, however, insists 365) p. that does reject he not mathe 2014, ([1975] matical modelling, stresses but its limitations when con Economicsfronted complexity. by can model possible sys tem states—“patterns”—but a deterministic set equations of of mainstreamof economics, which sought attain to a phys ics-likeanalytic and predictive Recall (1965, rigor. Jevons’s claim3) theat p. outset his of is clear”It that Economics, if is be it to a science all, at must ar 2014) be a mathematical ([1964] But, Hayek science.” gued, evolutionary sciences cannot determinis generate tic mathematicalmodels predicting even if outcomes: one assumed information, complete there ispossible no set of equations that can predict can the course We evolution. of saythat are possible developments impossible, some or but the course an of evolutionary cannot phenomenon be pre dicted. insisted365) that “the social sciences, like biolo of much gy unlike but most fieldsof physical the sciences,to have deal with structures essential of i.e., with complexity, struc tureswhose characteristic properties can be exhibited only modelsby relatively made of up large numbers variables.” of This is a fundamentally objectiondifferent over-ambi to tious mathematical social science than that which Boettke rightly stresses, viz., 182-185) pp. the subjective and(2018, intentional nature the of data in the social sciences and so their essentially interpretive, narrative, character. This lat ter criticism mathematical over-ambitious of social science HAYEK’S COMPLEXITY ANALYSIS AND THE AND THE ANALYSIS COMPLEXITY HAYEK’S TURN BIOLOGICAL great Hayek’s In view, contribution my in the later part of his career was the develop to complexity insight implicit in Smith’s mainline economics. withtors distinctive plans constantly adjust theiractions to the previous adjustments others. of And as they adjust they areconstantly creating new economic niches, with atten dant new possibilities interactions for and yet new reflex What is especially Beinhocker adjustmentsive (see 2013). noteworthy is that as this develops Hayek complexity in sightwas he increasingly drawn understanding to econom ics as an evolutionary discipline that shares a methodology withbiology rather than physics.As Boettke nicely stresses, was work a criticism Hayek’s of much the of methodology ------; we ; we exoge . Eachnew ser endogenous The WealthNationsof The variables transportation of and communication costs.

Adam Smith’s analysis simple the of exchange producing Given Smith’sGiven assumption that individualsare recipro the critical subject Book of I of readshould the into it not analysis system of self-organiza invisibletion (the hand) from Book IV. portantshall we (though, see in section III,necessar not is it differentily basic), from the self-sustaining growthof the wealth division How labor. and of the market grow is tion-equilibrating analysis: the on most common interpre tendencytation, a certain is produce to the it about system’s propertyemergent such as equilibrium. While this is im (Ibid., p. 117). This insight blurlostwe is when the 117). (Ibid.,analyses p. exchange of and the division labor of with Smith’s account the of invisible hand. The invisible hand a is self-organiza contexts, as they trading about go 112). (Kauffmanp. 2018, The market is thus constantly creating its the conditions for own expansion, constantly amplifying its own complexity the division labor of is thus the insight core a complexity of analysis individuals(Boettke 180ff.): p. are constant2018, ly creating new niches, with new information niche- about ten thousand goods 50,000 years ago billions to today!” 137). (Kauffmanp. 2018, can be exploited. “Theprocess broadly is self-accelerating. Thus, the growingweb explodeseconomic in a diversityof and substitutescomplements from perhaps a thousand or market this growth is, critically, vice good yetother produces a newor niche for new servic es goods, or which themselves new niches create more that exist in a small town become common in a large How city. as theever, physicist complexity theorist Stuart Kauffman has recently argued, in both biological and evolution in the exchange increases, and so the division labor of becomes that Jobs could not Boettke 162). minute p. more (cf. 2018, and the divisionlabor of as primarily driven the by nous As these costs down, go the number gain who people of by 3) goes argue, to on 3) the resulting division labor of becomes increasingly refined specializedand as marketthe expands. Smith seems viewed have to the expansion the of market markets. us most of are By far, reliable reciprocators, so ex change than (rather cheating and theft) is a naturalof way meeting Bk. our I, chap. 1, vol. needs. But, as Smith (1976, cators(natural the stage exchangers), is the set for division the invisible laborof (not hand) and its great expansion of VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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is quite impossible. This new line separates the complex tion within a liberal institutional framework produce what from the non-complex sciences. he called an adaptive “order of actions” (i.e., a pattern of Kauffman (2018, p. x) has recently argued much the cooperation or conflict that emerges from the underlying same: “what evolves cannot be said ahead of time.” And, moral and social rules and the way heterogeneous agents very much in the spirit of Hayek, Kauffman insists that act under them), but the underlying set of institutions pro- mathematics tells us little about where the evolutionary ducing this order is itself produced by a process of adapta- process may go. On Kauffman’s (Ibid., pp. 107, 110, 124) tion. In a world of complex change, this is a critically im- analysis evolutionary sciences—and here, like Hayek, he in- portant claim. Endogenously, the pace of the growth of cludes parts of biology and economics—concern “adjacent innovation and complexity is accelerating; exogenously, the possible new niches.” We can only identify ahead of time environmental conditions for the order of actions are con- possible adjacent new niches: evolution enables new devel- stantly changing. We need to understand how this institu- opments but, Kauffman (Ibid., p. 116-7) stresses, evolution- tional structure maintains its adaptiveness in light of these ary dynamics do not cause them to be occupied. Moreover, dynamics. Schumpeter (1950, pp. 81-87) brought to our at- such developments are path dependent: the niches that are tention that evolved economies are subject to the “gales” of created and so are possible to occupy at time t2 depend on creative destruction: a wide number of niches may be wiped those occupied at t1. Evolved systems are open, and so at out when there is a major technological change (say, from any point exogenous factors may radically alter the possi- horse drawn carriages to automobiles) Arthur (2015, p. 141). bility space. We cannot even know the possibility space (the In an important essay, the biologist, D. S. Wilson (2016) re- boundary conditions of the system), so we cannot identi- minds us that complex systems are not guaranteed to be fy the probability that the system will occupy any specific adaptive: we must provide some account of how rules and space: “not only do we not know what will happen, we do institutions themselves alter to maintain system functional- 35 not even know what can happen” (Ibid., 117). ity (Arthur 2015, p. 141). Gales can result in extinction: why think that this evolved system can maintain itself? TWO ACCOUNTS OF ADAPTIVENESS: SELF-ORGANIZATION AND The Main Mainline Answer: Self-Organization and the MACRO-SELECTION Foundational Invisible Hand COSMOS + TAXIS + TAXIS COSMOS

Why is the Self-Organizing Framework Itself Adaptive? The mainline answer is to again invoke the invisible hand Second-level Self-Organizaton as a mode of self-organization. Call this the Foundational Invisible Hand. The familiar invisible hand is an individu- Thus far I have been stressing a mainline track from Smith’s alistic, bottom-up, organizing device: focusing of the log- analysis of the division of labor to complexity and evolu- ic of rational choice, within suitable institutional rules a tion—a line of development that Boettke (2018, pp. 179-181) spontaneous order results (Boettke 2018, pp. 165-166). As also perceives, though it is not especially prominent in his Hayek proclaims, “Adam Smith’s decisive contribution was book. Hayek’s reliance on complexity and evolution, and the account of a self-generating order which formed spon- ultimately his “biological turn,” are all natural, but highly taneously if the individuals were restrained by the appro- sophisticated, developments of the core Smithian focus on priate rules of law” (quoted in Ibid., p. 166). The question market exchange and the division of labor. Boettke (Ibid., p. now is how these “appropriate” legal and institutional rules 3) is certainly right: Hayek is a theorist of the twenty-first, themselves arise. In exploring these problems in Rules and not the twentieth, century. Order Hayek focused on the common law (which is essen- We now come to what Boettke (2018, p. 174) calls “[t]he tially a bottom-up self-organizing process. Hayek suggests crucial step in the Hayekian analysis”—“to argue that not that there may be something akin to a market in law which only was the pattern of social interaction within the frame- determines what law is functional (Ibid., p. 175), just as the work a result of spontaneous order, but the very framework market determines what firms are adaptive. This would be itself was the product of another spontaneous ordering pro- a Foundational Invisible Hand, which provides an adaptive cess.” If we think in more evolutionary terms, the Hayeki- framework for the formation of the familar invisible hand an claim ([1967] 2014; Mack 2006) is that not only does ac- of the market. However, if, as we have been assuming, invis- ible hands require an institutional framework to function—

A Branch on the Mainline: Hayek’s Analysis of Complex Adaptive Systems

1 ------r -ax s the x K = the set in of N interdependences K s and significant N stressed the bottom-up self-or = the number interdependencies of K -axis.This “rugged sortof landscape” is the in y -dimensional system with Rules and Order N is not simply the isnot aggregation their of separate out 2 r and the functionality the of system Boettke (see p. 2018, The problem, problem, The then, obvious:is insofar“evolutionary” as Figure 1 illustrates a set institutional of frameworks (1- 5 Guidance Although ganization the of legal framework through the common allowed 88) that p. explicit(top-down) (1973, Hayek law, legislation is sometimes required an solve to evolutionary “impasse,” which is a good description an of evolutionary path 288-289) that pp. Boettke system ends at up 16. (2018, uation and lead very to may different When outcomes.” in stitutional frameworks high have framework is itself complex: the individualinstitutions are sufficientlyinterconnected a that change inany pro rule duces functionality-related changes in the many outputs of others, thus producing “rugged landscapes” as in Figure 1. That is what meantis by saying that the setof institutions functions In this as a “whole.” system there a high is not correlation between the adaptive value social one of frame andwork its institutionally similar neighbor. mean to evo is “gradual” employed (Boettke 176), p. 2018, lutionary, incremental, as in change the (such common law) does effective look not reformingat system functionality. be sure, see we gradients some To in Figure i.e., areas 1, in which an incremental evolutionary search mechanism can climbingdiscover by improvements a slope. There is a gra is a dient, example, for from framework 15/16 but and 12 15, local optimum: incremental searches cannot upon improve it, though there are functional a number more of institu tional frameworks be to had. An incremental evolutionary search will 15/16. at end TheSubsidiary Mainline Proposal:Top-Down Modest 24) arrayed 24) in terms institutional of similarity the on is the on 180) evitable result a value of (functionality) which is the out a of put In (Kauffmanthis case1993; Gaus 2016). stitutional rules and between the rules, in the sense that rules the of outcome and puts. In extensiveon actual her fieldwork institutions Eli stressed that institutions 111) are p. Ostromnor (2014, composed numerous rule of configurations in which the constituent rules strong have interdependencies, both with each other and with environmental change conditions. “A in these any of one variables produces a different actionsit ------

The above suggests The above regress a problem: our in searchto ex Institutional Frameworks Arrayed in Terms of Similarity of Terms in Arrayed Frameworks Institutional Interconnected 1: Fig. Institutional Frameworks lems of complexity, as complexity, inlems of Figure 1. work ratherwork than consequence a simple the of aggregation a setof rules of This, §IV). (see though,means that the search a better for framework again confronts us with prob of Hayek’s core points:core the Hayek’s of institutions as a “whole” work actions. of producing an order emergent That is why or the actionsder of is an property emergent the of entire frame involved in the common law. Just asinvolvedin Just the the interac set common agent law. of tions in the market are complicated, a set institutions of is alsobe to densely apt interconnected. Indeed, this was one about distinctabout levels. Putting there is regress now, aside for a deeper worry the about type incremental of search proce dure—solving a time—that at problem one thinks Hayek is stay philosophy: of they clarify help our models and claims. they often avoided in actualare Yet systemsby complicat ed networks interconnections, of making difficult it to talk more basic framework;more explain to that framework need we findto another invisible hand which impliesyet another framework, and and on Regress on. are problems a main plain the how invisible hand framework organizes itself, we basic invisible a more for look hand, which presupposes a the self-reformingendogenous story either runs ad out, or mits the possibility a non-institutional of invisible hand. consider whatconsider is the institutional framework that allows for an invisible hand in constitutional selection—that is, adap tivemarkets in constitutions. If there is such framework, no institutional framework. If the on invisible hand account the market depends the on institutions and suppos law, of ingthe market in dependslaw a constitution, on need we to the self-organization the of normal market depends an on institutionalstructure—it isunclear this how Foundation al Invisible Hand can function without its own appropriate VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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also defends “top-down” legislation as a way to improve a son: “[t]he evolutionary selection of different rules of indi- complex system. But explicit legislation faces perhaps even vidual conduct operates through the viability of the order it greater problems in a complex institutional setting. As Fig- will produce.” The distinction between a set of rules and the ure 1 shows, in order to get out of the “impasse” of system emergent order of actions to which it gives rise is a funda- 16 the legislature must move to system 23. But this requires mental insight of Hayek’s, which allows him to distinguish a simultaneous alteration of a number of institutions—and the focus of selective pressure (the overall functionality of if the legislature gets it wrong by a little, society can end the institutional order) and the underlying rules and insti- up in the even worse system 24. All the problems raised by tutions (that structure it), which are transmitted.6 Hayek’s critique of economic planning reappear here. The Such evolution is a form of cultural multi-level (group) hard truth is that neither bottom-up nor top-down incre- selection. As Hayek (1973, p. 18) says, “[t]he rules of con- mentalism are obviously effective in discovering functional duct have … evolved because the groups who practiced changes in complex systems. them were more successful and displaced others.” If society

Of course this is simply the beginning of the debate: self- S1, characterized by order of actions O1, is more productive organization-invisible hand accounts have a variety of re- than S2 based on O2, society S1 will tend to win conflicts sources to respond. But all responses have significant diffi- with S2, a mechanism akin to natural selection: O1 is more culties (Gaus forthcoming). Most obviously, it might simply adaptive than O2. Alternatively, the members of S2, seeing be insisted that things are not really very complex. That, the better-off participants inS 1 characterized by O1, may ei- though, not only seems empirically dubious, but it “solves” ther immigrate to S1, or seek to copy its underlying rules, Hayek’s problem by undermining his major contribution. thus inducing differential rates of reproduction between the

Or perhaps the familiar institutional structure of the mar- sets of rules underlying S1 and S2. The overall order of ac- ket order is so highly functional that no matter what the tions is adaptive because systematic selection pressures fa- 37 state and complexity of the economy, we should leave it vor institutional frameworks that promote overall orders alone. No searching is necessary (we are already at system that are more adept at facilitating cooperation and securing 23!). But then, pace Boettke (2018, p. 288), Hayek would in- its social benefits. deed recommend passivity with respect to the institution- My concern here is not about the ultimate explanatory al framework (any small change from system 23 will make adequacy of the macro-selection account. Rather, for our COSMOS + TAXIS + TAXIS COSMOS things a lot worse). In any event, we still have not explained purposes what is critical is Hayek’s great insight that it of- why the framework is adaptive: we seem just lucky to be at fers a promising explanation of the adaptiveness of the in- system 23. stitutional framework that departs from mainline thinking. If there are strong macro-selection pressures, and if a large Hayek’s Departure from the Mainline: Macro Selection number of institutional frameworks compete, functional “wholes” can be selected even on relatively rugged land- Wilson (2016, p. 44; see also Gowdy et al. 2016, p. 331) in- scapes such as Figure 1. Because the selection pressures are deed, believes that, sans identifying a mechanism to ensure on the functionality of the entire framework, its intercon- the functionality of the framework, the familiar market in- nections are, in a sense, also selected. It is a potentially el- visible hand would be little more than dumb luck. On his egant solution to the problem of the adaptiveness of high- view (Wilson 2016, p. 44) the most plausible basis for com- ly interconnected institutional frameworks—the problem plex system-level adaptation is some form of macro-evo- with which self-organization-invisible hand analyses strug- lutionary selection: “[f]rom an evolutionary perspective… gle. only when a society is a unit of selection…. does it function Macro-selection, though, is manifestly a departure from well as a unit.” On his analysis a complex social order will the strongly bottom-up form of explanation to which main- adapt to maintain its cooperative functionality only if, at line economics is devoted. Joseph Henrich (2016, p. 318), the societal level, forces are constantly selecting more over who adopts a broadly similar social evolution approach, less functional variants of its rules and institutions. Recall explicitly compares individual cells in an organism to in- that the entire set of rules and social institutions gener- dividuals in the evolving “superorganisms” of our societ- ates what Hayek calls an “order of actions”—the emergent ies. This is no mere metaphor: once the selection pressure property of social order that arises in a rule-based society is on the order as whole, its functionality, not the freedom (§IV). Hayek ([1967] 2014, p. 280) seems to agree with Wil- of the agents, drives evolution. Whereas self-organized sys-

A Branch on the Mainline: Hayek’s Analysis of Complex Adaptive Systems ------}; ). n . Mill. r S O … 1 r , composed of S } considered inde n : r O … 1 ’s that arise may ’s given the r }; n O r … 1 } and} an order emergent r n r … 1 r is not the is not sum { of is an of entirely different character than{ cannot be predicted not deduced or from the be O O O havior the of { members of apartpendently (i.e., from their interactionsin The The analysis becomesless even “individualistic”we when Rather than worrying whether analysis Hayek’s qualifies These claims defeat reductionist any program according (1) (2) (3) of anof underlying set individual of properties, emergent properties are novel often and unexpected. In perhaps the earliest analysis such systems, of John Stuart Mill (2006, pp. 438-440) considered a system,370-373, say, rules) { (e.g., elements proposes three features property of and processes that the Hayekian complexity/macroevolu tionthesis entails. Debates methodological about individu alism are in many ways a quintessential mid-twentieth cen tury obsession; sophisticated developed as more have we social analyses theyblinder a seem more than a helpful lens. to whichto claims social about properties can be reduced to those individuals. of properties Emergent are character izedmultiple realizability: by the same property emergent can arise from different setsof individualproperties. Hayek stresses the novel 2014) ([1964] same underlying set rules. of Thisnovelty impliesloose a ness between the individual properties and the emergent properties: knowing the full set individual of properties doesallow prediction the properties. of emergent say thatadd a set macro-selection rules of To complexity. to wasselected is—at least in the most straightforward cases— adaptive say thatto actions of a more produced order it in comparisonwith competing rule sets. is the It functionality that theof order whole explains institutions—the explana tionan of institution depends its functional on contribu tion the to Indeed, whole. take we once the perspective of systems thecomplex need antithesis contemplate we to of what might some the consider heart methodological of in dividualism: top-down causation: higher-level phenome (Ellis ones causenon lower-level 2012). methodological of as version some individualism, I’d sug gest that productive is analyze it to more the types claims of ------

Rather than staking any claim as what to “methodologi als acting within properties it. Emergent are sometimes dis tinguished from “resultant” mere properties the on grounds that, while a resultant property is the expected consequence both in mainstream and mainline economics. Consider the claim that actions” of the is an property “order emergent of an institutional framework and the individu heterogenous cal individualism” might be, is it useful stress to commit view Hayek’s of ments that are, methodologically, unusual methodological individualist is a complicated it of type— has calledperhaps what Philip “holistic Pettit (1993) indi vidualism.” decisions social to facts. All are distinct. Caldwell (2004, pp. rightly279-287) recognizes that, given his commitments to complexity theory and multi-level selection, if is a Hayek sometimes a commitment modelling agent-based to so of cialoutcomes, sometimes typea subjectivism, of sometimes a claim that social causation always runs from individual odological individualism” is: sometimes the term indicates an explanatory reductionist program, sometimes a meta physical claim what about are the “real entities” in society, infer from use Hayek’s multi-level of selection that drew he back from themethodological core individualism the of Austrian program. is it “methnot oftenpellucid what Now Individualism” insists that is it an error to 4, 186-191) pp. Boettke (2018, HAYEK’S INDIVIDUALISM AND LIBERALISM INDIVIDUALISM HAYEK’S Emergence, Macro-Selection and “Methodological accomplishes. How, then,accomplishes. can How, this provide a basis an for in dividualistic and liberal theory? that restricting individual decisions in secure to order sys functionalitytem-wide is precisely what macro-selection way—a cancerway—a cell is precisely a part that has free broken theseof restraints, and because this of threatens ultimate system in a rough might collapse. and say, ready way, We (individual) activity. Indeed, there is point higher-lev to no el selection ifdoes it not. Criticalthe to integrity an of or ganism is restricting the freedom parts of their go to own tems’ frameworks impose constraints the on freedom the of parts.On a multilevel selection(group) account, the high (societal) selectioner-level inherently restrains lower-level tems depend allowing on individuals large degrees free of reflexively to dom do theirown thing respondingin to the macro-selected sys 2016), decisions others of (Ismael 2011, VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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Hayek’s Two Liberalisms eral open society: on Hayek’s Whiggish liberalism, liberal principles arise from a critical reconstruction of its evolved Boettke (2018, p. 274) closes his fine book with a discussion content. of “true radical liberalism”—a theory about the framework Hayek’s complexity analysis, however, points to a more of society. I concur that Hayek’s liberalism is a claim about radical liberalism. He (Ibid., p. 379ff) chides the conserva- the framework of a type of evolved complex society. As I tive for accepting whatever outcome has been produced by understand it, the complexity/macro-selection perspective the latest intervention, and so his failure to stand up for the suggests that Hayek proposes two distinct liberalisms—the core principles of a free order, such as liberty and property. Whig and the radical. Now interestingly, Hayek (Ibid., p. 401) believes that these Evolutionary macro-selection lays the foundation for a principles can be derived—or at least confirmed by—the Whiggish liberalism. The crux of a macro-selection analy- theory of complexity: “A commitment to principles presup- sis is that we do not really understand what our rules do for poses an understanding of the general forces by which the us: they were selected as part of a functional whole. In his efforts of society are co-ordinated, but it is such a theory recent wide-ranging overview of cultural evolution Henrich of society and especially of the economic mechanism that (2016, p. 57) observes that “[I]ndividuals reliant on cultural conservatism conspicuously lacks.” The principles of lib- adaptations often have little or no understanding of how or erty and property are firmly grounded in the need of indi- why they work, or even that they are ‘doing’ anything adap- viduals in complex systems to effectively reflexively adjust tive.” In particular “[s]ocial norms make it possible for hu- their behavior: “a state in which each can use his knowl- mans to solve—often without anyone understanding how— edge for his own purposes” (Hayek 1973, pp. 55-56). Free- what would otherwise be inescapable social dilemmas” dom and markets, Hayek insisted, are first and foremost (Henrich 2016, p. 145). In a fundamental sense, then, our ways for individuals to successfully coordinate their heter- 39 institutional rules and norms cannot be understood, for ogenous plans, and adjust within a complex system. We are we do not know why they were selected or what social ends constantly tempted, says Hayek, to limit this freedom in the they serve. Hayek (1973, p. 81) describes these rules as “pur- pursuit of desired collective outcomes, but these outcomes pose-independent.” This would certainly preclude stan- are most uncertain, and it is only the principle of freedom dard consequentialist justifications of rules: we often do not that allows the constant adjustments on which a complex COSMOS + TAXIS + TAXIS COSMOS know what rules do, for their effects may be linked in sur- order depends. He thus makes what prima facie appears as prising ways to other rules. Yet Hayek (1988, p. 27) draws a startling claim for one who stresses uncertainty and com- back from an evolutionary ethics in which the outcome of plexity in social life: we should be dogmatic in our defense evolution simply defines the good or right. We must start of liberal principles (Hayek 1973, p. 61; Mack 2006). This is with our evolved inheritance, but we must critically exam- surely a radical liberalism. ine its features. The resulting liberalism is, as Hayek (1960, p. 409) explicitly holds, of a “Whiggish” inclination. Ed- THE HAYEKIAN TRACK mund Burke, a Whig admired by Hayek, was a moral crit- ic of English policy towards the American colonies and the Boettke’s book is an excellent account of Hayek’s critical slave trade, while adamantly opposed to the radical social contributions to mainline political economy. In this and and moral reconstruction attempted by the French revolu- other works Boettke has done us a great service in distin- tion. From within an evolved tradition (English law) one guishing mainline political economy from the highly for- can strenuously criticize rules, laws and policies that vio- mal, static, research program that has defined so much of late its traditions—stepping back on this or that matter and modern mainstream economics. Yet we can understand the evaluating it “piecemeal” in light of the whole (Hayek 1988, mainline tradition in various ways. I have suggested that, p. 8). But one cannot sensibly step back from the whole (as if we bring to the foreground evolutionary and complexity Burke believed the French sought to do), and seek to recon- theses, we get a rather different view of the mainline tradi- struct the society in light of some philosophical commit- tion and Hayek’s place in it. If we focus on reciprocity, ex- ment such as utilitarianism or naturalism rights. “We must change and the division of labor we bring out the roots of always work inside a framework of values and institutions market complexity and novelty. The invisible hand is the which is not of our own making” (Hayek 1960, p. 63). In the favored adaptive, self-organizing, mechanism in mainline last few hundred years Western society has evolved a lib- economics. However, it has considerable difficulty in -ex

A Branch on the Mainline: Hayek’s Analysis of Complex Adaptive Systems , The The . Philosophy Interface , Vol. 15, 15, , Vol. Rules and The Market . In: Bartley, W. . Chicago: Complexity and . 20 (4): 330–342.. 20 (4): , Vol. 1. Chicago: 1. , Vol. Oxford: Oxford The Market and Other Chicago: University of , Vol. 15, 15, , Vol. Moral Sentiments and Princeton: Princeton Cambridge: Cambridge Liberty, vol. 1, San Diego Law Review , Vol. 15, 15, , Vol. . 75 (2): 306-318. (2): . 75 . Princeton: Princeton University Arlington: Mercatus pp. Center, Oxford: Oxford University Press. The CollectedWorksF. Hayek A. of Mainline Economics: Lectures SixMainline Nobel . Chicago: University Chicago of Press, . 41 (3): 327-351. (3): . 41 London: Palgrave Macmillan. The CollectedWorksF. Hayek A. of . Chicago: University Chicago of Press, 257- pp. Complexity in the Economy. F. A. Hayek:F. Economics, Political Economy and Natural Justice. Natural Hayek’s Challenge: An Intellectual Biography of The Constitution Liberty.of Law, LegislationLaw, and Journal of Economic MethodologyJournal of The Secret of Our Success. The Order of Public Reason. Chicago: University Chicago of Press. The CollectedWorksF. Hayek A. of . Cambridge: MIT Press, 327-350. pp. TheFatal Conceit: The Errors of Socialism The Tyranny of theIdeal The Studies in the Abuse and Decline of Reason The CollectedWorksF. Hayek A. of . Chicago: University Chicago of Press, 362-372. pp. Chicago: University Chicago of Press. . 2 (1): 126-140. . 2 (1): . Cambridge: MIT Press. . 2010. The Subjective. 2010. Characterof the Dataof the Social . 2016. . 2016. . (forthcoming). What Might Democratic Self-governance in a The Theory 2014. ofComplex Phenomena.. [1964] In: Caldwell, The 2014a. Pretenceof Knowledge. . [1975] In: Caldwell, (ed.) B. . 1988. . [1967] 2014. Notes the on 2014. Evolution the of Rules. [1967] Conduct. of In:

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Gaus, G. 2011. Gaus, G. 2011. REFERENCES Arthur, B. 2015. W. Axelrod, The Emergence R.of 1981. Cooperation Among Egoists. Beinhocker, Reflexivity, E. 2013. D. Complexity, and Naturethe of Binmore, K. 2005. Boettke, J. 2018. P. Boettke, J., Haeffele-Balch, P. V. H. What 2016. is S. and Storr, Caldwell, B. 2004. Ellis, R. G. Causation 2012. F. Top-down and Emergence. Henrich, J. 2018. Self-OrganizationIsmael, 2011. J. T. and Self-Governance. Gintis, H., Boyd, S. and E. 2005. Fehr, (eds.) J., Mazzucato,Gowdy, M, van den Bergh, J. C. J M., van der Leeuw, A.Hayek, 1960. F. A. Hayek, 1973. F. ------con : he is : he clear that tradeis simply not a coincidence of

251-259). There is an obvious analogyhere to natural selection: selec tive pressures select a successful phenotype, with the under lying genotype being transmitted. passions where both may benefit from cooperation—some thing thinks he animals are capable of. of Paul work The 2016b, Lewis2016a, (2012, 2015b, 2015a, has tremendously 2017) deepened our knowledge the of de Hayek’s of complexityvelopment theory. On such similarity measures, 51-61, pp. see Gaus (2016, For importantFor Binmore attempts (2005), see Alexrod (1981), Trivers (1971). SeeGintis, Boyd and pp. Fehr (2005, chaps. Gaus 5-8), (2011, 101-122). really 17) p. vol.And is 1, concerned Smith with (1976, tracting

6 5 4 3 2 NOTES 1 ysis ultimately succeeds, miss we Hayek’s but of too much stunning originality if see we him as too closely adhering to the main line. analysis—an analysis that, while still unpopular among economists, is the the of at current forefront social evolu tionresearch agenda. myselfI am skeptical that this anal plaining the justhow institutional framework the for invis handible itself adapts. I think, Here, branches Hayek off the mainline,developing a highly innovativemacro-evolution VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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. 2016. How Physics Makes Us Free. Oxford: Oxford University Press. Jevons, W. S. 1965. The Theory of Political Economy. Fifth edition. New York: Augustus M. Kelley. Kauffman, S. A. 2018. A World Beyond Physics. Oxford: Oxford University Press. . 1993. The Origins of Order. New York: Oxford University Press. Lewis, P. 2012. Emergent Properties in the Work of Friedrich Hayek. Journal of Economic Behavior and Organization. 82 (2): 368-378. . 2015a. An Analytical Core for Sociology: A Complex, Hayekian Analysis. Review of Behavioral Economics. 2 (1-2): 123-136. . 2015b. Notions of Order and Process in Hayek: The Significance of Emergence.Cambridge Journal of Economics. 39 (4): 1167-1190. . 2016a. Systems, Levels of Organisation and Structural Properties: The Influence of Ludwig von Bertalanffy on the Development of F.A. Hayek’s Work on Complexity. Research in the History of Economic Thought and Methodology. 34 (A): 125-159. . 2016b. The Emergence of ‘Emergence’ in the Work of F. A. Hayek. History of Political Economy. 48 (1): 111-150. . 2017. The Ostroms and Hayek as Theorists of Complex Systems: Commonality and Complementarity. Advances in Austrian Economics. 22: 35-66. Mack, E. 2006. Hayek on Justice and the Order of Actions. In: Feser, E. (ed.) The Cambridge Companion to Hayek. Cambridge: Cambridge University Press, pp. 259-286. 41 Mill, J. S. 2006. A System of Logic. In Robson, J. M. (ed.) The Collected Works of John Stuart Mill, vol. 7. Indianapolis: Liberty Fund. Ostrom, E. 2014. An Agenda for the Study of Institutions. In Sabetti, F. and Aligica, P. D. (eds.) Choice, Rules and Collective Action. Essex: ECPR Press, pp. 97-119. Pettit, P. 1993. The Common Mind. Oxford: Oxford University Press. Schumpeter, J. A. 1950. Capitalism, Socialism and Democracy. Third + TAXIS COSMOS edition. London: Allen and Unwin. Smith, A. [1776] 1976. The Wealth of Nations. Cannan, E. (ed.). Chicago: University of Chicago Press. Trivers, R. L. 1971. Evolution of Reciprocal Altruism. The Quarterly Review of Biology. 46 (1): 35-57. Wilson, D. S. (2016). Two Meanings of Complex Adaptive Systems. In Wilson, D. S. and Kirman, A. (eds.) Complexity and Evolution: Toward a New Synthesis for Economics. Cambridge, MA: MIT Press, pp. 31-46.

A Branch on the Mainline: Hayek’s Analysis of Complex Adaptive Systems ------

century, theon paths tak th century: during the upcoming aggres of th , Globalization and , Globalization and 20 th What I see as the common traits the of enlisted moments, zational patterns which the vigilant Scottish Enlighteners observed in the transformation their of “lifeworlds” during the century, late 18th and pinpoints these observations on the the of emergence Smithian society” “great (Smith [1759] book part 1976, 1976, II, section II, chapter iii; Smith [1776] LivingI, chapter ii). in the context modernity’s of great so ciety—butcourse of nevertheless also in the various small groups like the village, family, parish, clubs—has or a put DISCONTENT WITH GLOBALIZATION: WITH GLOBALIZATION: DISCONTENT IS THIS TIME DIFFERENT? Why are so many citizens—in and the also West elsewhere —currently turning their back the liberal on of order glo balism? Thisquestion of course is anythingit could new, but posed very was) at been diversehave (and junctures during the 19 nationalismsive in the late 19 amid or and in post-1933, en in Russia post-1917 the anti-globalization the at turn movement the to new mil lennium. What has happened the since since US 2016—in the presidential election, in the UK since the Brexit refer endum,and in Central and Eastern Europe since the emer the of gence new so-called “illiberal democracies”—could either in be put the tradition the of rup aforementioned tures, could or require a “this time is different” interpreta tion.Let us explore these twopotentially diverging (but not mutually readings. exclusive) despite all obvious historical is their heterogeneity, shared revolutionary a further quest preclude to unfolding—or to even trigger rollback—of the liberal of a complete order mo dernity. “Modernity” is understood as here the set civili of alism”. Regardingalism”. the ruptures putting among “Austrians”, Boettke’swarning call that “liberalism is liberal” (Boettke in the context the of 2017) two megatrends that can make it effectiveeven more today for tomorrow. and ------Gesellschaft “Ge and and “Gemeinschaft” , and what this could mean for demarcation line. goal My in the Gemeinschaft (Tönnies 1887) to capture to (Tönnies the 1887) duality living of in

Gemeinschaft-Gesellschaft The core of The core this revisitspaper this fundamental tension

the theory and policy Boettke’s of Hayekian “learning liber paper is examine to the how two megatrends our of time, globalization and digitalization, reinforce may the logics of tional splits and ruptures current about issues like migra that arewell reconstructabletion 2015), (Horn along the Gemeinschaft-Gesellschaft this and order its sub-orders them interdependent present selves. In a parallel both on “Austrians” sides development, theof Atlantic recently have experienced serious institu Western democraciesWestern both on the sides of Atlantic have experienced truly traumatic their events for liberal order since least) fragile a new 2016—including sense how of (at legitimacy in the minds theof citizenry. as presents itself it in our global-digital age, especially as Hayek’s mainHayek’s concerns in hissocial philosophy: theHow logic the of small group continuously threatens and chal thelenges logic the of extended regarding order the latter’s tion what Boettke of has called elsewhere “mainline econo mists”least at (Boettkesince the Scottish 2012) Enlighten Andment. this duality doubtlessly A. constitutes F. of one sellschaft” communitya and living in society,a this duality is certainly Tönnies’ invention—instead,not has it occupied the atten order, a tension which a tension humanshad ever endure to order, have since modernity. entered While we famously depicted by Ferdinand Tönnies with theterms focusspecific one on aspect which I believe is crucialF. for A. reception Hayek’s today: the perennial between tension the logic the of small group and the logic the of extended (Boettke 2018) on one of the of liberal one most on complex (Boettke think 2018) theers of 20th century. reviewed As I have the the plenty of in thisbook essay elsewhere 2019a), I would (Kolev like to INTRODUCTION Boettke Peter has written trulya multifaceted book Email: [email protected] http://www.hwwi.org/ueber-uns/team/autor/stefan-kolev.html Web: Digitalization Digitalization KOLEV STEFAN F. A. Hayek, A. Hayek, F. VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

COSMOS + TAXIS 42 COSMOS + TAXIS

significant strain on our mind ever since, as both logics can gardless of the sustainability of this boom, the political sys- be portrayed in diametrically different categories: 1) while tems in almost all Western democracies are experiencing the small group ensures concrete interactions with the sur- an extremely demanding “stress test” grounded in polar- rounding, directly visible individuals, the great society is ization and ever-stronger extremes. In line with so-called full of abstract exchange, often in complete anonymity and “horseshoe theory” (Faye [1972] 2004; Backes 2006), today’s invisibility; 2) while in the small group a high degree of extremes also show tendencies of coalescing (“les extrêmes homogeneity prevails, a cornerstone of the great society’s se touchent”) against an ever-weaker center (Economist prosperity is heterogeneity across individuals, for exam- 2013; Craiutu 2017; Kolev 2019b). ple regarding religious or ideological attitudes; 3) while the Still, this “conspiracy” is not unique if we look back at the small group’s composition is usually fairly static, the great past two centuries. What makes things “really” unique, is society can be dramatically dynamic. Important for this in- the nature of the technological ruptures which have taken terpretation, the historical junctures mentioned above share place in the past three decades since the World Wide Web one particular pattern: the construction of group identities. began transforming our world starting in the 1990s. These From the construction of “rankings” of nations or races in ruptures, their effects, and the possibly necessary policies the 19th century, of class-based and race-based mentalities will be at the center of the rest of this essay. in Russia and Germany, of the “Global South” or of national anti-establishment mentalities: These processes are, above DIGITALIZATION AND KNIGHT-POPITZIAN all, about belonging to a community. Large or small, real or “ORDER UNCERTAINTY” virtual: When aiming to belong to a community, one can easily derive his or her identity from differentiating oneself To begin with, any definitive judgment about the nature from other communities, as well as from mobilizing forces and effects of digitalization is certainly premature and can- 43 within the newly found mental home against the abstract, not be anything but a very tentative “groping in the dark”. cold, anonymous, invisible exchange processes of the great And this is one of the fundamental differences to globaliza- society. tion: We have had exposure to waves of globalizations for So much for the commonalities. What might be specif- centuries if not millennia, while our exposure to digitaliza- ic about the most recent backlash against globalization? To tion is only few decades old, and there are indications dis- COSMOS + TAXIS + TAXIS COSMOS begin with, it seems rooted in both material and ideation- cussed below that digitalization may be qualitatively differ- al causes, constituting a paradigmatic Millian “conspiracy ent from the triggers of earlier industrial . This of interests and ideas” (Mill [1845] 1991, p. 503). The speed section looks at digitalization by combining two notions: and scope of globalization since the 1980s have produced a “uncertainty” as understood by Frank Knight (Knight sizable proportion within the citizenry of Western societies [1921] 1964), and “order security” as understood by German who see themselves as losers of globalization. Whether this sociologist Heinrich Popitz (Popitz [1986] 2017). is factually true or not, as heatedly debated among econom- Liberal political economists are sometimes (too) quick to ic historians (Piketty 2014; McCloskey 2016): Since David simply declare that we are facing in digitalization another Hume ([1742] 1987, part I, essay V) and Walter Lippmann example of Schumpeterian creative destruction. Howev- (1922), we can plausibly claim that it is subjective opinions er, already today two rather specific traits of this peculiar rather than objective facts that are decisive for the “politi- Schumpeterian process are discernible: 1) its forces are im- cal” in political economy. And here the material transfor- pressive in the scope of domains they hit, and 2) the speed mations following the globalization-related surge of trade, of its unfolding is breathtaking. Liberal political economists investment, and migration combine with powerful ide- are generally open-minded to such processes and their in- ational forces stemming from public intellectuals like Jo- herent dynamics—but only under the dual condition that seph Stiglitz, Paul Krugman, Greta Thunberg, or Slavoj the process takes place within an efficient humane order Žižek: With different arguments, they reinforce the opin- (Eucken [1940] 1950, pp. 315-317; Eucken [1952] 2004, pp. ion that globalization is above all a rigged game producing 372-374). This condition is the real issue here: To what ex- exploitation, inequality, and environmental damage. This tent do our judgment standards for an order have to change “conspiracy of interests and ideas” has proved rather explo- when so many interdependent societal suborders are simul- sive so far: Even though in 2019 many Western economies taneously undergoing the transformation from analog to produce the best macroeconomic figures imaginable, re- digital? Can this peculiar Schumpeterian process destroy

F. A. Hayek, Gemeinschaft and Gesellschaft, Globalization and Digitalization

------Ge Ge Gesell - AND AND logic. In Gesellschaft can be pre Gesellschaft Gemeinschaft Gemeinschaft GEMEINSCHAFT : THEORY AND POLICY RÖPKE ON logic the of small group continuously counter can be explained as follows: In the eyes many of demarcation line. Although their theoretical systems Ina preliminary comeback of today’s conclusion, mula of the “extended order” (Hayek 1988), for Röpke it was it Röpke for mula1988), the of (Hayek “extended order” precisely this modernity that as saw he a process with con siderable destructive human for even explosive or force co Röpke’s 7-20). 1960, pp. [1958] Röpke existence 1947; (Röpke stance only is not reminiscent modern of communitarian also but Hirschman’s of ism thesis (Renner 2002, 217), p. feudalof blessing, according which to traditional modes of reciprocity exchange be to socially could prove “useful” if schaft resemble each other in many ways, they are diametrically opposed each to other along this line: the As at mentioned great Hayek’s outset concern the of is that paper, the meinschaft acts even disrupts or the rules the of contrast, is driven Röpke the by the quest how coordi of nation mechanisms the of small served from the dangers a predominant of inwhoserole modernity constantly expands, possibly the at cost the of logic community. of So while identified Hayek earlymodernity on as well asits great society asthe central 1948,building pp. his block of theory order [1945] (Hayek and reframed3-5), them in his towards late work the for promising here: It willpromising It here: beharnessed not as a meticulous ex egesis dogmas, of will but instead focus identifying on the urgently necessary theorizing our global-digital for order of age. VS. HAYEK GESELLSCHAFT F. order The A. Hayek Wilhelm theoriesand of Röpke can also be juxtaposed precisely along the a quantitative sense, instead but can interdependently rein themselves force and categorically change the vs. order cha os perception reality of the of individuals affectedby digita lization, pushing towards it chaos. meinschaft citizens, the has become world “too dynamic”. If this di agnosis is correct, the therapy seems obvious: order The it somewhat put to livestatics”we in“more mustor, offer clearof precisely, “fixedi.e. elements more the points”, in stitutional framework that assist the individuals lose to not orientation amid their “too dynamic” By the provi order. fixedof sion points, perception of the chaos aforementioned can give a new recognition to way and order its of principles through newlyenabled learning. could suchhow ther a But A history about? come apy economics of seems approach ------manner since its effectson capability learn to characteriz qualitative subjective

changing because encompassing of and fast change in

A genuinely novel challengeA genuinely novel associated with digitization Thisquestion concerns both levels of “rulesthe the of the the different sub-ordersof societysimplyup add not do in to some objective some to measure transformation of set an by al legedly neutral scholarly digitalization and observer, 2) af fectsthe in order a are worth underscoring: the ability 1) adapt to is intimately connectedone’s to ing those individuals affectedby digitalization, opposedas any from principles their order of lifeworld, as they fail to catch with up the velocity learning of required the by or properties transformation. sucha development of der’s Two the objective reality, the danger increases that citi some zens start may perceiving their lifeworld as permanently chaotic. In that case they be extract to able longer no may political (“pattern prediction”) economy and social phi (“thelosophy state as gardener an of English garden”)— are (Boettke 2018, pp. 81-88). If one’s subjective perception of If one’s (Boettke 81-88). pp. 2018, patterns—a truly notion fundamental Hayek’s only not for also but his for 2017), psychological inquiries [1952] (Hayek transition every and process to psychologically. it However, cognitive process this of kind necessarily takes time, as it requires something essential any liberal for learning order: liesin its speed. Everyhuman sensory order—and the asso ciated transition perception from chaos order— to in one’s presupposes that has one the cognitive abilities grasp to this economic policy can fortunately resort existing to best practices. tentially threatened. In a certain sense, this is still categor icallycomparable with the effects that are already known from the globalization-related structural change, which for individual and social capital the of be to “writ group have ten off”.Those individuals andhave who become groups as a result“obsolete” digitization of can exis therefore feel about theirabout future: When entire industries and professions disappear, high proportions both of human capital the of tion states. important more Even be may the impact the on moves. The radicalaforementioned of forces digital change can the plunge into an players equally radical uncertainty inthe significant of event changes in processes the encased theby rules. is also It that plausible rules the of enforcement in the digital will world become less probably easy na for game”As the far and of the of game”. as “moves the rules areconcerned, digitalizationundoubtedly means perma a pressure constantly to nent and set to new ones reconsider, orders withoutorders creating new ones, as seen from the percep tion the of affected individuals? VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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they precluded the destruction of socially necessary norms “uncompromising” libertarians like or (Hirschman 1982). Hans-Hermann Hoppe who saw his program as being close Modernity is an extremely young product of Western civ- to what a social democrat would argue for (Rothbard 1980; ilization in comparison to human history, and it is a phase Hoppe 1994). which can be depicted by two central characteristics: 1) This paper provides a specific perspective on the provi- the differentiation of the societal suborders instead of the sion of social security, again along the Gemeinschaft-Ge- merged lifeworld of the traditional village, and 2) the in- sellschaft demarcation line. To begin with, the attempt of crease in abstract-anonymous interpersonal relationships some liberals to ban the state from conducting social pol- instead of exchange with concrete-known persons in local- icy and to delegate it exclusively to the voluntary coordina- ly narrowly defined areas. Hayek’s decades-long quest for a tion mechanisms of the various community contexts (fam- “Constitution of Liberty” aimed precisely at finding those ily, church, neighborhood, etc.) is inconsistent with Hayek’s sets of rules in which the modernity-related logic of the ex- encompassing plea for the comprehensive validity of an ex- tended order could be brought closer to legitimacy in the tended order logic. The extended order would have a highly eyes of the citizens, having experienced that they often find problematic “open flank” if it did not itself offer solutions this logic counterintuitive or even absurd because of their for cases of social hardship, but instead depended on what ancestors’ millennia-long existence in village communities. Hayek called “atavisms” of the millennia-long life in com- Röpke’s efforts to establish and preserve a “Civitas Hu- munity, and that at such a neuralgic point. Theorizing the mana” go in exactly the opposite direction, i.e. towards the liberal welfare state brought Hayek little sympathy: Apart rooting of the individual in the traditional and manageable from the libertarian voices mentioned above, the book and nature of coordination mechanisms in small groups, aim- its policy proposals were also criticized from some of his ing to counteract the, in his view, highly problematic pro- closest contemporaries (Mises [1960] 2008; Robbins 1961; 45 cess of “massification” and the disorientation of modernity. Viner 1961). Similarly, Röpke’s counter-proposal of provid- These different approaches clearly show the rather different ing security above all in the community also received mul- leitmotifs of the individual and of society in Hayek’s and tiple critiques and has been described as naively conserva- Röpke’s thought. Historically, liberalism in its many fac- tive (Burgin 2012, pp. 139-146; Gregg 2010, pp. 173-181) up ets has certainly not developed a consistent and consensual to the recent characterization as a “retro utopia” (Solchany COSMOS + TAXIS + TAXIS COSMOS position on these fundamental questions. However, it may 2015, p. 570). Paradigmatic for Röpke’s leitmotif to solve be precisely this richness of facets that often makes liberal cases of social hardship is his model of the small town—or, thinkers stimulating for later generations—even though, at more generally, of small units in economy and society—as the same time, misunderstandings about fundamental po- the ideal environment for human existence and association. sitions across different liberal currents can hardly be denied It almost sounds as a version of the “small is beautiful” mot- and often also not resolved or reconciled. to that became so popular in the decades after Röpke’s pass- Such diverging order-theoretical positionings also entail ing in 1966 (Schumacher 1973) and has been aptly termed direct order-political consequences: I will focus here on the a “liberalism from below” (Sally 1998, p. 131). Röpke’s vi- provision of social security. In Part III of his “Constitution sion of an “economic humanism” (Christ 2018, pp. 44-48) of Liberty” (Hayek [1960] 2011), Hayek outlined a program is based on personal independence and, given the interper- of liberal social policy, the core being to transfer the gener- sonal visibility in such a context, on interpersonal solidar- ality principle of the rule of law (and of Freiburgean “Ord- ity, while he saw social policy coming from the state with nungspolitik”) to social policy, i.e. to organize the various suspicion and as a threat to disintegrate the traditional policies and measures through generalizable rules (Fritz community, potentially putting the individual’s indepen- 2016). With this, he implicitly argued how the provision of dent existence into the position of a “comfortable stall-feed- a social security minimum that equally applies to all mem- ing” (Röpke [1958] 1960, p. 170) by the “pumping engine” of bers of the jurisdiction is not only not necessarily a contra- the welfare state targeted at full employment (Röpke [1942] diction to the liberal understanding of the state, but that it 1950, p. 171; Röpke [1958] 1960, p. 157). can be understood as a vitally necessary component of the So even though regarding the central duality of this paper extended order (Kolev 2017, pp. 265-270). As it is widely Hayek and Röpke opted for diametrically opposed prima- known, this book—and here especially Part III—brought cies—Hayek for Gesellschaft, Röpke for Gemeinschaft—their him the biting critique of self-proclaimed “consequent” or concern about the provision of security, from Gesellschaft or

F. A. Hayek, Gemeinschaft and Gesellschaft, Globalization and Digitalization . ------Gesell and Gemeinschaft appears vin , are, rejected by or Gemeinschaft Gesellschaft Gesellschaft Gesellschaft certainly has effectson indi —so far skepticism Hayek’s towards Gemeinschaft appears vindicated. In this perspective, glo Gemeinschaft . Global competition leads the to permanent necessi Inboth globalization and digitalization, can one also ics in our lifeworlds, their but parallel coexistence can also instability createmore through positive feedbacks that am plifythe respective logic of This couldlead to an increased polarization for the citizen’s mind confronted with the the of tensions two logics, mak ingthe pre-digital living of tension in moderna society and in communities difficult even more to handle cognitively. vidual and also behavior, applies—in a modifiedform—to virtual communities, although certain forms reputation of and trust-building themselves show differently here than in the immediate interactions individuals of in a concrete geo graphical area. recognize the dangers that and identified Hayek Röpke in the conflict between logics the of schaft ty learn to and adapt, as well as constant to occupational mobility within the country across or countries, which can serioushave disadvantages the for and new formation of, the embeddedness in, families and local communities—so skepticism fartowards Röpke’s dicated. Social media, the on other hand, can lead the to formation groups which of often turnto be homo out so geneous that the pluralistic discourse modernity of hardly takes place anymore. In the course time, of of the content the social media group can thus turn increasingly extreme and one-sided, the to point tolerance, where plurality, and so diversity, indispensable for this new Gemeinschaft balization and digitization only dynam not lead more to even more difficulteven more to bearandcreate a sense of anxiety vis- anonymous internationalà-vis one’s competitors. the At same2) time, in the face digitizationof which is es sentially caused the by decline in communication costs inventions to and due innovations our everydayin life IT, is increasingly characterized using by applications so of cialmedia. They enable the individualjust be longer no to also but mediaa consumer, of which,producer a content, in addition the to effectof a growing fragmentation in the media space, entails that the individual form to able is now genuinely new virtual communities infinitesimally at low cost, example for Facebook groups WhatsApp. on or In ad dition, applications like Skype give us back the visibility which so many bemoaned the be to to lost due competitive pressure of mobility work-related amid globalization. This comeback of , ------AND AND Gemein Gesellschaft : POLARIZATION : POLARIZATION . Let illustrate me this by GESELLSCHAFT relate to the to relate claim regarding our Gemeinschaft GEMEINSCHAFT , can still be read in a unified In read the way. Gesellschaft and

ymous interactions which make the competitive pressure ket game—along with making us richer and giving us an increasing number options, of things often taken for grant andperceived ased—is more more taking place in anon so far—is seen as having globalization, promoted visible examplefor in the currently strong anti-migration senti both on ments the sides of Atlantic. In addition, the mar by theby abstract these many, rules the of To extended order. rules appear own today control, lead as being beyond one’s ingfundamental to ruptures in the political system that— if compared earlier to decades with their intensity lower of globalization. Each individual is pressured understand to that is she partor he globala of process structured and run These levels of two companiescompetition—for lo for and cations—simultaneously affect the existenceof individuals as and an as employee a citizen, and the pressure has grown in transportation and communication costs, is permanent ly intensifying the competitive pressure com only not for panies,also but locations for as jurisdictions worldwide. ization and digitization: competition, social and 2) 1) me The deepeningdia. specialization 1) of the international di vision labor of and knowledge, essentially the to due decline tain comeback of depicting which, two according sub-phenomena the to current state affairs, of a play central bothfor role global rect:Essential traitsglobalization of can be understood as a reinforcing the dominance the of logic of while in much the process digitization of can lead a cer to schaft global-digital age that social policy today should primar ily aim providing at fixed relation The points? is quite di OR SYNTHESIS? does thisHow historyeconomics of exercise on LIVING IN GLOBALIZED LIVING IN GLOBALIZED DIGITALIZED a subjectivea sense security of is an essential prerequisite for life-long abilityone’s and willingness learn. to tion of order is retainedtion order of and the individual’s ability learn to is preserved—insteadand adapt (Boettke 81-88) pp. 2018, tippingof into a perception chaos. of In this interpretation, As discussed in the earlier sections, such fixed points as ele the of ments institutional framework are crucial in the “too dynamic”times that experience, some so that the percep Gemeinschaft ing this the of paper, security provision can be interpreted as caring the about indispensable provision of fixed points: VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

COSMOS + TAXIS 46 COSMOS + TAXIS

However, this is not the inescapable conclusion from the ily fall out of the dynamic division of labor and knowledge, interaction of both megatrends. One can also examine the the state would offer via social policy temporary stability in thesis that both processes—precisely because of their si- the sense of “statics” and enable them—not only by alimen- multaneity—behave to each other as complements, and tation, but even more by requalification and by assistance thus partly cancel out their potentially undesirable effects. to regain trust in one’s own autonomy and learning capa- The argument would go like this: While it is true that in bilities—to return to an emancipated, humane life based on times of globalization individuals probably have to become self-responsibility. As always, this provision of social secu- more mobile in their “real life”, digital technologies enable rity can certainly be complemented by assistance stemming them in their “virtual life” to partially compensate the so- from the diverse voluntary associations of Tocquevillian cial uprooting and the loss of embeddedness. Today’s circle civil society—and its institutions will certainly profit from of friends is no longer tied to a specific time and place to the new digital opportunities for self-organization, visible the extent it was in the pre-digital world decades ago. And in practices like crowdfunding. It seems nevertheless un- while it is true that digitalization in “virtual life” can lead likely that civil society will be able to substitute the com- to more “echo chambers” in which the content can radical- parative advantage of the state, which is to provide a general ize due to the sourcing of information within self-imposed level of security for all, as opposed to the specialized assis- “filter bubbles”, in the increasingly global “real life” we are tance for specific hardships provided by civil society chari- constantly confronted with diverse cultures, , and ties. But it is quite likely that, in line with Václav Havel’s ways of life. In such a reading, the antithetic coexistence in vision (Havel 1995), digitalized civil society may be able to a globalized Gesellschaft and in many digitalized Gemein- find solutions for more and more issues which in the past schaften suddenly appears as a curious form of synthesis. were either classified as common-pool resource problems, In case this optimistic reading turns out to be valid, is i.e. solvable within a community but entailing substan- 47 there nothing left for policy? Does such a global-digital sys- tial internal coordination efforts (Ostrom 1990), or even as tem regulate itself completely automatically, in that the an- public good problems that, in the pre-digital age, were only tithetical logics of community and society are synthetically deemed solvable if the state stepped in. neutralized and offset due to the simultaneity of globaliza- tion and digitization? As pointed out in the beginning of CONCLUSION COSMOS + TAXIS + TAXIS COSMOS the essay, it is certainly too early for such comprehensive forecasts due to our far too short exposure to digitalization. This paper presented Hayek as a representative of the “think- But at least it makes sense to point to this possibly of com- ing in orders” tradition in political economy and addressed plementarity: Perhaps such a reading could resemble the al- a crucial aspect of his order theory: the primacy of Gesell- leged contradictoriness of the doux-commerce thesis on the schaft over Gemeinschaft in Hayek’s comprehensive plea for one hand, and the self-destruction thesis of the market on the logic of modernity’s extended order. The two Tönnie- the other, which Hirschman (1982) summarized in such a sian forms of association are mapped to the two megatrends way that the system-stabilizing and the system-destroying of our time, globalization and digitalization, claiming that power of anonymous market relations can work simultane- globalization tends to reinforce the logic of Gesellschaft, ously and one must focus on preventing the dominance of while digitalization may amplify the logic of Gemeinschaft. the destructive elements. Before discussing the possible antithetical or synthetical ef- The necessity of “more statics” via fixed points remains fects of globalization and digitalization on the individual’s an important plea resulting from this analysis. As the glob- perceptions of this central tension of modernity, a common al-digital age continues to unfold, what needs to be ob- property of both megatrends: Each of them, and even more served with particular attention is how the “market-state- so in combination, tends to produce a sense of ever-increas- civil society triad”, and here especially the “division of ing order dynamics. The central plea of the paper is that this labor” among the three, may change and transform. Mar- burden for the individual’s sensory order in the global-dig- kets obviously become more and more dynamic if we main- ital age must be taken seriously by Hayekians, both when tain their present institutional framework and if the world theorizing order and when searching for adequate policies. evolves (halfway) peacefully. In the Hayekian interpreta- A sense of an order being “too dynamic” can prove high- tion of this paper, the state could become the guarantor and ly detrimental for the polity, as citizens start classifying as liberal provider of social security: For those who temporar- chaos what was previously seen as order. To preclude such a

F. A. Hayek, Gemeinschaft and Gesellschaft, Globalization and Digitalization . Berlin: https://

. . In: Bartley, W. . New York: . New York: . . Tübingen: Cheltenham: Éditions . , Vol. 1. Chicago: 1. , Vol. Frankfurter Berlin: Springer. . Chicago: University of . Chicago: University of . . 7(1): 67-93. . 7(1): . Paris: . Chicago: University of Left-or Neither. Right-Wing? WU Vienna University of November 26, 2017. November 26, 2017. . Journal of Economic Literature Journal of Göttingen: Vandenhoeck & . . 69: 35-50. ORDO Risk, Uncertainty and Profit The FoundationsHistory The Economics:of and The The Economist Langages totalitaires Essays Moral, Political, and Literary . Cambridge: Harvard University Press. , May 17. Living Economics: and Today Yesterday, Grundsätze der Wirtschaftspolitik The Constitution Libertyof The Sensory Order and OtherWritings on the Faces of Moderation. The Art of Balance Agein an of Politische Extreme. Eine Wort- und Begriffsgeschichte und Extreme. Wort- Politische Eine The GreatPersuasion. Reinventing Free Markets 2013. Is 2013. Toward a Civil Society:Toward SelectedSpeeches and Writings Wilhelm Röpke’s Political Economy Political Röpke’s Wilhelm Neoliberale StaatsverständnisseNeoliberale Vergleich im Der Hayekianische Wohlfahrtsstaat im Licht Review Austrian of Economics The CollectedWorksF. Hayek A. of . London: Palgrave Macmillan. . Oakland: The Independent Institute. . Prague: Lidové Noviny. TheFatal Conceit: The Errors of Socialism . Philadelphia: University Pennsylvania of Press. F. A. Hayek.F. Economics, Political Economy and Social . Accessed 8 September 2019. Individualism Economic Order and [1952] 2004. [1952] 1988. . 2017. . [1952] . [1960] 2011. . . 2017. The Challenges. 2017. Facing Liberalism in 21st Century.the . 2018.

A Critique. Zeitung Allgemeine Indianapolis: Liberty Fund. Augustus M. Kelley. Gruyter.De We ConsiderWe Ourselves to Be in the ‘Radical Centre’. September 3. Theory in the Analysis of Economic Reality Mohr Siebeck. Hermann. gegenwärtiger Sozialstaatsforschung Economics and Business, Master Thesis. Elgar. Edward 1990-1994 A. (ed.) Chicago Press, 1-32. pp. Foundations TheoreticalPsychology of Chicago Press. Chicago Press. III (ed.) W. University Chicago of Press. Civilizing, Destructive, Feeble? or 20 (4): 1463-1484. von der Antike bis zur Gegenwart Ruprecht. Tomorrow Economic Education for Foundation fee.org/articles/the-challenges-facing-liberalism-in-the-21st- century/ Philosophy Depression the since Methodological Heresy. Extremes

Horn, Die K. rechte 2015. Flanke der Liberalen. 1987. Hume, [1742] D. 1964. Knight, H. [1921] F. S. 2017. Kolev, Economist, The. 1992. [1940] Eucken, W. 2004. [1972] Faye, J.-P. Fritz, R. 2016. Gregg, S. 2010. 1995. Havel, V. 1948. Individualism: A.Hayek, [1945] F. and True False. In Hayek, F. Hirschman, A. 1982. O. Rival Interpretations Market of Society: Hoppe, H-H. A. 1994. Hayek Government on F. and Social Evolution: REFERENCES Backes, 2006. U. Boettke, J. 2012. P. Burgin, A. 2012. Christ, A Measure K. 2018. Judgments—Wilhelm of Röpke’s Craiutu, A. 2017. - - - - . Gesellschaft

order’s logic of order’s 2019—could fail the at very point identifiedby Boettke as epistemicthe Hayek’s of liberalism: core the individual’s ca pability and willingness learn to and adapt the to extended and knowledge. Otherwise theextended our of globorder al-digital modernity—palpably fragile as presents itself it in tialstablea prerequisite of that liberal one must be order, provided the by institutional framework in when moments the individual temporarily the of drops out division labor of ifthese fixed pointsprovided be Hayekianby a may welfare state, a civil by society, simultaneously or both, by I claim that the sense subjectively of sufficient security is an essen cessfully handle uncertainty”, the prevalent “order a notion coined inthe enhancing paper by Knightianuncertainty security. withorder concept of Regardless Heinrich Popitz’s perception, the paper recommends considering the notion fixedof points,of i.e. elements the institutional framework that assist the individual lose to orientation not and suc to VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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. 2019a. Review of Peter J. Boettke, ‘F. A. Hayek. Economics, Political Economy and Social Philosophy’. Œconomia — History / Methodology / Philosophy forthcoming. . 2019b. Besieged by the Left and the Right: The Order of Liberal Globalism. Review of Austrian Economics, doi: https://doi. org/10.1007/s11138-019-00473-w. Lippmann, W. 1922. Public Opinion. New York: Harcourt, Brace and Company. McCloskey, D. N. 2016. Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World. Chicago: University of Chicago Press. Mill, J. S. [1859] 1991. On Liberty and Other Essays. Oxford: Oxford University Press. Mises, L. v. [1960] 2008. Liberty and its Antithesis. In Mises, L. v. (ed.) Planning for Freedom: Let the Market System Work. Indianapolis: Liberty Fund, pp. 111-116. Ostrom, E. 1990. Governing the Commons. The Evolution of Institutions for Collective Action. Cambridge: Cambridge University Press. Piketty, T. 2014. Capital in the Twenty-First Century. Cambridge: Harvard University Press. Popitz, H. [1986] 2017. Phenomena of Power. Authority, Domination, and Violence. New York: Columbia University Press. Renner, A. 2002. Jenseits von Kommunitarismus und Neoliberalismus. Eine Neuinterpretation der Sozialen Marktwirtschaft. Grafschaft: Vektor. 49 Robbins, L. 1961. Hayek on Liberty. Economica 28 (109): 66-81. Röpke, W. [1942] 1950. The Social Crisis of Our Time. Chicago: University of Chicago Press. . 1947. Das Kulturideal des Liberalismus. Frankfurt: G. Schulte- Bulmke. . [1958] 1960. A Humane Economy: The Social Framework of the Free Market. Chicago: Henry Regnery. + TAXIS COSMOS Rothbard, M. N. 1980. F. A. Hayek and the Concept of Coercion. ORDO. 31: 43-50. Sally, R. 1998. Classical Liberalism and International Economic Order. London: Routledge. Schumacher, E. F. 1973. Small Is Beautiful: Economics as if People Mattered. New York: Harper & Row. Smith, A. [1759] 1976. The Theory of Moral Sentiments. Oxford: Oxford University Press. . [1776] 1976. An Inquiry into the Nature and Causes of the Wealth of Nations. Chicago: University of Chicago Press. Solchany, J. 2015. Wilhelm Röpke, l’autre Hayek. Aux origines du néolibéralisme. Paris: Publications de la Sorbonne. Tönnies, F. 1887. Gemeinschaft und Gesellschaft. Abhandlung des Communismus und des Socialismus als empirischer Culturformen. Leipzig: Fues’s Verlag (R. Reisland). Viner, J. 1961. Hayek on Freedom and Coercion. Southern Economic Journal. 27 (3): 230-236.

F. A. Hayek, Gemeinschaft and Gesellschaft, Globalization and Digitalization ------3 4 phy, in what Boettke the of phy, book in to refers chapters 8-10 theas “Restatement of Hayek’s LiberalPrinciples Jus of tice”) (pp. 179-281). Asalready noted, Boettke’s account an merely is not his on his “Abuse of Reason of which Project”, in hison Boettke’s “Abuse view thecovers period from1940 untilIn 1960. those years reflected Hayek upon why alltoo many of fellowhis econ omists adopted formal analytical methods that obscured the fundamental faced society economic problem by and the institutions of role in(therefore) solving it. In par ticular, as Boettke makes clear in the of some best sec tions the of book, in the 1940s considers and Hayek 1950s in theirhow effortsto imitate the trappingsof natuthe ral sciences, neoclassical economists increasingly concen trated their analysis equilibrium on states. in But a world equilibrium,of institutions are largely redundant, since thecoordinating of plans—to problems which people’s they contribute—hasalready been solved. Neoclassi cal economics’ focus equilibria, on and the demands of constructing formal models, therefore led institutions to firstof all fading backgroundinto of the analysis, recas a ognised largely but unstated background condition, and chap or then their to being 141-95 ignored together (pp. 229-32). also 113-14, ters see 6-7; pp. Finally, in Stage his 3 of which work, the covers years between and 1960 draws the Hayek 1980, out implica tions epistemic of institutionalism political for philoso problem of plan of coordination problem (including, in the Hayek’s ory the of trade cycle, intertemporal coordination) (chap 37-139). pp. ters or 3-5 The second stage of Hayek’s intellectual journey centres torical also He one. can that contends work Hayek’s inform contemporary in work economics and political philosophy, • • ------epistemic institution 1 , considering, its own on it terms and F. A. Hayek F. So, what is Boettke’s goal? The book,we told, are is 2 ”, which is the”, term Boettke uses the to refer to way

In stage which one, Boettke entitles ‘Economics as a Co ordinationand which Problem’ in his tellinglasts from until 1920 about focuses the Hayek mid-1940s, the on Boettke’s principal claim is that there is a common thread

• and shape his as encompassing work account Hayek’s of three main xvi-xvii). stages (pp. analyticalfocus the of book. is central It Boettke’s to ac ideas Hayek’s of and thecount of his to development claims theirabout evolutionary potential. Boettke uses guide to it ple need coordinate to ple their plans and thereby make good use the of resources their at disposal This xiii-xiv). em (pp. phasis the on epistemic properties institutions of is the key alism in which different institutional arrangements have different capacitiesthe generate to knowledge and the feedback peo running through in work economics Hayek’s and political Thisphilosophy. is a commitmentto “ evolutionary potential ideas, Hayek’s of which by is meant “whathis ideas still us sayto to in have ourcontext andin xiv). our (p. debates” the story the of a perspective of evolution economic, of po litical economic, and social philosophic thought how about The the works.” ultimate world objective to is highlight the seeing well succeeds it how in fulfilling goals the itssetby author. intellectual a proper “not xii, history. (pp. “is xiii). it Rather, was wise not enough write to themselves. I am going try to that failing avoid to engaging by in an immanent critique of Boettke’s The The temptationreviewing when a book to is talk about the the you, written, wouldone have reviewer, which but the person actually who wrote the book under consideration INTRODUCTION: EPISTEMIC EPISTEMIC INTRODUCTION: INSTITUTIONALISM King’s College London King’s College Email: [email protected] https://www.kcl.ac.uk/people/professor-paul-lewis Web: Liberalism Liberalism LEWIS PAUL Epistemic institutionalism: Rules and Order, Complexity, and Complexity, and Order, Rules institutionalism: Epistemic VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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seeking to show how the notion of epistemic institution- tion 5 identifies some other interesting potential points of alism can be used to cross-fertilise ideas from other tradi- discussion and concludes the review. tions—perhaps most notably those of the Bloomington and Virginia Schools—in order to develop new, fruitful lines of inquiry. BOETTKE’S INTERPRETIVE STRATEGY, There are many interesting and attractive features of EPISTEMIC INSTITUTIONALISM AND HAYEK’S Boettke’s approach. His overall account of epistemic insti- IMPLICIT ECONOMICS tutionalism as the Hayekian research programme is com- pelling; his discussion of rule of law as a bulwark against in- My first point concerns Boettke’s interpretive strategy. tervention (pp. 211-23) is insightful; his excoriating critique Boettke describes it as follows: of what he refers to as ‘litmus test’ (pp. 265- 69), which “celebrates not the liberal virtues but the right [T[]he most productive reading of Hayek is one which of the individual to be closed, to reject, and to be intoler- sees the common thread in his work from psychology ant” (p. 267), is powerful and timely, as are his criticisms of to economics to the philosophy of science to political (pp. 269-72); and his invitation to inquiry about philosophy to law and finally to philosophical anthro- twenty-first century cosmopolitan liberalism is appealing pology and social theory. The common thread is [the] (pp. 272-77). decisive epistemic turn to comparative institutional In what follows, I explore various ways in which some analysis. (p. 25) of Boettke’s arguments could be strengthened, the better to achieve his goals. There are three such areas. The first On this view, Hayek “was always working as a technical is Boettke’s account of Hayek’s epistemic institutionalism, economist concerned with the problem of economic coor- 51 which I shall argue does not bring out as clearly as it might dination through time, and he was always a political econo- the way that Hayek’s fullest explanation of how plan co- mist who cared about the institutional infrastructure with- ordination is possible in decentralised market economies in which economic activity took place” (p. xvii). is to be found only in his later, post-1960 work on politi- This approach, according to which Hayek’s “version of in- cal and legal philosophy (Section 2). Second, I shall argue stitutional economics must be read back in an explicit way COSMOS + TAXIS + TAXIS COSMOS that Boettke pays too little attention to Hayek’s complex- into his earlier writings” (p. xix), certainly brings advantag- ity theory, both in his account of Hayek’s Abuse of Reason es, not the least of which is that it enables Boettke to identify project but also, and more importantly, in his exposition a strong narrative thread—centring on the notion of ‘epis- of Hayek’s epistemic institutionalism. The upshot is that temic institutionalism’—that runs through his account of Boettke’s book largely ignores material from which a good Hayek’s intellectual career. And Boettke deploys that nar- deal of the evolutionary potential of Hayek’s ideas derives rative to good effect, using it to undermine some common (Section 3). Third, in section 4, I consider Boettke’s account fallacies about Hayek’s work, such as the view that Hayek’s of the causes of Hayek’s institutional term from the 1930s work provided no more than intuitions about the work- onwards. Boettke is of course correct to identify market so- ing of the market could, and indeed had to be, formalised cialism and Keynesian economics in important causes of in order to realise their full potential (pp. 79-80, 106-08),5 Hayek’s increasing emphasis on the institutional frame- and also to clarify Hayek’s key argument against socialism, work within which economic activity takes place. However, namely that the knowledge for central planning is institu- Boettke could, and should, have said more about another tionally contingent and cannot be utilised by planners even important contributory factor, namely discussions within in principle, simply because it does not exist absent the ri- liberal circles in the 1930s and 1940s—in which Hayek was valrous process of market competition (pp. 12, 23-24 104, an important participant—about how, in order to revive the 132-33).6 fortunes of liberalism, its supporters needed to think much But this interpretive strategy also comes at a price, be- more about the positive role of the state in shaping the legal cause by placing so much emphasis on epistemic institu- framework required to sustain a spontaneous market order. tionalism as the common thread of Hayek’s thought, it Doing so would also have helped Boettke to achieve anoth- tends to ‘flatten out’ his intellectual trajectory more than is er of his goals, namely dispelling some of the cruder stereo- perhaps warranted. What I mean by ‘flattening out’ is that it types about the early days of the Mont Pelerin Society. Sec- makes it harder than it might otherwise be to acknowledge

Epistemic institutionalism: Rules and Order, Complexity, and Liberalism ------The - - he made he 7 8 , It wasIt only through a re-examination the of age-old con abstract rules. If impulse or emotion tells them what they want, the conventional rules tell them they how will be and able be allowed achieve to 1976: it. (Hayek 85.) 1978: also12; see [1967] theFor then, later Hayek, social rules are just as impor recognisedHayek this point himself, writing in “Kinds What reconciles the individuals and knits them into a common and enduring pattern a society of is that … they respond in accordance with the same abstract rules … What … enables them live to and to work gether in peace is that in the pursuit their of individu alends the particular monetary impulses which impel their efforts … are guided restrained and by the same ceptfreedom of theunder basic the conception tra of law, ditional liberalism,and the the of of problems philosophy theof which law this raises, that reached I have what now seems a tolerably clear me to picture the of nature the of spontaneous which of order liberal economists so long have 50.) 2014: been talking. [1965] (Hayek tant a source the of knowledge required plan for coordina tion as relative prices. While there are gestures towards this argument writings in Hayek’s of some in 1940s, the point most fully writings in post-1960 po his on later, litical philosophy what where is and arguably the law, his account themost complete of possibility social of in order decentralised market economies can be found. Rationalism”—inof a passage cited but Boettke by 5), (p. whosefull significance I not is think made clear in rest the Boettke’sof while book—that had he developed key insights into the issue plan of coordination and in pa 1945 his 1937 pers, “it was still from way this a long an to adequate insight intothe relations betweenthe abstract rules whichthe in dividual follows in his actions, and the abstract overall or der which is formed as a result his of responding, within the limits imposed him upon those by abstract rules, the to concrete particular circumstances which encounters”: he contributions they need others make to if their own plans are fruition to come to will actually be forthcoming. The rulescan thus be seen be to an important source the of knowledge that—in conjunction with the knowledge pro vided relative by price signals—helps form reliable to people expectations future each of other’s conduct, enabling them adjustto their plans another. writes As one to Hayek in Social of Mirage Justice ------My

… [in 1941] 1941] … [in The Pure Theory of Capital

However, as Steve Fleetwood (1995) and one of the and of one schol as Steve FleetwoodHowever, (1995) To illustrateTo this point, the I want of one consider to able contracts,able those rules reassure to help that people the ries practical of social knowledge, embodying inherited wisdom concerning should people interpret how and re various to spond kinds situation. of By facilitating enforce formal and informal social rules as the prop of laws (such erty, tort and contract, and norms honesty of and promise- keeping those Hayek, respectively). For rules are reposito omies. In those later writings, argues Hayek that the dis semination knowledge of required plan for coordination is facilitated only price not by signals also but a system by of 1960 work on social on work 1960 theory and political that philosophy, developed a fully-fledged,Hayek and convincing, theoryof socialhow is possible order in decentralised marketecon ars Boettke’s whom to book is dedicated, namely Karen argued, have in was it his only later, post- (1999), Vaughn hints the about local knowledge which informs their ac tions, thereby enabling successfully people coordinate to their actions with another. one sis of theirsisof local knowledge,they changes generate in rela tiveprices which indicate the consequences their of actions thefor scarcity various of goods and thus others to convey coordinated, in his essayUse ‘Theof on Knowledge in So Through his famous tin2014). example, we as ciety’([1945] all argues Hayek know, that when individuals act the on ba knowledge. Of course, advanced and Hayek most famously, his first accountof major the causalprocesses through which knowledge is discovered and transmitted, and plans hadfirst of posed “Economic in and 1937, Knowledge” in explaining is possible order in how modern industrial econ omies characterisedelaborate by divisions labour of and point, in a nutshell, is that is it writ only in his post-1960 ings—that are ostensibly political about and legal philoso actually Hayek phy—that solves the challenge, which he to his readers precisely how, and histo what to effect, readers precisely how, con Hayek tinued economics do to in the 1950s, 1960s and 1970s. pletely agreepletely with Boettke’s interpretation. concern My lies withmore the that way his interpretive strategy makes it harder than might it otherwise him be for make to clear it the publication of andretreated political to theory, legal theoryand public in tellectual I should the sayat outset that4). work”com I (p. misconceptions that Hayek about Boettke seeks dispel, to namely thateffectively “Hayek abandoned economics after the extent which to understanding Hayek’s the in of of role stitutions in facilitating social displayed order an upward trajectory, developing and yielding new insights time. over VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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What Hayek is saying here, I submit, is that it is only in social worlds are quite distinct. While a truly scientific ap- his later, point-1960 work that he provides a full account of proach would recognise the differences between the natu- how the market system solves the key economic problem of ral and social worlds, in particular those stemming from coordinating people’s plans in the face of dispersed knowl- the subjective character of human action, and acknowledge edge, theorising explicitly the epistemic function served by that they called for different methods of investigation, those social rules and integrating it into his account of the infor- who fell under the spell of scientism failed to do so and mational role of relative price signals. Those later writings consequently adopted an approach that led them to ignore can thus be seen to contain what Karen Vaughn has felici- key aspects of the social world. In particular, according to tously referred to as “Hayek’s Implicit Economics.”9 Hayek, their chosen methods left them unable to recognise Boettke mentions Hayek’s ‘implicit economics’ (p. 5) but the importance of spontaneously-arising social orders and he does not, I think, make clearly enough the point made by with an unjustified faith in people’s capacity consciously Fleetwood and Vaughn that, far from simply drawing out to design institutions and plan outcomes (Hayek [1942-44] the implications for political and legal philosophy of an al- 2010: 142-55). ready complete economic analysis of social order, Hayek’s However, what Boettke does not mention is that Hayek’s post-1960s work sees him refine and develop significantly views underwent a significant change in the 1950s, when he his account of plan coordination, even writing that “price ceased to draw a sharp division between the natural and the signals represent the institutional guidepost for learning social sciences, distinguishing instead between sciences that within the market process” (which comes close to conflat- study simple systems and those which study complex sys- ing the informational role of prices and social rules) (p. tems.14 That a significant omission on Boettke’s part—one 132).10 What this suggests is that Boettke could have pur- that is of more than purely historical interest—because it sued his goal of dispelling the myth that Hayek gave up on ultimately has consequences for the very issue that upon his 53 economics in the 1940s more effectively by pointing out account lies at the heart of Hayek’s work, namely epistemic that Hayek did not merely continue to apply the analysis of institutionalism. To see why, it is necessary first to explain plan coordination he had already developed but rather con- what Hayek means by the notion of a ‘complex system’.15 For tinued to refine and improve it in the 1960s and thereafter.11 Hayek, complex systems have two defining characteristics. One is that they display emergent properties; the system as COSMOS + TAXIS + TAXIS COSMOS THE COMPLEXITY OF HAYEK’S a whole possesses properties that are not possessed by any METHODOLOGY: THE ABUSE OF REASON of its individual component parts ([1964] 2014: 262; [1975] PROJECT AND BEYOND 2014: 365). The other is that in complex systems the “the number of significantly interdependent variables is very The second stage of Hayek’s intellectual journey demarcat- large and only some of them can in practice be individual- ed by Boettke centres on his “Abuse of Reason Project.” In ly observed” (Hayek, [1955] 2014: 200). These attributes are Boettke’s view, this covers the period from 1940 until 1960 important, in Hayek’s view, because—as we shall see—they and saw Hayek striving to uncover and criticise the “philo- imply that there are limits to the extent to which social sci- sophical and methodological underpinnings of modern so- entists are able to explain and predict the behaviour of com- cial science” (p. 25). In doing so, Hayek would explore the plex systems. origins and expose the shortcomings of ideas that he be- These ideas are significant for our present purposes be- lieved had led to a failure to appreciate the importance of cause the notion that society is a complex system informs spontaneously grown social orders and to an unjustified and shapes Hayek’s efforts in the 1960s and thereafter to faith in man’s capacity to plan society (pp. 27, 33, 285-86).12 conceptualise the very issue that—in Boettke’s estimation— A major contribution to this endeavour was the publica- stands at the heart of Hayek’s ‘epistemic institutionalism’, tion of Hayek’s essays on “Scientism and the Study of So- namely the relationship between social rules and the possi- ciety.”13 In those works, Hayek advances a critique of sci- bility of plan coordination and social order. For what Hayek entism—defined as the “slavish imitation of the method or ultimately comes to argue is that the capacity to coordinate language of science” ([1942-44] 2010: 80)—as well as giving people’s plans—the “order of actions”, as Hayek terms it16— an account of how he thinks the study of the social world is best conceptualised as an emergent property of the entire ought to proceed. Put succinctly, Hayek’s conclusion is that system of rules {r1, r2, …., rn} that governs people’s activities the methods appropriate for the study of the natural and (rather than being the product of any one of those rules or

Epistemic institutionalism: Rules and Order, Complexity, and Liberalism

------22 lauded Law, Legisla Law, The Economist ). This ). line of criticism is implicit in Mi That is,of course, goal a I wholeheartedly en 21 Hayek’s work on complex systems complex on is work alsoHayek’s important for and influential social scientists and politicalphilosophers in years, recent has it often—not always,of course, of but ten—been his society on work system as a complex that used. have people article A recent in complexity economics as an interesting and important ap mentioningproach, its as early of Hayek one exponents. Consider also the following and idiosyncratic) (incomplete of theof causal mechanisms governing the production so of cial in order modern industrial economies. On the basis of such explanations the of principle, can we then on—if go onlyfallibly, course—both of rule to as out infeasible goals whose achievement is inconsistent with the smooth work ingthe of causal mechanismsthat sustain the extended or der and also suggest to reforms that will us enable instan to tiate the principles a liberal of social effectively more order in our institutions. In short, theory Hayek’s sys complex of tems affords us a setof epistemological categories that can the ushelp rebut to charge inconsistency of against which Boettke is rightly trying Hayek. defend to a second reason. This is the contributionit makes to some thing whichby Boettke sets great store, namely thescope contribute to future to work Hayek’s for research. Boettke wants portray to as Hayek progressive the re “a of author search programme in the social xix), sciences” which (p. I take meanto that wants he argue to that, farfrom being historical of merely interest, ideas Hayek’s can fruitfully inform contemporary in work social science and political philosophy. pointdorse. is simply My this. looks If one the at in way which ideas been interesting Hayek’s by have appropriated ning and a particular distributionincome of respectively, whilst the at same time that also he can we (ii) contends know enough only the not about rule to world such pol out iciesand goals alsobut engage to in the existingof reform institutions perhaps most strikingly (as seen in the plan for a model constitution set in 3 of out volume tion andLiberty chael Oakeshott’s barbed remark that devises Hayek plan “a resistto and all 26) is made explicitly planning” by (1991: other critics, such as GeoffHodgson, who argue ap by that pealingreason to limit to the scope rationalist of thought, has“Hayek placed himself incontradictory a position” Of course, has nothing Hayek done the of 183). sort, (1993: andcan one appeal complex ideas to on fromwork Hayek’s In a nutshell,ity is arguing Hayek see to why. that can we usereasoning our of powers understand to the operation

, ------17 quanti qualita structure 20 18 Such ‘explanations Such the of principle’, 19 predictions, suchas that an increase in the of their of separate effects taken in isolation). sum pattern predictions the of precise magnitude that of price rise

features the most notably of the market coordi order,

Theseideas relevant are leastfor at Boettke’s projectfor The The fact Hayek that increasingly to comes view his epis policies and achieve certain goals, such as widespread plan is in thought, a tension Hayek’s arising from the that way he argues that is it impossible usboth know to for enough (i) theabout social successfully world certain implement to two reasons. First, they can head to a off help lineof criti cismthat is levelled often at Hayek to whichand Boettke al towardsludes the his of end book. The charge is that there tative 260-71). 2014: 202-09; [1964] 2014: (Hayek: [1955] demand a good will for lead a rise to in its price that or the absence the of institutions a liberal of polity is incompatible with social they but order; facilitate not do reliable which people’s (inter)actions lead certain to (inter)actions which people’s kinds out of come, can also us help make to terms Hayek general (as or them) the local knowledge and of, particular made by, judgements myriad individuals). as terms Hayek these accounts the of causal process through distribution the of rewards earned different by people (be cause those features the of system will of depend some upon the many variables that are inaccessible the to analyst, such tive plans that people’s nation is of its defining characteristic,it can neither explain predict nor the concrete details the of and predictions will be limited the to general features of those their outcomes,not details. instance, For while so cial theory can explain the of some key abstract or ticular, while is it possible give to an account the of caus almechanisms through which social complex phenomena such as the market are order produced, such explanations theorysystems complex of is importantbecause suggests it there are limits the to extent which to social scientists can predict and explain the behaviour such systems. of In par temic institutionalism—his account the of relationship be tween rulesand order—through the lens provided his by ty that supervenes the on system rules of in question (Gaus 2006; Lewis Gaus 2018). 2015 fore, thefore, overall actions of order is neither equivalent the to underlying set rules, of can nor be readily it predicted as the resultantsimple them; of rather is it an proper emergent that, taken they together, sustain properties emergent not 280, 2014: possessed any them by of [1967] alone (Hayek there Hayek, For 105-122-23). 59-61 283 and 1973: Hayek the mere Putslightly differently, is there an intricate rule with certain rules each complementing other in the sense VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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list of interesting and important work in economics and po- advocates of market socialism (e.g. pp. 135-37, 166-67, 229- litical philosophy: 30, 285). But in doing so he largely ignores—and, to the ex- tent that he mentions it at all, gives an incomplete account • Jerry Gaus’s work on complex economic and moral sys- of—another debate over liberalism that was taking place tem (Gaus 2018, 2019). in the 1930s and 1940s, in which Hayek also played a cen- tral role. This is the debatewithin liberal circles in the 1930s • David Colander and Roland Kuper’s work on ‘laissez- and 1940s over the nature, and the future, of liberalism. faire interventionism’ (Colander and Kupers 2014). Of course, this debate was a response to the rise of collec- tivism, to which the Keynesian and market socialist ideas • Rob Axtell’s work on complex economic systems (Axtell highlighted by Boettke had contributed (along with the 2016). work of the Fabian socialists and so-called New Liberals).24 In Hayek’s opinion, however, there were other reasons • Dick Wagner’s efforts to develop a system-theoretic ap- for the decline of liberalism, some of which reflected how proach to macroeconomics (Wagner 2012; Lewis and liberalism had come to be articulated by its defenders in Wagner 2017). the nineteenth century. For Hayek—and for others, such as Walter Lippmann, Walter Eucken and Henry Simons— • David Harper’s work on capital as a complex system one of the principal reasons why liberalism had lost ground (Harper 2014; Harper and Endres 2018). to was that it had become too readily identi- fied by defenders and critics alike as an essentially ‘nega- • Roger Koppl’s work on complexity and computability tive’ doctrine, concerned principally with highlighting the (e.g. Koppl 2010). shortcomings of government activity rather than identify- 55 ing the positive role that state action could play. Consider, Let me be clear what I am claiming in drawing atten- for example, the following passage from Hayek’s Road to tion to such research. I am not suggesting that Hayek’s Serfdom, which is quoted by Boettke: work on complexity is the most important element of his work, or the one with the greatest evolutionary potential. It is regrettable, though not difficult to explain, that COSMOS + TAXIS + TAXIS COSMOS There are many candidates for such accolades and I doubt in the past much less attention has been given to the that Hayek’s work on complexity would come top of ev- positive requirements of a successful working of the eryone’s list of candidates for such awards. But I submit competitive system than to these negative require- that it is important enough to warrant more attention that ments. The functioning of competition not only re- Boettke gives it. If you really aim to convince readers that quires adequate organisation of certain institutions they can “find insight and inspiration on how to think seri- like money, markets, and channels of information – ously about fundamental issues in economic science, politi- some of which can never be adequately provided by cal economy, and social philosophy” (p. xix), then you need private enterprise - but it depends, above all, on the to pay significant attention to Hayek’s work on complexity existence of an appropriate legal system, a legal sys- theory. In failing to give a proper account of Hayek’s work tem designed both to preserve competition and to on complex systems, Boettke does not pursue as effectively make it work on beneficially as possible … The sys- as he might have done of his goal of highlighting the “evo- tematic study of the forms of legal institutions which lutionary potential” (pp. 214, 252) of Hayek’s work on the will work the competitive system work efficiently has epistemic properties of different institutional arrangements been sadly neglected (Hayek [1944] 2007: 87; quoted for contemporary political economy.23 in Boettke, p. 162)

HAYEK’S INSTITUTIONAL TURN AND Boettke quotes this passage in support of his claim that DEBATES OVER THE FUTURE OF LIBERALISM the neoclassical economists had neglected institutional analysis (pp. 161-62). But it is clear that in the section of The When Boettke is explaining the ‘institutional turn’ in Road to Serfdom in which this passage is found, Hayek is Hayek’s thought after the 1930s, he focuses—understand- concerned at least as much with criticising the attitude of ably enough—on the critiques offered by Keynes and by the some liberals, who he believed had reduced liberalism to a

Epistemic institutionalism: Rules and Order, Complexity, and Liberalism ------and the 29 Hopefully some

30 theportrayal Keynes of

26 28 the decision largely ignore to thefourth stage

27 In addition strengthening to Boettke’s explanation of to countenanceto intervention. government theof other contributions this to symposium will examine thesethemes. sufficesit thenote for moment to But that this thought-provoking book will undoubtedly stimulate debate the a thinkerabout of work whose ideas will remain fertile well into the future. sion of Hayek’s views Hayek’s of sion the about shortcomings liberalism, of as expressed had to come it in the first three decadesof the twentieth century, and his belief in the liberals need for to discuss the positive aspects liberal of thought, would have enhanced Boettke’sefforts bothpromote of to goals.those CONCLUSION There manyare other aspects of Boettke’s book merit that discussion: the question in of what sense, is it help if any, ful describe to as Hayek adhering ‘methodological to in dividualism’ when his is also work characterised “a by bidirectionality between purposive human action and insti tutions; between agency and structure” also 192; see (p. pp. 4, 186-90); thought, Hayek’s of “Philosophical on Anthropology and thexvii-xviii); Study Man of (pp. actorsas to in are someone “economic whose prone work speculative behaviour irrational)”(read 43); (p. significanceof Boettke’s decision, when considering the evolutionarypotential thought, Hayek’s of largely pair to it with ideas drawn from scholars are who committed advo cates theof market—suchas Coase,Buchanan, and Fried man—rather than with the thinkers of work willing more sider how to reform corporate law, the patents, of corporate reform to and law how sider law, all labourwhichlaw, of believed he had fostered monopoly 115-16). 1948: [1947] (Hayek power institutionalHayek’s turn, a discussion belief Hayek’s of in the need reframe to liberalism asa positive doctrine would alsoserved have Boettke’sof some other purposes. of One Boettke’s goals the is rebut to charge that was Hayek cate gorically also He wish 4). opposed action government to (p. es convince to readers thatPelerin the Society Mont “was neoliberal for a Davos never economists has … but always been a debate and discussion society concerned with foun dational issues facing the liberal society” xix), and that (p. “MPS meetings focused think to how on theabout chal liberalism to lenges and importantly more revise to how our understanding true of radicaldiscusA liberalism” 258). (p. ------25

In attempting explain to made his Hayek why institu isting the nor past legal rules are free from grave de 85-86.) 2007: fects. [1944] (Hayek for liberalism,problem was The itsof that some however, titude. The liberal argument is of makingin favour the bestpossible use the of competition of forces as a means coordinating of human efforts, not an argu leaving for ment things order just as they are [I]n … that competition effectively, a carefully work thought legalout framework is required and … neither the ex It is importantIt confuse to not opposition against … planning[central] with a dogmatic laissez-faire at made contracts could competition, reduce and also con to liberals and Chicago old school economists like Henry Si mons, was it necessary liberals for depart to from the view that freedom contract of was sacrosanct, since freely some uses the legal framework the enforced by state in to order make competition as effective and beneficial as possible” the as Hayek, for For ordo- 110). 109, 1948: [1947] (Hayek damental liberalism as preaching the state “absence of ac tivity rather than as a policy which deliberately adopts com petition, the market, and prices as its ordering principle and where inwhere his lecture “’Free’ on Enterprise and Competitive argued Hayek Order” “the most fatal tactical mistake” of nineteenth century liberals was portrayed have to the fun frameworkso that was the to it a of conducive emergence spontaneous This market was, order. of course, a key theme in the firstmeeting Pelerin of Mont Society the 1947, in ics,also came but Hayek explore believe to how to that the revival liberalism of required its supporters think to much the about more the positive of role state in shaping the legal tional turn, therefore, is it important just his consider not to effortsneoclassicalrespondto to Keynesian and econom contends, the “as wooden insistence liberals some of cer on tain rough rules thumb, of all above the principle laissez of faire.” sible”—in favour of “passively favour accepting of sible”—in [existing] institu noth “Probably 71). 2007: tions as they [1944] are” (Hayek ingharm has so much done the to liberal Hayek cause,” advocates had neglected its positive aspect—the that way allowedit an active the for state role in “creating a system within which competition will as beneficially work as pos work itself): negative doctrine centring a presumption on against gov ernment intervention (including a presumption that there in government wasreforming for role no the legal frame VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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NOTES lated points on Hayek’s continued efforts in the field of eco- nomics in the 1950s and 1960s, see Caldwell (2016). 1 I am grateful for advice and encouragement from Bill Bu- 10 For instance, Boettke writes on p. xviii of his book that, “It tos, Ted Burczak, Malte Dold, Lenore Ealy, Nathan Good- is important for my narrative to understand that … [f]rom man, Shaun Hargreaves Heap, David Harper, Roger Koppl, 1920 to 1980, [Hayek’s] work consistently and persistently is John Meadowcroft, Mikayla Novak, Jochen Runde and Virgil grounded in his ‘Austrian’ understanding of the coordina- Storr, none of whom should be held responsible for any er- tion of economic activity through time.’ That is true; but it rors in what follows. leaves unsaid the important point that Hayek’s understand- 2 All otherwise unattributed page references are to P. Boettke ing of order develops over time, along the times I’ve suggest- (2018). ed. Similarly, in a recent ‘Liberty Matters’ discussion of his 3 As Boettke puts it, if the analytical focus is on equilibrium book, Boettke writes that, “Hayek’s epistemic institutional- states, where people’s plans are already aligned, then “many ism, as articulated in the 1930s and 1940s, provided the foun- institutions are essentially redundant, pointless, or other- dation for his own reconstruction and restatement of liberal wise relegated to much more limited roles than our everyday political economy as evidenced in The Constitution of Liber- experience of economic reality would ever suggest” (p. 113). ty and Law, Legislation and Liberty” (see https://oll.liberty- 4 Boettke identifies but then largely ignores a fourth stage of fund.org/pages/lm-hayek; emphasis added). Readers could Hayek’s work, which he labels “Philosophical Anthropology be forgiven for taking that to mean that Hayek developed a and the Study of Man” (pp. xvii-xviii). complete theory of coordination in the 1930s and 1940s and 5 This point is a long-standing feature of Boettke’s work, then without developing further it simply drew out its impli- which has seen him long argue that the verbal (or apprecia- cations for liberalism in the 1960s and 1970s. Readers might tive) mode of theorising adopted by Hayek is not merely, as also be led astray by claims, such as that found on p. 93 of the 57 orthodox economists suppose, a vague, intuitive and unrig- book, that “Hayek himself had basically left technical eco- orous precursor to formal modelling but is rather a mode of nomics by mid-century.” It is also noteworthy that, when he analysis that is able to capture and do justice to insights to does discuss sources of information other than relative price which formal theorising is blind (also see pp. 105-11; also see signals that contribute to plan coordination, Boettke often Boettke 1996, 1997, and Beaulier and Boettke 2004; also see refers only to people’s local awareness of things such as the COSMOS + TAXIS + TAXIS COSMOS Lewis 2005: 84-88). In elaborating on this point here, Boettke availability of other goods and their knowledge of how they deploys Nelson and Winter’s (1982) distinction between for- can be obtained, (pp. 84-86, 105-06), only briefly mentioning mal and appreciative theorising to good effect (pp. 79-111). the role of social rules in helping people to predict one an- For more on that distinction, and an argument complemen- other’s future conduct towards the end of the book and then tary to Boettke’s claim that appreciative theory yields genu- without explaining how those rules complement and work ine insights denied to those who rely on formal theory alone, hand-in-glove with the informational role of prices (p. 191). see Northover (1999). 11 It is indeed the case, as Boettke writes on pp. 4-5 of his 6 For a recent elaboration and development of this point, see book, that “Hayek’s ideas went through critical refinement Lourenço and Graça Moura (2018). throughout his long career.” And that was as true of his un- 7 See, Hayek, The Road to Serfdom, p. 113 and Hayek, “The Use derstanding of epistemic institutionalism as of any other as- of Knowledge in Society”, pp. 101-02. pect of his thought. 8 This is one way of making sense of Boettke’s otherwise rath- 12 For a more detailed account, see Caldwell (2004: 232-60). er cryptic remark that Hayek’s ‘institutional turn’ starts with 13 The scientism essays were first published in Economica be- the publication of “Economics and Knowledge” in 1937 but tween 1942 and 1944. Now see Hayek ([1942-44) 2010). “gains[s] in momentum in the 1940s and 1950s” (p. 153). It 14 See Hayek ([1955) 2014 and [1964] 2014). Several influences does so at least in part because, over time, Hayek articulates arguably contributed to the shift in in Hayek’s views, includ- more clearly how social rules contribute to the solution of the ing criticisms of his account of the natural sciences by phi- problem of plan coordination. losophers Ernest Nagel and Karl Popper and a referee’s re- 9 See, for example, Hayek (1976: 107-32). Also see Vaughn port on ‘Degrees of Explanation’ written by mathematician (1999) and Lewis (2013, 2014). For different but closely re- Warren Weaver. For details, see Caldwell (2014: 14-16). 15 For fuller accounts, Gaus (2006), Lewis (2013: 395-98, 2015) and Lewis and Lewin (2015).

Epistemic institutionalism: Rules and Order, Complexity, and Liberalism ------For more on this on more For issue, 2007) see example for Hodgson (1991, 2020: sectionand 4). 218-19, Lewis (2014: This decisionmeans that Boettke’s book does not consid er another important source contemporary of interest in Hayek’s ideas, centring recent on examining work group how selection processes the of kind postulated Hayek shape by preferences andpeople’s dispositions particular (in so as to give rise to so-called ‘pro-social’ preferences a disposi or tion other-regarding, for rather than purely self-interested, behaviour). See, example, for Wilson Wilson (2004), et al. and Gintis and Bowles(2013), (2014). differentFor readings, allof which suggest that Keynes’s analysis investment of was based a concept on rational of be haviour,albeit that one differs significantly fromthe expect ed utility-maximisation presupposed by orthodox econom and Meeks (2003). Runde (1991) ics, 1991), see Lawson (1985, BurczakSee example for 2016), (2006), Col Hodgson (1999, Wilson Wilson and Gowdy (2015), ander and Kupers (2014), and Bowles et al.(2015), (2017). forcement of any of forcement and all voluntarily-agreed contracts. Un derlying this divergence opinion of was view Hayek et al.’s that free market contracting could give rise to monopolies, endogenouslyas were, it whereas Mises believed that mo nopolyarosepower only as exogenously, resulta misguid of edgovernment policies that limited competition. Consistent with this continued commitment to nineteenth century lais sez faire, Mises also wished to retain the ‘liberalism’ word unmodified (whereasin any way those who believed thatre viving liberalism required to be it differentiated from nine teenth century laissez-faire also strove to findnew a a name Indeed,it). for is it in recognition such of differences with the classical liberalism Mises of that Hayek later described the ordo-liberals as adopting restrained “a liberalism” and as a “neo-liberal” 1992: 189 group or movement (Hayek [1983] and 146). Hayek 1978:

27 28 29 30 ------was their ul laissez-faire (2019).

A notable dissenting voice belonged to Ludwig Mises. von In contrast to Hayek, Simons, and the ordo-liberals, Mises re gardedfreedom contract of as sacrosanct. therefore He ad vocated a ‘night watchman’ state whose activities would be confined to provision the of national defence and the en the impression to gain ground that timate and only conclusion—a conclusion which, course, of would been have invalidated the by demonstration that, in any single case, State action was useful. remedy this To de ficiencymust of one be the main tasksof the future”(Hayek 194-96). 1997: also see 31; Hayek [1939] 1991: [1933] Hayek (1978: 130-32) provides an 130-32) account the of Hayek(1978: decline of liberal ideas in the early twentieth century. Hayek had made similar points several on occasions in the 1930s, including in his inaugural lecture the at LSE. where arguedhe thatnineteenth century liberals had “very much neglected the positive part the of task and thereby allowed Hayek’s ideas about complexity, does not, I think, suffice in this case; especially given the fact that significant portionsof the book are devoted to thinkers other than Hayek, is it not hard with to see how, a little judicious editing, room could beenhave made in the book an for outline this of aspect of Hayek’s work. For more on Boettke’s on more For views the how on study older of works in economics can inform contemporary research, see 2002). (2000, Boettke The Economist The obviousresponse to this lineof criticism, namely that considerationsspace of precluded a proper discussion of See, for example, Hayek [1967] 1978: 75, 1967: 70-73. 1967: 75, 1978: See, example, for Hayek [1967] is only not It social scientists, also but laypeople who can be thought as of navigating a complex social making by world pattern predictions, based their on knowledge the of social rules that govern their activities (Lewis and Lewin sec 2015: Boettketion 7; 84). p. tual touchstones, namely Elinor Ostrom, according towhom “rules combine in a configurationalor interactive manner” in the sense that “the rules way one operates is affectedby the on more For 108, 100). other 2014: rules” (Ostrom [1986] parallels between Hayek and Ostrom this on issue, see Lewis (2017). The functioning and causal impactof one any rule depends theon other rules in the system which of isit a part so that, as Hayek puts it, “any given rules individual of conduct may beneficial prove as part one of set of such rules, or one in set externalof 280). circumstances” 2014: (Hayek [1967] Similar views are expressed another by Boettke’s of intellec Hayek [1967] 2014: 278-80 and 139. 135-36, 2014: Hayek 1978: Hayek [1967]

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The The Economist Vaughn, K. I. Hayek’s 1999. Implicit Economics: Rules and the Runde, Keynesian J. 1991. uncertainty and the instability beliefs. of Oakeshott, R. 1991. An AgendaOstrom, 2014. the for E. Study [1986] Institutions. of Nelson, R. and S. Winter, 1982. Evolutionary 1999. Northover, P. Growth Theory Formsand of Meeks, G. 2003. Keynes the on Rationality Decision of Procedures Lourenço, and D. Graça Moura, The M.Economic 2018. Problemof Lewis, P. and Wagner, R. E. 2017. New AustrianLewis, R. and Wagner, E. 2017. P. Macro Theory: A Lewis, and Lewin, Orders, 2015. P. Orders, P. Everywhere: On

Lewis, 2005. Boettke, P. the Austrian School, and the Reclamation of

Lawson, T. 1985. UncertaintyLawson, 1985. T. and Economic Analysis. Koppl, R. Some Epistemological 2010. Implications Economic of

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You Can Take Hayek Out of Vienna… ADAM MARTIN

Texas Tech University Email: [email protected] Web: adamgmartin.com

INTRODUCTION nits, secure in the belief that this is not the most useless re- sponse his book will receive. Who knows? Maybe I’ll hit Peter Boettke’s take on Hayek is basically right. Conserva- upon 3 or even 4% of a contribution along the way. tively, let’s say 98%. The actual number is probably higher, but it is hard enough to write a meaningful response to a NIT THE FIRST: AUSTRIAN ECONOMICS IS NOT book that had me saying: “Yes. Yup. Good. Right on. Indu- NEOCLASSICAL bitably.” And so on. So we’ll say 98%, leaving me 2% of a point to make. Buckle in. “Hayek is an evolutionary theorist.” Nope. I divide my 2% contribution evenly between two dis- “Hayek is a cyberneticist.” Swing and a miss. tinct nits I want to pick with Boettke’s account. Nit-picking “Hayek is all about complexity and emergence.” Whiff. is not the most interesting sort of response essay to write. “Hayek is a dogmatic libertarian.” Sit down before you fall 61 But nor is it the least interesting. It is at least better than down. the subgenre that criticizes a book because “it’s not what I “Hayek is a near-equilibrium theorist.” Hard eye roll. would have written” or because “it ignores this part of the “Hayek is a closet Nietzchean!” I’m not going to dignify that topic that I like.” Unfortunately, both of these approaches to with a response. criticism characterize some corners of the world of Hayek COSMOS + TAXIS + TAXIS COSMOS Studies and adjacent fields. Boettke’s book sets the record straight: F. A. Hayek was When I was a graduate student, I observed one of an Austrian economist (Boettke 2018, pp. xv-xviii, 17-18, Boettke’s classes that arguing about how to interpret Hayek 162-169, etc.1). Or, in Boettke’s phrasing, an “epistemic in- was a veritable cottage industry. He pointedly (literally, he stitutionalist” (Ibid., p. xv). This is not to say that evolution, was pointing) said I was not allowed to specialize in that cybernetics, complexity, emergence, and liberalism are not field. He was partially successful, and the warning has important to Hayek’s thought. They are. (The last three turned me into a better scholar. Instead of asking what con- characterizations listed above range from dead wrong to tribution I could make to the conversation about Hayek, he bonkers.) But the central threads running through Hayek’s nudged me toward asking what contribution Hayekian in- thought come straight from Mises and Menger. This point sights might have to larger conversations in political econ- has been obscured by treating Hayek’s social theory and omy and social philosophy. Thanks, Pete. Thankfully, this political philosophy as a separate enterprise from his work book follows that approach as well. in economic theory, a mistake that Boettke (like Caldwell Writing a book about economics is itself an economic act: 2004) studiously avoids. Austrian economics is the central it involves tradeoffs and scarcity. So unless omitting an idea element of Hayek’s thought. These other aspects are his at- mischaracterizes something important or misses its target tempts to translate or enrich his Austrian foundations with audience, it’s not a worthy criticism. Pete’s book makes no contemporary thought. Adding local ingredients to a burg- such omissions. Indeed, Boettke’s book is not what I have er does it make burgers less American, and sprinkling some written, and all the better for it, because then I wouldn’t Leoni, Tocqueville, Burke, Bertalanffy, or Ferguson on your have learned anything. There’s plenty to learn here, even for Mengerian economics does not make it less Austrian. those with a Ph.D. in Hayek Studies. So rather than claim- Boettke foregrounds the phrase “epistemic institution- ing that Pete should have written a book that I would have alism,” but this is just his way of following Fritz’s lead learned nothing from—as some will do—I will pick those (Boettke 2018, pp. 5-6). When the phrase “Austrian eco-

You Can Take Hayek Out of Vienna… ------from the neo-classical, unless be in it the different dis Similarly, foregrounds Menger dynamism. The nature tribution of emphasis. (Veblen 1899, p. 261). p. 1899, tribution emphasis. of (Veblen Whether Veblen—and Boettke—areWhether Veblen—and right about not or The relationship The betweenMengerian marginalism and sea social of Marshall—while charge (Kirzner 1978). still a sical ideas that Austrians largely most took notably on, kets such as agglomeration economies (Young 1928). The The ketssuch asagglomeration 1928). economies (Young knowledge is subject revision, to and so the set goods of lationship between Smithian and Ricardian economics. place, as in the spurredbut First Theorem, Welfare continu of a goodof depends mankind’s on state knowledge of about advertently wished have may not. He or emphasize to ad ary and local, deer as traded how with beavers in the “early and rude state society” of Book I Chapter VI). (Smith 1776, and services—not the mention to institutional environ analysis.the But careful attention context to that charac as the hourglass 20th of century economics (Boettke et. al. anything else easilythat a graphical wasn’t on put axis. Just foreground shiftsto allocation away and from growth. ment withinment which they are traded—are constantly evolv further apart in the ensuing decades. 89- pp. Boettke (2018, Smith focused the on process economic development of nomics back toward equilibrium theorizing. His theory of neoclassical tradition, leading what to Boettke describes theoretical I discuss (which approach pushed eco below) terized Marshall and Wicksteed gradually drained from the ing progress in a continuously deepening division labor of analysisic Techni foregrounded were (Morishima 1989). ics considerably in that direction. That its ability 52). p. satisfy to 1871, desire some (Menger ing. Market prices are islands equilibrium of in a roiling justment and learning, as Boettke claims, aspects but his of dynamic thinker in many respects—flips this emphasis, in is rooted indevelopment exceptions his to theory mar of cal tradeoffs such as productivity the of land, dynamicnot changes in knowledge, had the dominant influence. Ricar wasdo a strictly not static thinker, pushed he econom but Ricardoflipped emphasis.the Stationary states and stat 92) is right the92) note to subtlety Marshall’s and of force own P’s and Q’s, thanks. and Q’s, P’s Neoclassicals even rejected neoclas Knightian uncertainty (Friedman 84). p. 1962, Marshallian neoclassicism is strikingly similar the to re 2007). Economists gradually institutions about forgot and (Easterly 2019). The The invisible hand hold agents not in did (Easterly2019). 2006). Equilibrium(Holcombe was there, was but second 1890’s neoclassical1890’s economics, the two grew approaches ------Austrian contribution political to econo the was heavily annotated in Marshall’s own hand

on theon relative claims the of recognized two three or main theory, of beyond the “schools” somewhat ob called Austrian school is scarcely distinguishable No attempt willNo be made here even pass to a verdict

vious finding that,for purpose the in hand, the so- WhileAustrian Hayek’s well-documented, bona-fides are Thorstein Veblen appears Veblen coinedto have Thorstein“neo termthe Austrian and neoclassical economicssubstan overlap biography of Carl of biography that Menger Marshall’s Menger’s copy of but ratherbut thinking institutions of in terms both of incen substantively Austrian ideas, also he explores the Austrian search, though thetextbooks Furton lag (see and Martin part the of accepted canon mainstream of economic re here. Johnhere. Hicks and GeorgeStigler make similar moves el, topsy-turvy axes and all. odological individualism. Both treat and supply demand origins of his thought. economics.” And onlyeconomics.” not does Boettke foreground Hayek’s of Austrian of Economics presidential address that economic enough it; to see Boettke Nowadays, institutions Ch. 7). are as distinct, assume that market behavior is non-tuistic, and from one another. As Boettke (2018, p. 97) notes, was 97) from another. Hayek As one p. Boettke (2018, my. It alsoIt reinforces themy. uniqueness Austrianof insights neoclassical tradition (2018, pp. xv, 23, 165). He is not alone is not He neoclassical 165). 23, xv, pp. tradition (2018, unique Austrian about economics: its institutionalism, not nomics” re-emerged, Samuelson’s neoclassicalnomics” re-emerged,Samuelson’s synthesis the same passage, arguing that they are closer than either is : and historicism to thetaking by favor Marshall’s on and supply demand mod treat utility the as two subjective. schools borrow Moreover, tially. Both schools are marginalist and emphasize meth tivesand knowledge.“Epistemic Institutionalism” updates that often assumed perfect (or something information close influencedby Knight.remarks Hayek footnotein a in his in the family views of that calls Boettke “mainline (2012) reigned. Economic models institutionless were vacuums classical.” distinguishes He from it Austrian economics in calculation is Boettketimes at grafts Austrian the school to a as whole the Boettke’s (1998) claim in Boettke’shis Society (1998) the for Development writing Austrians 2008, (Hayek returned fn. have 83, 71). p. with neoclassical economics (Ekelund and Hebert 2002; Opocher 2017). But this But grouping is a mistake.Opocher 2017). 2018). What Pete’s helpful What phrase Pete’s highlights2018). is what is still Grundsätze (c.f. Collander (c.f. 2000). Many seem conflate to marginalism VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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These two stories are so strongly parallel that one might in which human beings develop solutions to deal with those be tempted to say they are part of the same story. Indeed, complexities. Many thinkers in this column also count as my flesh is weak, and I have succumbed to just such a temp- neoclassical economists. In the last column—largely absent tation. In an act of reckless categorization that would ele- from U.S. based economics departments, with a few notable vate the blood pressure of a careful historian of econom- exceptions—even simple economic relations breed chaos. ic thought, I have used family trees like that in Figure 1 to The overview greatly simplifies the history of economic give a broad overview of the history of the discipline. It thought. That is its job. For one thing, it ignores the ways borrows from one of Boettke’s own legendary 2×2 matri- in which different strands of economics borrow from one ces. The “simple world” and “complex world” labels here are another. It also ignores that ideas sometimes skip a genera- relative: how complex is the world compared to individual tion. I would be willing to negotiate the positions of some cognition? Varying traditions in economic thought have thinkers. And some, like Kenneth Arrow, defy easy catego- approached that question very differently. rization. But as a first approximation, I submit that it is bet- ter than those that might lump together Austrian and neo- classical approaches. Any time we lump economists into schools of thought we are looking for functional, rough- and- ready groupings that are useful for some purposes and not for others. That said, the optimal amount of essentialism is not zero. So what is the main difference between Austrian and neo- ? In a word, production. Marshall’s re- vival of the classical approach to cost—but now with a mar- 63 ginalist twist—is what puts the classical in neo-classical. Marshall famously uses the metaphor of scissors (1920, p. 348). Prices are jointly determined by the distinct forces of subjective preferences and objective costs of production. Whether he wished it so or not, it is no accident that reha- COSMOS + TAXIS + TAXIS COSMOS bilitating classical cost theory pushed neoclassical econom- Figure 1: Traditions In Economic Thought ics down the same equilibrium-obsessed path. The Austrian approach to modeling markets is subjectiv- The first column follows what Boettke calls the “main- ist all the way down. On the consumer side, it is extremely line” of economic thought. Smith’s picture of an evolving, close to the neoclassical approach. Close enough, for a short dynamic market system migrates from Scotland to France article, to say they are the same (there goes that historian in the early 19th century, as Say, Molinari, and Bastiat are of thought’s blood pressure again). But objective costs are much closer to Smith than Ricardo is. This approach pass- a corpse that should have been left in the ground. Kirzner es to Vienna in 1870’s, and these Austrian influences turn offers a standard explication, echoing thinkers like Wick- up in certain strands of public choice and new institutional steed (1914): economics in the 20th and 21st centuries. In the second col- umn, Ricardo’s equilibrium approach makes its way to Wal- This subjectivist view of Menger differs not only, as -al ras (Morishima 1989) and Marshall. That approach gains ready seen, from the classical view. It also differs, at its most prominence in the Chicago school2 and into New least philosophically, from the Marshallian version of Political Economy, with thinkers like Shleifer arguing that the neoclassical view. In this latter view (which has, underlying objective conditions drive institutional equilib- largely due to the influence of Knight and his disci- ria (Djankov et. al. 2003). Leeson (2019) gives a forceful de- ples, become the contemporary mainstream view in fense of this approach. the United States) economic phenomena are seen as In the third column, deviations from ideal conditions emerging from the interplay of the subjective and ob- lead to economic disorder. Market failure economics, like jective elements of supply (expressing objective cost mainline economics, recognizes the complexity of the conditions) and demand (reflecting consumer prefer- world. But it does not put much stock in the ingenious ways ences). For Menger, as we have seen, the relevant in-

You Can Take Hayek Out of Vienna… ------selec can change. Firms pick selection criteria driving such a process must operate more When it comes to commerce, however, we should we ex When comes commerce,to it however, There There environments choice are approximate that this This argument against Austrian the critiqueof Mar “But wait,” the“But sophisticated objector this to view says, becomes. The range of isomorphism between the ap two be punished Tuesday. on behaviors are chosen random, at selection pressures and shall works. Sometimes. The key condition is that the stateflux, of then behavior that rewarded is Monday on will static description. Social norms are costly pub develop, to survivorship can push firmsoperateto as if they confront lic,and facilitate solving recurring is perfectly It problems. proaches is significant but limited. pect selection criteria remain to in flux. Entrepreneurs hastime plenty of refract to the institutions onto in such ed objective by constraints Reality Stigler (c.f. 459). 1992, p. of producingof them came from.neoclassical The treatment productionof costs cannot be separated from equilibrium curves?” supply enceon Reality is indeed “refractory” in constraints. cost objective as well. the But bigger the question—across time across or appropriate to analyze to appropriate them as static equilibria. A norm, by are selective pressures operating, these norms will be affect and thus cannot make sense crucial Hayek’s of insight that markets—the important more the dynamic perspective maximizers, provided that the underlying variables—tastes, further, add a heapingspoonful if Even Alchian of (1950). that they Austrian do and neoclassical scissors willcut just technology,etc.—remain relative stable. If they are in a themselves can alter underlying variables (Kirzner 1992). theideas the for products themselves and the best means the market is a discovery procedure (Boettke 86). the phrasing memorable Paul of Craig Roberts that (2002) ing strategies randomat will looking up end like profit its nature, than is more a little static. And insofar asthere functionalist,ic, be institutions of neoclassical accounts relatively static extended for periods the extent time. of To cases. Austrians can easily and fruitfully borrow from stat cause institutions are often static and functional. consumers filling a grocery basket,neglectwe to ask where quickly than the tion mechanism tion Boettke strengthen quoting. of is fond To this argument Ofcourse, business some practices and industries remain “shouldn’t the physical raw “shouldn’t fact scarcity of influ some have ------both supply chain supply conditions in formu and half markets how of use economic calculation to sight is that—while, be to sure, the objective situation has much to do with hasdo to much the specific market outcomes outcomes emerge. (Kirzner emerge. outcomes 2000, 42-43) pp. that in emerge the course the of economic process—it is the solely actions choosingof consumers that in fact initiate and drive the process through which these Foregrounding entrepreneurial expectations places rela Kirzner’sformulation raises an important point. The

The The scissors determining marketprices real, are but the books with production instead consumer of behavior? In beginswith Marshall. Objective costs a to belong properly stead treating of production as an analogue consumption of some of my early my of some thoughts entrepreneurship on and knowl school, Richard Wagner, askedschool, Richard a characteristically Wagner, brilliant sumer’s willingnesssumer’s the of best (and pay to means satis to sumer demands are operating through both the and supply ket within the constantly shiftingnetworkother of markets, lating their bids. Mises calls this appraisement, and is it the pricespaid factors of production—key for of components er than amendments a static to Since start we theory.” with edge. Paraphrasing: “What if started we the economics text obvious byproduct reintroducing of objective costs, which expectations.While Kirzner is right that consumervalua analyzing stable-ish patterns interaction of in a single mar acquire other a factor production, en of must she outbid model of a simple world, Smith’s world, a simple model state of “rude society.” of fy the not consumers them), themselves, set actual day to mate causemate that sets factor prices. an For entrepreneur to marginal cost and thus the on supply—depend ability of to grappleto with time and ignorance from the outset rath the market process. second primary My in graduate mentor tively static andsupply demand analysis belongs: it where the element of subjectivetheof element knowledge that the market social trepreneurs. All these of entrepreneurs are forecasting tions are related the to curve supply they are the not proxi two blades are consumer sovereignty and entrepreneurial those factors satisfy to other consumer demands. So con ists expunged. the But purge subjective of knowledge is an improved upon, in upon, improved that a way accurately more captures the day prices. In Boettke’s account (2018, pp. 82-83), this is 82-83), day prices. pp. In Boettke’s account (2018, cope with the The expectations economic problem. of con consumer demand demand curves. I think But this formulation also could be question during dissertation my defense, which included ex ante [think: indifference curves would we have and isoquants], (sometimes implicit) Austrian view. VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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But the further we move away from these questions, the greater the differences become. Boettke himself used to ask the following question: how is it that the school of thought that predicted the three greatest economic events of the 20th century—the Great Depression, the breakdown of Keynesian demand management, and the failure of social- ism—end up marginalized? Hayek himself is responsible for two of these predictions. To Boettke’s list, McCloskey (2010) would have us add the ability to explain the big- gest economic event of all time, the Industrial Revolution. But none of the pre- or post-dictions could happen with- out the Austrian emphasis on entrepreneurship. Entrepre- neurs need prices as guides, so a dysfunctional price sys- tem can generate macroeconomic instability. An absent Figure 2: Austrian-Neoclassical Convergence and price system, social collapse. Entrepreneurs drive innova- Divergence tion, but also make errors that require adjustment. Austrian economics offers compelling analyses of these episodes pre- Figure 2, adapted from Martin (2015), illustrates this cisely because it is not neoclassical. point. At the level of micro foundations there are subtle dif- ferences between the Austrian and neoclassical views. Con- NIT THE SECOND: METHOD, THEORY, AND strained optimization includes both subjective and objec- HISTORY 65 tive elements, while choice under uncertainty foregrounds knowledge. Many Austrians and fellow travelers are con- Boettke (2018, p. 165) offers what can be read as a subtle tent to draw strong conclusions from these subtle differ- amendment to Rothbard’s (1973) take on the methodology ences. Buchanan (1959, 1982) for instance criticizes the of Austrian economics. Economic theory proper is non- normative application of theories of objective costs. But on testable, because it is derived via a priori praxeological de- COSMOS + TAXIS + TAXIS COSMOS the descriptive level, the difference between subjective and duction. Assuming one’s starting premises are true and de- objective costs when describing individual action is rarely ductions logically valid, one can neither prove nor disprove grounds for a strong argument. This is doubly true because theory with history but only ascertain whether the theoreti- both roads still lead to supply and demand. cal assumptions apply in any given case. This divides Aus- When it comes to analyzing movements of individuals trian economics into three descending levels of abstraction: markets, the Austrian and neoclassical approaches con- verge. Boettke is not wrong to note a strong affinity for the • Method: Praxeology two schools of thought. Moreover, noting that similarity • Theory: Catallactics (or Price Theory, economics proper) is crucial at the current time. Economists are increasingly • Application: History in the grip of what Boettke (2012, ch. 19) calls “formalistic historicism,” denying the presumptive usefulness of price The appealing intuition behind Rothbard’s claim is that, theory altogether. Empirical work disconnected from eco- in explaining historical conditions, one always draws on a nomic theory is becoming increasingly common. The dan- theory of some sort. There are no genuinely a-theoretical ger of this trend is now being revealed in psychology. Mi- accounts of history, only accounts with implicit and unde- chael Muthukrishna and Joseph Henrich (2019) argue that fended theory. Similarly, every theory either makes its un- psychology’s current replication crisis is partly due to the derlying method explicit and defended or implicit and un- lack of an overarching theoretical framework that can help defended. Nonetheless, this simple representation moves shed light on surprising results that may be due to quirks in too quickly in its distinctions. research design. In their appreciation for marginalist price Some ideas that seem naturally theoretical are not wholly theory, neoclassical and Austrian economists are natural a priori. It is difficult to imagine a wholly a-historical -un allies in the current intellectual climate. derstanding of property rights and other market institu- tions. Does this mean one can never have a theory of price

You Can Take Hayek Out of Vienna… ------Finally, one might apply monopoly theoryFinally, might monopoly one apply to Praxeology is derived from analysis some Relative catallactics to as explana a tool of Example 2: Example 3: Example 1: An overarching methodology—an account methods— of A theory attempts answer to a question. A method tells us settings such as markets, states, games, etc. These institu stitutional settings than just an abstract market, such as a straction. every Not research piece of will engage three dis sessment meanings, of which is then turned the to ques properties various of (historically institutional contingent) explain a specific historical episode, such as whether Mi well-developeden how price theory is. of humanof nature, experience, 1 describes reason. or Table a series immutable of and exclusive domains. and Lavoie a matter degree of than kind. of Action qua action is the answer is the the how to firm question (e.g., to earnable Talkon praxeological the above-normal profits?). of level abstraction will likely place seem of here, especially out giv more helpfulmore think to in terms a continuum of rather than most abstract that point on spectrum, there but are many gets historically one to fore unique actions. manner, e.g.,manner, property ‘private rights’ rather than the spe The of detail amount monopoly. that economic theorypro Storr (2011) argues along similarStorr lines, (2011) making a case that needs be to sensitive these to levels abstraction. of is it But no strongno claim is implied The here. label meantis only to the distinction between praxeology and thymology is more tional settings aretypically defined relativelyin a abstract tion, praxeology is a method. is used It determine to what studyto are defined. tions, in this framework, minimal some must have empiri tinctive levels, and engage more. may some the method deriving for praxeology but as phenomenology, meanstion what it of act. to Praxeology includes definite theoreticalitself, propositions such as the diminish of law intermediary less or specific levels more of ideal types be ing marginal utility, can it but also be applied illuminate to is a sensible explanation price of formation and what is not. relationships betweendifferent at propositions levels of ab cific rulesof English common law. 1995. Price crosoft in power monopoly had theoreticideas cal These content. categories meant are help sortto out the thatconvey the foundation praxeology of is the internal as willappear in the background and be used adjudicate to the what a plausible answer whatplausible a looks like. An application tells us thewhat theory phenomena us helps understand. Applica vides abstractly depends how on the institutions is it used Catallactics, in turn, can specific be applied more to in ------theory—such as price formation. Applied applied theory—such as the diminishing of law marginal util

It depends.It Aristotle Analytics (Posterior offers Part 13) There is no reason no There is ropeoff to any particular of level anal

baseline a new theory. of propositions relationship The be shrinks the domain theory of On the other proper. hand, priate answering a given question. no There is cosmically hand, geometry is a subject unto itself, a body proposi of one drawone the boundaries method, of theory, and applica er than particular historical episodes. This sortof defense asked. Table 1 presents threeasked. examples Table this of point, all of a classic and helpful response a similar to question about mologically, means it an account action of and involves def method. seems It natural a theory it consider to as well: ety forms of formation? Boettke’s isformation? distinguish, to move then, between tween praxeology and catallactics follows the same pattern. the science optics. of might One similar a offer analysisof the relationship between calculus and Newtonian phys tions subject disciplined to inquiry. On the other hand, the the relationship between geometry and optics. On the one tion? then, is the method deriving for praxeology? Where does theory focuses abstract on features institutions of rath ics, any or number mathematical of inapproaches various inite claims the about nature means what it of act. to What, ity, which isity, derived strictly praxeologically—and various pure conclusions fromconclusions geometry furnish the starting point for ysis that social scientists engage in be to called ‘theory’ or Rothbard also too quickly moves naming praxeology a which seem be to equally legitimate classifications. fixed categoryof theory of independent question the being fields. A theory method is a formits when conclusions the Table 1: Methods, 1: Table Theories, andApplications VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME ‘method.’ It depends the It on abstraction‘method.’ level of most appro

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In raising this as a nit to pick with Boettke, I am most- NOTES ly concerned with pushing him further. His distinction be- tween pure and applied theory is a nice starting point. It 1 Really, check almost any other page. For a real good time, highlights both the necessity and limitations of praxeologi- check out the “Mises” entry in the Author Index on p. 311. cal reasoning. In stating that the line between theory and Unless stated, references to Boettke are references to F.A. history is more of a continuum, my aim is to open up the Hayek: Economics, Political Economy, and Social Philoso- interdisciplinary conversation between philosophy, social phy (2018). science, and history even further. It is critical to the growth 2 I remain agnostic on whether it took root in Old Chicago— of scientific knowledge—if we wish to avoid future replica- Knight himself seemed torn between this approach and the tion crises—that these various levels of analysis be in con- mainline approach—but it definitely held from Friedman tact with one another. Hayek Studies may have an impor- and Becker forward (c.f. Reder 1982). tant role to play in this transdisciplinary endeavor after all, as Boettke’s book ably demonstrates. REFERENCES CONCLUSION Alchian, A. A. 1950. Uncertainty, Evolution, and Economic Theory. You cannot take Vienna out of Hayek. Hayek’s great appeal Journal of Political Economy. 58 (3): 211-221. Aristotle. 1984. Posterior Analytics. In: Barnes, J. (ed.) The Complete is that his thoughts touch on so many disciplines and top- Works of Aristotle. Princeton: Princeton University Press, pp. 114- ics. This has the wonderful effect of promoting cross-dis- 166. ciplinary conversation. But it also means that individuals Boettke, P. J. 1998. Economic Calculation: The Austrian seize upon certain ideas as central without knowledge of Contribution to Political Economy. Advances in Austrian 67 Economics. 5: 131-158. the intellectual context that actually shaped Hayek’s work. . 2012. Living Economics: Yesterday, Today and Tomorrow. By locating Hayek’s thought within 20th and 21st centu- Oakland: The Independent Institute. ry debates in economics, Boettke’s book offers and impor- . 2018. F.A. Hayek: Economics, Political Economy and Social tant corrective to the exegetical world of Hayek Studies and, Philosophy. Basingstoke: Palgrave Macmillan. more importantly, a way forward to integrate his crucial in- Boettke, P. J., Leeson, P. T., and Smith, D. J. 2008. The Evolution of

Economics: Where we are and How We Got Here. Long Term + TAXIS COSMOS sights into contemporary social science. View 7(1): 14-22. How does Boettke’s book compare to the other great over- Buchanan, J. M. 1959. Positive Economics, Welfare Economics, and view of Hayek, Bruce Caldwell’s Hayek’s Challenge? They Political Economy. Journal of Law and Economics. 2 (1): 124-138. are wonderful complements more than substitutes. While . 1982. The Domain of Subjective Economics: Between Predictive Science and Moral Philosophy. In: Kirzner, I. (ed.), Caldwell remains the most straightforward introduction to Method, Process and Austrian Economics. Lexington: DC Heath Hayek for a general audience, Boettke both offers important and Co, pp. 7-20. updates and speaks more directly to contemporary social Caldwell, B. 2004. Hayek’s Challenge: An Intellectual Biography of scientists. Boettke’s command of the broad currents of eco- F.A. Hayek. Chicago: University of Chicago Press. Colander, D. 2000. The Death of Neoclassical Economics. Journal of nomic thought is simply staggering. For those that have a the History of Economic Thought. 22 (2): 127-143. solid background in economics or have read Caldwell, this Djankov, S., Glaeser, E., La Porta, R., Lopez-de-Silanes, F. and is the book about Hayek. Shleifer, A. 2003. The New Comparative Economics. Journal of Comparative Economics. 31 (4): 595-619. Easterly, W. 2019. Progress by Consent: Adam Smith as Development Economist. The Review of Austrian Economics, doi: https://doi. org/10.1007/s11138-019-00478-5 (accessed 10 September 2019). Ekelund, R. B., and Hebert, R. F. 2002. Retrospectives: The Origins of Neoclassical Microeconomics. Journal of Economic Perspectives. 16 (3): 197-215. Friedman, M. [1962] 2010. Price Theory: A Provisional Text.Chicago: Aldine. Furton, G. and Martin, A. 2019. Beyond Market Failure and Government Failure. Public Choice. 178(1): 197-216.

You Can Take Hayek Out of Vienna… The The The The Review of Independent Independent . Cheltenham: , doi: https://doi. London: Routledge. Eighth Edition. London: Chicago: University of The OxfordHandbook of In: Caldwell, B. (ed.) TheJournal of Law and Cambridge: Cambridge 13(4): 396-426.

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, Vol. 4. Chicago:, Vol. University of . The Logic of Action . 6 (3): 31-45. 6 (3):

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. 19 (2-3): 189-201. Bourgeois Dignity. Bourgeois Dignity. Oxford: Oxford University Press, 13-42. pp.

An Inquiry into the Nature and Causes of the . Ricardo’s Economics: A General Equilibrium Indianapolis: Liberty Fund. . 38 (152): 527-542. . 38 (152): Principles of Economics. TheFortunes Liberalism:of Essays Austrianon Journal of Institutional EconomicsJournal of Routledge History Economic of Thought, doi: London: Routledge. 35 (2): 455-468. (2): 35 .

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. 1992. .2000. in the Light the of “Marginal” TheoryValue of of and Distribution. Science. In: Murray Rothbard Edward Elgar Publishing, pp. 28-57. pp. Publishing, Elgar Edward Economics Economists. org/10.1017/S1744137419000109 (accessed 10 September 2019). Rethinking the Line Between Thymology and Praxeology. In Coyne,C. J. and Boettke, J. (eds.) P. Macmillan. Market Adjustment in an Entrepreneurial Economy. Chicago Press. Chicago Press University Press. Nature: Human Behavior Human Nature: Review Review Austrian of Economics

Quarterly Economics Journal of CollectedA. Works of Hayek F. Economic Journal Economics Economics. Economics and the Ideal of Freedom.

Journal of Economic Literature Journal of 10.4324/9781138201521-HET11-1 (accessed [date]). (accessed 10.4324/9781138201521-HET11-1 The Economic Journal The Economic Theory of Distribution and Growth. Wealth of Nations.Wealth Austrian Economics. Austrian Economics Economic Journal Atlantic

Smith, A. [1776] 2000.Smith, A. [1776] Stigler, G. J. 1992. Law Economics? or Leeson, P. 2019. LogicLeeson, 2019. is a Harsh Mistress: P. Welfare Economics for Lavoie, D. and Storr, V.H. 2011. Distinction 2011. Lavoie, and D. V.H. Storr, Dichotomy: or Rothbard, M. [1973] 1997. Praxeology 1997. Rothbard, as M. the [1973] Method Social of Reder, M.Reder, 1982. Chicago Economics: Permanence and Change. Roberts, 2002. P.C. Time My with Soviet Economics. Holcombe, R. G. 2006. Does the Invisible Hand Lead? or Hold Hayek, F. A.Hayek, 2008. F. Kirzner, I. M. 1978. The EntrepreneurialSystem. Role Menger’s in Morishima, M. 1989. Muthukrishna, M. and Henrich, A Problem in Theory. J. 2019. McCloskey, D.N. 2010. McCloskey, 2010. D.N. Marshall, A. 1920. Martin, Austrian A. 2015. Methodology: A Review and Synthesis. Opocher, A. 2017. MarginalistOpocher, A. 2017. NeoClassical) (or

Wicksteed, P. H. 1914. The Wicksteed,Scope H.Method 1914. and Politicalof P. Economy Young, A.Young, 1928. Increasing Returns and Economic Progress. Veblen, T. 1899. The Preconceptions 1899. T. of Veblen, Economic Science. VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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Two Contrasting Views of People and Institutions in the Philosophical Anthropologies of Hayek and Marx DAVID L. PRYCHITKO

Northern Michigan University Email: [email protected]

INTRODUCTION to Marx. I will argue that their concept of the person may be the core difference between them. While Hayek is most Peter Boettke, in his rich and masterful discussion of widely known as a critic of socialism, Hayek focused his Hayek’s lifework (2018), weaves an analysis of Hayek as of- conversation on the theoretical market socialists and so- fering an integrated and coherent whole, covering price cialist intellectuals of his era, and unfortunately never re- theory and capital theory and the puzzle of decentralized ally engaged Marx himself. Consequently, Boettke does not plan coordination to problems of market socialism and the discuss Marx at all in his book. I would like to take advan- democratic process, from issues of epistemology to that of tage of that open opportunity in this paper. cultural evolution. Hayek may have been a polymath, but he was no dilettante. Boettke presents Hayek as a systemat- HAYEK’S PHILOSOPHICAL ANTHROPOLOGY 69 ic thinker—even though there are tensions within his work (2018, pp. 283-96)—rather than some kind of philosopher While mentioning Hayek’s fourth phrase, Boettke does not who dabbled in economics or an economist who later in his provide a systematic discussion of Hayek’s philosophical career simply played with non-economic puzzles. I believe anthropology in the remainder of the book.1 Now, philo- Boettke has vastly succeeded in that endeavor. sophical anthropology may focus on the evolution of hu- COSMOS + TAXIS + TAXIS COSMOS Boettke divides Hayek’s work into four general periods man history, but it is primarily an examination of what (pp. xvi-xviii): The first, “Economics as a Coordination constitutes human being. I have in mind not so much a Problem,” during 1920-1945; the second, “The Abuse of question of human nature per se but a question of Hayek’s Reason Project,” from 1940-1960; the third, “The Restate- conception of human being, one that examines our being in ment of the Liberal Principles of Justice,” between 1960 and the world, not through the lens of atomistic individualism, 1980; and the fourth, “Philosophical Anthropology and the but being as embedded in social relationships and institu- Study of Man,” after 1980. Boettke closely discusses, with tions. While Boettke does not offer an account of precisely fine scholarly precision, the first three periods throughout what Hayek’s conception of human being is, one can easily the course of his book. The fourth, Hayek’s philosophical draw it out from Boettke’s analysis throughout the entire anthropology, he writes, “is a challenge not only to the de- book. velopment in economic thinking by John Maynard Keynes In fact, readers of this journal are probably already aware and Oskar Lange, but broad social theorists such as Karl of Hayek’s philosophical anthropology, of his conception Marx, Sigmund Freud, and Karl Polanyi. The arguments of man, even if it hasn’t been stated as such. Hayek views that Hayek develops in this phase of his career will not the person as a being who follows rules, some explicit, most be treated with the depth they deserve in this book. It is often tacit (language being an obvious example) that have my hope that future scholars will find the ideas I discuss evolved over the millennia. These rules allow the person in these pages to be intellectually enticing and promising to engage in a means-ends rationality through the use of so they will want to apply them to the contemporary intel- one’s reason. The person has the ability to learn, and to ad- lectual debate in moral economy and social economy” (p. just to changing circumstances. That said, one’s knowledge xviii). is inescapably incomplete, and moreover, what one actually I would like to take up Boettke’s invitation, on the top- knows cannot be fully articulated. As social beings, people ic of Hayek’s philosophical anthropology and its challenge coordinate their plans with one another—they get on with

Two Contrasting Views of People and Institutions in the Philosophical Anthropologies of Hayek and Marx ------Man hasMan reason because have we rule-guided and institutional na , about what we can what, about we and cannot accomplish If we add Hayek’s economic theory If add Hayek’s we the on pabilities—to the extent revealed he them—emerged tween alluring hopes and haunting fears, whose ca in the social process definedby specific institutions Hayek’s contrast Hayek’s with Marx stark. be more couldn’t He saysHe later: [M]an, to Hayek, was Hayek, to a fallible[M]an, creature caughtbe (Ibid., 231-32). pp. While this sound may only like a theory institutions, of but “man” as “man” a collectivebut agency struggling with itself … as by retainsby a sophisticated as opposed naïve to methodologi stitutions in play cognitively orienting the life-projects of knowledge this to problem anthropological ontologi not (if of the of individual as beinga fundamentally embedded in a a collective agency. a more “rational”a more plan will comprehensive undercut if not calls he as (what ) a “species While being.” speaks Hayek a phenomenon, about the about a phenomenon, later, emergent,later, order not fully their of making, and they men and women. It is, and itsmen It at man core, about a statement women. as naïve individualism, yet with its own. of severe problems gles with “himself.” “himself” Not as an individual person, nature our of being and the critical that role undesigned in MARX to retainto a naïve methodological holism, the a of opposite tempt to overturnto tempt those undesigned institutions in of favor successfullyto ourselves orient in the social and world, en istic mainstream of neoclassical Marx economics), seems in Hayek it isin it ultimately Hayek the about intersubjective and social joy a sustainedjoy increase in our material standard living. of cal) view the of person, there is a clear implication: the at destroy the very types epistemic of processes that allow us constellation social of relations and institutions, and there cal individualism atomistic (an individualism so character uct our of reason. Individuals beings are an of evolved and, followed rules, those same rules generally are not the prod ture of ourture of being withthe use our of reason. are criticallyare dependent upon that order for their freedom prosperity. and vidual persons and instead treats as people a collective unit, WhenMarx speaks seems he lose to sight indi “man,” of of THE PHILOSOPHICAL ANTHROPOLOGY OF OF ANTHROPOLOGY THE PHILOSOPHICAL “Man,” especially“Man,” under the institutions capitalism, of strug ------function (hence Boettke’s discussion of cognitive

social the is not order result conscious of design and standing in our social is the world failure view to soci posite of theposite of purposive behaviorindividuals, of they etyas an interpretive process which translates mean als affirm or reaffirm overall the order But insociety. are the not result conscious of human design. The in useful knowledge, so that the various anonymous ac gardless whether of this was their intention (Ibid., pp. tors may come into cooperation come may tors with re another, one tentional, that is, meaningful, behaviors individu of ingful utterances the of human mind into socially control. Perhaps thecontrol. Perhaps greatest source misunder of Boettke this puts it way: Though structures the complex of society are the com Through that courseof people history, findthemselves 184-5).

bers and well-being. Human history itself is, in this a way, be a direct such rules product of the conduct, of but rules low people to engageto people in low acts cooperation of successfully lar knowledge and interpretation their of own unique sit lives—through cultural customs and practices, which only prices. Market institutions such as prices—being perhaps people stumbledpeople practices upon that sustained their num he applies andhe law to other institutions as they well), al other things, the exchange private of separate or property. objectives in that a way allows an for extensive social di over timeover might into explicit evolve codes and rules just of and transmit information, and act their upon own particu forma uations, through theever-changing latticework market of gage in rational economic calculation and both to receive through time. the most obvious example, certainly but the not only—per terial standard living. of Those rulesupon, center among the benefitsnarrative Hayek’s been enjoyed. have runs from the beginning civilization of advanced to capitalism, how themselves generally have been not rationally designed with that objective in mind, and are often codified wellonly after ing, critical but fulfilling to theirown individual and group depend critically the on pricing system allow to them en to conduct.gains The enjoy through people cooperation may within evolved sets institutions of their of not own mak People in thePeople modern era advanced of market institutions vision of labor, higher visionlabor, productivity, of and risea in their ma VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME “epistemic institutionalism”“epistemic throughout the book, which “discovery as process,” 185). Boettke p. says (2018,

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It stems from Marx’s praxis philosophy, which is devel- “himself.” “Estranged labor turns thus… Man’s species being, oped in The Economic and Philosophic Manuscripts of 1844 both nature and his spiritual species property, into a being (1964), first published well after his death, in 1932. Marx alien to him, into a means to his individual existence. It es- views man as a maker, a producer, a creator. Man is a “prax- tranges from man his own body, as well as external nature is being,” one who has the capacity to deploy reason and and his spiritual essence, his human being” (p. 114). This is engage in free, creative, willed activity. Man has the pow- not some kind of psychological concept. Marx’s concept of er to plan, to design, to organize, to put will and imagina- alienation and estrangement means that “man” is institu- tion into action, to affirm and fully realize himself through tionally and structurally blocked from his full potential as his activity. As Mihailo Marković put it, “Praxis is ideal hu- a praxis being. man activity, one in which man realizes his optimal poten- While alienation did not begin with the introduction of tialities of his being, and which is therefore an end in itself. private property—the urge itself to want to separate “mine” Marx never gave an exhaustive definition of this notion, from “thine” is probably the first cause of alienation—pri- although it plays a key role in his anthropology and is the vate property makes alienation structural and systemic. fundamental standard of his social criticism” (1974, p. 64).2 Private property becomes an institution.3 Marx’s narrative Notice Marković’s last statement. Marx deploys his con- runs from the primitive and ancient orders through feu- cept of man as praxis being to critically evaluate peoples’ dalism to capitalism, his main focus. With the develop- actual place within the economic, social, and political insti- ment of private property other institutions unfold over the tutions that have historically surrounded them. In the 1844 long sweep of history—markets, money, the pricing system, Manuscripts he devotes an entire chapter to “Estranged La- rules and laws that legitimate and enforce private property bor” (1964, pp. 106-199). Why labor? Because man as mak- rights, commodification and market exchange, the intro- er, producer, and creator is denied his abilities, which is duction of the factory system and boss-worker relationships, 71 obviously true of the slave, and the peasant of the feudal in short, the economic base of capitalism, with its own class era, but also of the “free” laborer under the institutions of antagonisms and crises. Marx uses the method of dialec- capitalism. Production is not a free, creative activity. From tical materialism to examine these institutional changes the worker’s perspective, productive efforts are a source of through time, with his concept of man as a praxis being as disutility. The worker’swage provides the utility. Man as la- its foundation (cf. Marcuse 1932) and, recalling Marković COSMOS + TAXIS + TAXIS COSMOS borer has no control over the fruits of his labor—he produc- above, as the benchmark of his social criticism. His philo- es commodities that are designed, planned, organized, and sophical anthropology drives his dialectical critique.4 owned by the capitalist employer, which are then thrown Marx certainly recognizes that capitalism is an un- into the competitive market in search of profit. “If my own planned order—a spontaneous order, if you will—driven by activity does not belong to me, if it is alien, a coerced activi- the lure of profit and the punishment of loss, allegedly coor- ty,” Marx writes, “to whom, then, does it belong?” “To a be- dinated by a Smithean invisible hand, and he’s horrified by ing other than myself. Who is this being?” Marx responds: what he sees. While there’s detailed planning within each “The alien being, to whom labor and the product of labor be- capitalist enterprise (which he finds exploitative and there- longs, in whose service labor is done and for whose benefit by problematic in itself), the overall system of the social di- the product of labor is provided, can only be man himself” vision of labor and commodity exchange is out of peoples’ (p. 115). In addition, labor and machinery are considered full control. Man’s ability to freely shape his circumstances substitute inputs in the eyes of employers. But if man can and collective being is most severely blocked under the in- be easily substituted by an inanimate piece of machinery in stitutions of capitalism, he is estranged from his full praxis the workplace, what does that make of man as a creative be- potential, he fails to realize what he is and can be. ing? Man, as laborer, being treated like, and treating him- (R)EVOLUTION AND INSTITUTIONS: WHAT self like, an unthinking thing—an exchangeable “good,” a PEOPLE CAN AND CANNOT ACCOMPLISH “commodity,” an “input,” must treat other men the same. Hostile class relationships result. And on top of that the In forming his philosophical anthropology, Hayek stands market system is an alien, independent power, something in the present and looks back to the empirical past; Marx beyond man’s control. It is not only that labor is alienated stands in the present and looks both to the past and for- under capitalism. All of us are: “man” is estranged from ward to an imagined future. Hayek views the person as

Two Contrasting Views of People and Institutions in the Philosophical Anthropologies of Hayek and Marx ------sys man a col is and not private act gen of actual . “Man” is. “Man” , and therefore as essence and by for comprehended false (Ibid.). appropriately planned appropriately transcendence of (i.e., human) being—a re (i.e., social thecore of Marx’sphilosophical an

becoming positive positive resolution of the of resolution conflict between man asthe human self-estrangementhuman , as appropriation of the human the of appropriation process its of genuine species. is the riddle history of solved, esis (the birthesis (the act its empirical of existence) and also entire wealth previous of [Communism] development. the of olution strife existence of and essence, between objectification and self-confirmation, between free and knows it itself be to the entire The solution. move and nature and between man and man—the true res ment of history of ment is, therefore, both its its thinkingfor consciousness the man; communism therefore as the return complete of man himself to as a the real turn become conscious, and accomplished within the is the known property dom anddom necessity, between the individual and the Communism And is it precisely that here Marx fails. Mis (and If Hayek “Man” can“Man” only become “himself” designs when he insti see Boettke’s (2018) discussion on pp. 119-37, and 141-46), and 141-46), discussion 119-37, pp. on see Boettke’s (2018) sively designs, sively plans, and coordinatesmodern, a non-pri socialism communism) a “return as a “reintegration,” of (or lectivity that can and will successfully plan a modern econ problems that problems lead failure to readersthis of (which jour planning faces insurmountable calculation and knowledge omy whichomy will lead us a realm to freedom. of end. The emergent order of commercial order end. emergent The society will be abol occur. Man returns himself, to man will truly be what he him)es are before correct when they argue comprehensive material abundance and human flourishing. That man himself, to the transcendence human of self-estrange goes He in further 135). p. detail:ment” (1964, nal are well probably aware and of repeat I need not here; understands and articulates it—is tutions fit to his will. Under the tem,alienation and estrangement will finally to come an the praxis being work. at That is the essenceof Marx’s con thropology. it is not only isit not that Marx suffers “abusefrom reason.” of an ished. Marx is certain it. The of antagonism within“man” can and must be: a collective that freely and comprehen ception man. of That is will finally end under full-blown socialism. A unity will Marx’s man concept of as a praxis being—as Marx himself vate property, non-market based order, in the a way basedvate non-market property, creates order,

------if this and Marx views 5 . Nor do I see do as it . Nor a alone potential and realizablepossibility,

But I’llBut further go and suggest the key disagreement be It willIt well take aware it. do to And a revolution we’re Marx’s narrative sees man as alienated and estranged—

Who be may that is it correct? both Now arewrong. some kindsome economic plan. comprehensive of son, their conception man—the of their of core philosophi simple differencesimple betweenideologies. The difference is epis ly, freely, and creatively freely, design,ly, organize, and eco control private markets, property, commodification,pric money, potential rationally to design and organize social and eco his philosophical anthropology examine to the sweep long es, very and (the so institutions on which argues Hayek are overturn the economic institutions capitalism, of replacing of freedom. over methodsover and methodology even if cultural Hayek’s theory evolution is problematic, I evolution; Marxevolution; uses the dialectic. seeks Hayek preserve to of history,of in part, using a Lamarckian cultural to approach ers, today, withiners, today, a largely unplanned com and emergent anarchic sea capitalist of commodification.applies Hayek an institutional being, critically his for dependent materi al well-being acts on cooperation of with anonymous oth fends Hayek against these criticisms (2018, pp. 186-91), but but against Hayek fends 186-91), these pp. criticisms (2018, much more exciting. more much mercial Marx order; sees man as a collectivity that has the necessary cognitive for orientation, freedom, and human nomic andnomic social institutions in that a way will deliver us, nomic institutions,nomic finds but himself currentlylost in the that Marx thinks dialectically it’s inevitable. Socialism will tween and Hayek Marx their is over conception the of per temic, regarding both the uses and limits our of reason the informational and communicative character market of that I don’t need discuss to thatdon’t I But, here. also, theo Hayek’s them. offers a largely Hayek dispassionate analysis; Marx is the institutions private of property and the market order the thatevolved over millennia; have Marx seeks destroy to inMarx’s words, from the realm necessity of the to realm i.e.,blocked from realizing his praxisbeing under pre-so institutions. rycultural of has evolution its critics. Boettke carefully de cialist institutions. alienation only Now, makes sense in context if praxisis a cal anthropology. continue the So let’s discussion Marx’s of conception man of as a praxis being just a little longer. don’t see the differencedon’t betweenhe Marxand as a debate we canwe actually our reason and, employ point, some at ful Marx’s dialectical materialism is loaded with problems flourishing) with the institutionsof socialownership and VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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If comprehensive planning is epistemically impossible, radicals, and in our capacity as scholarly students of it does not imply that man cannot “return to himself”—as civilization, as teachers of political economy and so- if people would then be permanently alienated in a mar- cial philosophy, and as writers and public intellectuals, ket economy, that we must somehow accept alienation as a must aid in the cultivation of more mature moral in- fact of life. It implies that Marx’s own notions of “man” and tuitions if the tremendous benefits of the great society “himself,” “alienation” and “estrangement,” are fundamen- are to be sustained (2018, p. 259). tally flawed. There is no “himself” to return to.6 Marx forms man in the image of a collectivity that com- Moreover: prehensively plans the economy. To the extent that we are not dialectically moving through history towards a Marx- The true liberal mind-set … is one of cultivating and ist heavenly realm of freedom—a comprehensively planned unleashing the creative powers of a free civilization. It economy—the story is problematic, at best. But worse, to is one that celebrates human diversity in skills, talents, the extent that we in fact cannot comprehensively plan an and beliefs and seeks to learn constantly from this economy, then Marx’s substitute for God—the praxis be- smorgasbord of human delights. Liberalism is, in the- ing—does not exist, and Marx’s own conception of “alien- ory and in practice, about emancipating individuals ation” and “estrangement”—like the Christian’s own con- from the bonds of oppression (Ibid., p. 261). ception of “sin” should God not exist—is fundamentally flawed. If socialist planning cannot work, we are not “stuck Can it be, that by not espousing the total destruction of with” or “condemned to” alienation in Marx’s sense. While modern capitalistic institutions, Hayek’s quest for a com- there are very real problems in capitalism—and real-exist- plete social theory—one that runs from his philosophy of ing socialism -- Marx’s own concept of alienation as an es- mind through the speculative and historical examination 73 trangement from an alleged praxis being would have to be of cultural evolution to the great questions of constitution- abandoned and replaced by something else. His philosophi- al democracy and comparative political economy, and one cal anthropology just doesn’t work. that calls for a vision of a liberal utopia of its own—can it be that Hayek’s lifework fully and successfully avoids the ON GRAND NARRATIVES, MARXIAN AND problems we have seen in Marx and others? In short, does COSMOS + TAXIS + TAXIS COSMOS HAYEKIAN Hayek save the modernist project of the grand narrative from its own self-destruction? Marx floundered with his conception of human beings, and used it as a foundation for a totalistic theory of society and revolution. As persuasive as it once was among many, it NOTES fails as a Grand Narrative. After reading Peter Boettke’s presentation of Hayek, he 1 There is also a straightforward error of omission: Boettke ac- implicitly (if unintentionally) suggests Hayek formed a knowledges Hayek’s book, The Sensory Order ([1952] 1963) grand narrative of his own. Hayek’s four phases are thread- on pp. 16 and 306, but he does not discuss it at all, even ed into a coherent whole, which Boettke then parades as though there has been a growing literature on the subject: having contemporary political relevance as an emancipa- Butos (2010) and Marsh (2011), for example, which link tion project. Boettke argues: Hayek’s philosophy of mind with his social theory. 2 Yes, this is the same Mihailo Marković who overturned his The challenges of a globalized world are not new, just lifework regarding Marxist humanism and internationalism as fear of the “other” is not a new challenge to true and became the key propagandist for Slobodan Milošević’s liberalism. As Hayek pointed out repeatedly, the mor- nationalist campaign in Serbia during the early 1990s. al intuitions that are the product of our evolutionary 3 Marx: “though private property appears to be the source, the past, which are largely in-group morals, often conflict cause of alienated labor, it is rather its consequence, just as with the moral requirements of the great globalized the gods are originally not the cause but the effect of man’s society [my remark: perhaps Hayek himself actually intellectual confusion. Later this relationship becomes re- has some kind of backward-looking “estrangement” ciprocal” (p. 117). concept of his own at work here!]. We, as true liberal

Two Contrasting Views of People and Institutions in the Philosophical Anthropologies of Hayek and Marx New New York: New York: Boston: Boston: New York: Verso, Verso, NewYork: New York: NewYork: New York: Doubleday. New York: Chicago: University of The Phenomenon of Man.Phenomenon of The Northampton: Edward Elgar. New York: OxfordNew York: University Press. The Sensory Order:Inquiry An into the The Social Science Hayek’sof “The Sensory Marx’s ConceptMarx’s of Man. Studies in Critical Philosophy. Marxism and Self-Management: Workers’ The Capital, I: The Volume Process of Capitalist Hayek in Mind: Hayek’s Philosophical London: Palgrave Macmillan. Westport: GreenwoodPress. From Affluence toPraxis: Philosophy and Social Between Ideals and Reality: A Critique of F.A. Hayek: Economics, and Hayek: Economy F.A. Political A Contribution to the Critique of Political Economy. Marx Century: in the Mid-Twentieth A Yugoslav Bingley: Emerald. . Chicago: Charles H. Kerr & Company. Ann Arbor: University Michigan of Press. New York: Penguin New York: Books. Markets, Planning and Democracy: Essays after the The Economic andPhilosophic Manuscripts1844. of Grundrisse: Foundations of the Critique of Political Bingley: Emerald.

. . 1964. . 1973. 1981. . [1859] . 2002. pp. 221-305. Beacon Press, 1-48. pp. New York: InternationalNew York: Publishers. Socialism and Its Future. Harper. Social Philosophy. In: Marcuse, H. (ed.) Continuum. Chicago Press. Foundations of Theoretical Psychology. Foundations TheoreticalPsychology. of Collapse Communism. of Order” Criticism. Economy. Tension. Essential Psychology. Psychology. Production Philosopher Considers Karl Writings. Marx’s

York: InternationalYork: Publishers. TheHumanist Controversy and OtherWritings. Stojanović, S. 1973. REFERENCES Boettke, J. 2018. P. 2010. N. (ed.) Butos,W. Hayek, F. A. [1952] 1963. 1963. A.Hayek, [1952] F. Petrović, G. 1967. Prychitko, L. D. 1991. Fromm, E. [1961] 2004. Fromm, E. [1961] Marsh, L. (ed.) 2011. Marsh, 2011. L. (ed.) Marx, K. 1906 [1867]. Marcuse, H. [1932] 1973. TheFoundation 1973. Marcuse,of Historical H. [1932] Materialism. Marković, M. 1974. Teilhard de Chardin, 2008. P.

Althusser,Humanist The L. 1967. Controversy. In: Althusser, (ed.) L. , ------, and Capital (1973, pp. 452- pp. (1973, Grundrisse A Contributionto the Critique concept if “sin” of God didn’t ex considered asseparationa from God (1981 [1859]) and chapter volume 1 of I [1859]) (1981 this particular (1906 [1867]). In fact, Marx brings [1867]). the (1906 language Capital

become of back in and speaks labor of being alienated from its prod if God exist? doesn’t Without God, the whole concept “sin” of ist? What would become the of many Christian narratives ized. See 2002, Prychitko chapters 2-6). The (1991; impor itypraxis of philosophyand the corresponding concept of ism,” “reification,”ism,” other and similar concepts) in his later is philosophy project theof earlier Marx. others I (and who the other hand, ifGod exist doesn’t does it imply not that tobe examined indifferent a Also, broadly, more and way.) through the salvation Jesus of sinners will ultimately join thecomprehensive plan as being centralized decentralor tantpoint purposesmy for here is that theplan is compre his narrative would be fundamentally flaweditsat core. That hensive in nature, completely abolishing market institutions and processes. and alienation Petrović in (1967), Marx, see Fromm (2004 [1961]), alienation and estrangement continuing even though gen he self is evolving toward a union with God. If God exist, doesn’t Stojanović (1973), and MarkovićStojanović (1974). (1973), much wouldmuch be obvious. uct,facing an alienwill, etc., in remained unpublished the on until more For central 1939. evil, and so exist. longer on, no Evil is real. would it But have of a groupof “fallen” of people whowill be we be saved? Would of of Capital,of in which the mature Marx abandoned the prax emphasize Marx’s praxisphilosophy) see the same theme of erally usedoesn’t theterm (preferring “commodity fetish consider Teilhard’s narrative (2008) thathuman history it cept sin, of sin as some kind separation of from God, and discussions commodities of in cal break” between Marx the of 1844 Manuscripts and Marx would to have be fully reconsidered, if abandoned. not (On God the for in sake heaven. Now, argument, of what would of Political Economy Political of 71), which was written71), after the thirdvolume of There has been some debate over whether Marx conceived Allow to me offer an analogy. Consider the Christian con Althusser argues (1967) that there is grand a “epistemologi “stuck” in sin, of a world

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A Problem of Knowledge for Hayek JEREMY SHEARMUR

Email: [email protected]

INTRODUCTION ment on the basis of what knowledge. Indeed, a critic might say that Hayek’s work is haunted by the ghost of a Platonic Peter Boettke’s F. A. Hayek: Economics, Political Economy philosopher-king. For Hayek, right through his work, and and Social Philosophy is an interesting book, although the alongside his key themes about the social distribution of fact that it is written as a number of independent essays knowledge, and the importance of various forms of spon- was, for me, a source of frustration. For it meant that we taneous order, himself makes crucial use of claims to theo- tended to get repeated introductions to important but ba- retical knowledge, and also implicitly assumes its privileged sic Hayekian themes, rather than a more detailed explora- social instantiation. But it is not clear that the social insti- tion of difficult or more controversial subjects. Boettke also tutions that Hayek favours really offer room for this to take seemed to me, at times, to come over as a bit of a cheer- place. Further, Boettke, in various critical comments about leader for Hayek. I’d agree that there is much to cheer about. ‘elites’, seems to me to add to the problems that Hayek fac- But there is a risk that, at times, his style was more like that es here. Let me briefly refer—in line with my ‘haunting’ of someone on a debating team, rather than that of a schol- theme—to four manifestations of such appeals to knowl- 75 ar pursuing a research programme to which he was attract- edge in Hayek’s work. ed, but who also admitted clearly just what the problems First, consider Hayek’s inaugural lecture at the L.S.E., were that his approach faced. ‘The Trend of Economic Thinking’.2 Hayek there developed As someone who has worked on Hayek for many years, I a criticism of the ideas of the ‘younger’ historical school found many things in Boettke’s discussion interesting and of economics (ideas which were shared by some people at COSMOS + TAXIS + TAXIS COSMOS stimulating. At the same time, there was also much that I the L.S.E. at the time3), on the grounds that they served to disagreed with, including the tight links that he suggested undermine the important contributions that work in the- between Hayek and Mises, his discussion of methodology, oretical economics made to the refutation of various uto- his treatment of The Road to Serfdom and of what might be pian ideas. He refers, for example, to Mises' work on the called Hayek’s interventionism. However, I thought that it problems of economic calculation under socialism. For might be most useful, on the present occasion, to put these Hayek, a key contribution of theoretical economics is that issues to one side, so that I could concentrate upon one cen- it can serve to inform us that various ideas that we might tral theme. have about what social arrangements would be attractive, Boettke’s stress on the significance of institutions for are, in fact, not realizable.4 Hayek’s point is, it seems to Hayek’s analysis seemed to me particularly good, notably me, a strong one; it is also not just purely theoretical, but his discussion of this in the context of Hayek’s work on eco- also empirical and historical work which can play such a nomic calculation. But it also seemed to me—other than his role.5 Hayek’s concern—to combat the view that there could noting, in his final chapter, the tension in Hayek between not be any knowledge of this kind—seems to me impor- his stress on ‘evolutionary’ emergence and the role of criti- tant. It is also a battle that seems to have to be re-fought cal reflection in the improvement of, and indeed in some in each generation: those attracted to postmodernism and cases in the construction of, institutions—that he did not poststructuralism seem to me in danger of leading us into fully bite an important bullet in his discussion of this as- similar ground to that occupied by those influenced by the pect of Hayek’s work. It is this. Boettke stresses, repeat- younger historical school in Hayek’s day. At the same time, edly, the importance of suitable institutions and the rule criticism of the critics of such claims to knowledge, like of law. But this faces us with the problem of which institu- that in Hayek’s Inaugural Address, is not enough. For as we tions, what understanding of the rule of law,1 and improve- shall see, there are problems about the status of such knowl- edge (not least in the face of such important points as falli-

A Problem of Knowledge for Hayek

------10 9 what , second edi are an interesting these might be, and whatever DenationalizationMoney of The DenationalizationMoney of their overall consequences are. A Hayekian liberalism, Finally, there is the in way which appeals Hayek the to While this is all true enough concerning this aspect of beprovided through market mechanisms rather than by by contrastby with this, which is one is informed a critical by based our on theoretical inherited, ideas how about and knowledge—and,its social in on another, or way some ac lemma of: ‘how reconcile to the functioning a planning of last resort the best considered judgment should prevail’. that note to own Hayek’s Do’, logue: Hayek What Would people’. Harrod this to refers people’. in terms ‘the of presupposi politically influenced and imperfectly informedmonetary posals the for edge about how anedge how about alternative system a central to bank earlier views, which called active for policy-making a by enced conservatism. by a conservativism But without theo example this, of they but are means no by the only one. and interfering democracy with therequirement that in the authorities’. ment on Hayek’s part Hayek’s on ment was itself basedclaims on knowl to seems it might that me to does serve operate!), it not to for example generallyviewa to moved in can which ‘money and should understanding certain how of such inherited social orders tions Harvey of the Road’, street in Cambridge in which the Keynes family lived. Harrod goespoint to di a to on tion, became he critical central of banks, and that more he ing, and the to refers in way Harrod— which—to Roy quote retical understanding means that will people be attached to rules and institutions dispel the underlying with problem which I am con here cerned. is that It classical liberalism the of kind that Hayek, decisions [as] being reached a smalldecisions by [as] intelligent group of decision-taking in the real goes in He on, world. an ‘Epi central bank, the open to were same objection. However, ever Boettke rests and in I favour, important theoretical ways on Boettke discussestheeconomic policy-mak of problems Boettke makes here an important point in the context of later work, notes that, in (1978) Hayek’s 71) p. Boettke (2018, Hayek’s views is it alsoHayek’s (and worth noting that this argu In his chapter ‘Theof an Anatomy Crisis’. Economic work, andwork, course of they how about might be reformed. inway which might we design set to out new institutions, well-functioning, ‘spontaneous work. His orders’ late pro THE HARVEY ROAD PROBLEM ROAD THE HARVEY ‘Keynes tended till the think to end the of really important ------Law, Leg might be that there are 8 , through his to ideas Law, Legislation Law, and Liberty may be of value, be may of also favoured the idea , would be informed such ideas. by is It 7 —while (justly) critical ‘rationalistic’ of 6 The Road to Serfdom

Second, there is the fact that himself—through Hayek

Third, of appreciation Hayek’s is there operation the of At theAt same time, must ask: one institutionalization in be stressed, that both because the of fallibility any of such body electedof like people lay that which discusses Hayek but also, but its to implicitly, institutionalization, in the sense bilism, and the—legitimate—existence different of compet sequences which seem us to unfair. or be to problematic play theplay kind that role envisaged of Hayek in it the for dis of theseof be sure, systems. societies To simply be may influ often ouroften intuitive deep-seatedand ideas which,on Hayek’s existingAll law. this, again, appealsexpert to knowledge— the of relevant knowledge being in the hands those of who a (developing) theoretical(developing) a understanding the of character a market-based social and other of well-functioning order, account, stand may in need correction. of needs It also to as constituting his second preferred chamber in also makes occasional remarks which would suggest that about how the how about kind system common-law-based of that he and appreciative the of in way which various institutions mon-law precedents leads inmon-law directions. problematic He for freedomfor in most of hismost of work the legal system stand may in need piecemeal of in reform the light our of analysis the of economic consequences of tion, Hayek arguestion, Hayek both in a particular favour of kind of that inherited institutions could and should be improved. it makesit sense us make to for use such institutions, of act ingwithin inherited systems rules of and so and re on, not inherited social orders, as such. such an Given appreciation, ideas, and the risk the of abuse their of people by power improved. It is worthimproved. It bearing in mind that, in this connec ing theoretical research also programmes), but what about I complex andcomplex difficultproblems posed by all this. discovery procedure amongst judges, and common-law fa came championto in couraging utopian of fantasies. islation andLiberty But such a perspectiveBut itself rests, in the background, on who arewho given authority act to such ideas, on will undertake this revision. there is clearly, reason no suppose to that For, a what form? which have evolved wishes reconstruct to all institutions from the ground up, willas to the refer its socialneed for entrenchment, if is it to volting against them throw even when such orders con up vours the a legislature by law of reform if a system com of Whatsaid he this about ranges from ideas planning about VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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ceptance. Boettke, in a most interesting chapter, ‘The Re- “‘We’re upside down’ on trade deals,” Trump said. construction of the Liberal Project’, discusses populism of “We’re underwater on every one of these. The other the left and the right. If one considers the political scene in countries are making money. Just look at all this stuff the United States at the time at which I write, it seems to up there. We’re paying for it all.” Cohn tried to re- me truly alarming the extent to which influential people on mind him that it was actually good for the US econ- the left of the Democrats—and their supporters—regularly omy. “I don’t want to hear that,” Trump replied. “It’s display an enthusiasm for socialism, without, on the face of all bullshit.” Trump wanted to bring the money home, it, having any conception of the theoretical problems that especially from South Korea (Runciman 2019, p. 198). have been raised concerning the ideas about which they are so enthusiastic. While the Republican Party seems to have Later, Woodward reports the following exchange: been willing to follow Trump in his uncritical enthusiasm for tariffs and economic . All this in a country Several times Cohn asked the president: “Why do you which not only had a long tradition of broadly liberal in- have these views?” “I just do,” Trump replied. “I’ve dividualism, but in which, also, there has been almost un- had these views for 30 years” (Ibid., p. 201). matched time and money spent in the education of people about the significance of markets, the price system, and so My concern, here, is not with who is right about these on.11 matters of economic policy. The problem, it seems to me, There are two aspects to this. Clearly, I’d welcome it if which faces the classical liberal as much as it did Keynes, is people generally accepted broadly Hayekian ideas about the that it matters for each of us that policy should be guided problems of economic calculation and drew what seem to by the best ideas. A key role is played, in a Hayekian liber- me the appropriate lessons from them. But what is disap- alism, by ideas, including ideas about what makes for good 77 pointing—and poses our problem—is that, despite every- institutions. These are, obviously, fallible, and need to be thing, they don’t seem to be even aware of them. Second, it open to contestation. But what matters, in this context, is is important to note that even if they became aware of these that the contestation of the ideas should be on the basis of ideas and engaged with them, this does not mean that they their merits, rather than just on the basis of our gut feelings. would necessarily become classical liberals. Here, Simon Further, as in the case illustrated by the exchange with COSMOS + TAXIS + TAXIS COSMOS Griffiths’ (2014) bookEngaging Enemies: Hayek and the Left Trump, what is also needed is an acceptance of the social seems to me instructive.14 In this, Griffiths surveys the ideas division of labour. Each of us is limited in what we can of a number of (mildly) socialist British intellectuals, and know about, in any detail. This means that we must, of ne- reports on the ways in which they engaged creatively with cessity, depend on the (fallible) views of experts. If we are Hayek’s work. It is possible, after all, to read one of Hayek’s suspicious about something, we may ask if there are people key concerns in The Road to Serfdom (and in much of his with relevant expertise who have differing views, and if we subsequent work) as being with the problem of how people are in the right kind of position to do so—such as a Presi- could pursue values like those to which he was attracted as dent could have been—we might ask them to explain to us a young man, but in ways that don’t pose problems for a lib- their views, what is at issue between them and the more eral economy or for people’s freedom. dominant views, and why they think that their ideas are to All this seems to me to lead on to two concerns. The first be preferred, and so on. relates to the organization of the academic world, the sec- What seems to me to make no sense, not least if—as ond to what one might call the significance of the social en- Hayek does—you think that ideas matter, and that some trenchment of our best—but of course fallible—ideas. ideas that have a lot of intuitive appeal are, in fact, highly Consider, in this latter context, the following brief ex- problematic for reasons that can be illuminated by theoreti- change reported on in Bob Woodward’s Fear, which dis- cal reasoning (e.g. that of Mises!), is simply to appeal to our cussed the early period of the Trump White House, and (inherited) gut feelings, or to ideas that might be endorsed which has been singled out for discussion by David Runci- through opinion polls. man in his recent Where Power Stops.15 A conversation be- tween Trump and Gary Cohn, his chief economic advisor, is reported to have run as follows:

A Problem of Knowledge for Hayek ------15 ) would) recourse, need have to wishing if were it en to 16 Such thingsSuch are also important, generally. Consid more We need, withinWe any discipline, towards a form move to sensusthat they aresignificant, of and ongoing statethe of that,sion would seem it me, to would be needed if Hayek’s legitimate in play to the role academic is it also But world. had to say about, say, ‘relations of production’ and production’ their of ‘relations had say about, to say, er our ideas about people’s rights.er our ideas people’s In about the broadest terms, of lessonone that can we draw from scholarship recent about estantideas ‘natural about jurisprudence’ developed ideas enced, having to a deliberate effort madeto picture a create theof range ideas of concerning which there is con a broad of theof social organization knowledge of in which, as dis ars. the in way (Consider which many those of take who ra as programmatic ideas, and what, in fact, they been have achieve to able explanations, date of to way by as compared gagein piecemeal the the of reform on law basis econom of BEYOND SPECIFIC DISCIPLINES SPECIFIC BEYOND the understanding rights of in the Seventeenth and the tinct from(and thewould I differentstress again, fullylegit the debate them. about Thiswould serve focusas a for the ture is, what they of need take to account if they wish to tise that important points concerning what their tradition has tional in approaches choice the social sciences, treat the so than something crucially shaped our by history prior and the to achievements those of favour who competing views. ic ideas. imate) programmatic imate) ideas whichby be influmay people indication those to wish who competing develop to ideas ideas be developed, and, if these ideas ac should prove ideas—e.g.in economics—that bodya such as the Supreme ideas the about revision into prac be the to put of were law is very useful). But, similarly, Marxists would typically say interactions.) Contending programmatic ideas a fully have cation in people to other disciplines pic what the (current) draw ideas on from the discipline in question. ceptable, existing institutions be is reformed. such it to For consequences, typically have been ignored other by schol cial as if world was it an unstructured state nature, of rather Eighteenth Centuries, is that the main tradition Prot of It is not of importance of is not It specific just for disciplines suchthat work of scholars of work within the discipline, least not as giving an what the existing in problem-situation their discipline is withwhich they would engage. also to It have give an indi vital that their distinguish proponents between their views Court in (whether its existing in form, or the kind ver of ------12 For it is it striking For that, if are we in 13 But it seems it But that me to need encourage we to 14

This,it seemsme,to is an interesting exampleof an un The The first relates to organizationthe ofthe academicworld. both which of might be argued be to elitist. They are,obvi stream’ positions misinterpret, work ignore or Hayek’s say, state the of discussion them. about In addition, is it typi subject. These range from the editorial policiesof various knowledge,and the about importance inherited of insti proceeding that is is here problematic. account It a proper planned order, but one which one in but view my plannedstands order, in need promotion and different tenure at promotion universities, basisthe on on knowledge on and institutions(Boettke’s discussion here on theon part academics of just not particular, specialized of science—whichof I must spare the the reader on present occasion. edge which aims contentful at truth, are we currently how argument my of of detail quite would off bit go a into con of piecemealof reform. on theon basis range a whole of programmatic of ideas—from ously, complex, and complex, I cannot dealously, here with them in any de endorsement of anti-elitism. of endorsement There seemme, to rather, two of what Hayek has what Hayek of written the about social dispersion of asconsumers, and those the of preferences give who money for educational purposes. takeless-mainstream thehere, positions. in way Consider, terested in a body of tentative the of knowl development the issue their the students of of (and preferences parents) thatthere social is complex a constituted epistemology, by the various incentives and pressures which to scholars are those inspired particular by ideological affiliations, through thoseto which they from up pick the various paradigms tion but not of systematic of not tion but human design. Academics work tail. might words a few But be useful. tutions, which one is not dealt but with adequately the by issues significance of which by championed are those who into which they are trained. is also It the case, however, journals, the ways in which journals are publishers) (and ranked within different disciplines, the criteria for hiring, cally the that problem ‘mainstream’ seems work ignore to cerning the philosophy and also the history and sociology differentto be problems levelsaddressed, of the answersto Here, we are we Here, faced with human product of a complex ac which, from a classical liberal perspective, those in ‘main work, but also but work, reflection broader on themes and the current which grant funding is available, and so There on. is also WHAT IS TO BE DONE? IS TO WHAT VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME The situation The least not seems me to complex, in the light

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about rights in the context of ideas about duties to God, in earlier. For one needs, in addition to a deliberate effort in part drawn from Scripture, in part from what at the time any particular discipline or problem-area to collect together seemed obvious.17 Rights were things which people were what, tentatively, we can agree upon (not least so that it can, understood to possess, so that they could discharge such then, be submitted to criticism), but also that we recognise duties. Further, as Jerome Schneewind stressed in his clas- the appropriate social authority of experts, in the context of sic ‘The Divine Corporation and the History of Ethics’,18 it the division of labour. This, obviously, does not mean that was believed that God had arranged things so that, if people experts must be assumed to be correct. But if we are not developed their ideas about rights correctly, and acted on a specialist in a particular field, we need to be able to rec- the basis of them, the result would also be the generation ognise those who are, and then—if we stand in need of in- of a well-functioning social order (unintended by them, but formation—to ask them to explain not just their own views, not by God). but the current state of the debate in the field in which we Such ideas clearly left their mark up to the time of the are interested, something which we can cross-check with American founding.19 But most of us would typically now others. The problem with Trump, in the area referred to in think that issues about the inter-relationship between what the quotations, seemed to me to be that having appointed gets recognised as a right (and in what form), and what someone who was competent, he did not then seem will- makes for a desirable social order, is very much in human ing to take criticism from him of his own intuitive ideas, hands. But from such a perspective, our understanding of or to accept instruction from him about the field in ques- social theory will play a key role. Consider, in this context, tion.22 (Of course, what is needed is someone who is both the debate about trade in grain that took place in Europe knowledgeable but also well-informed about, and able to in the Eighteenth Century. As Hont and Ignatieff (1983) offer a fair picture of, the state of play in the field in ques- have argued,20 this played an important role in the forma- tion: something that it is important that we cultivate.) This 79 tion of Adam Smith’s views, and in particular, in his ratio- problem seems to me to be becoming increasingly ubiqui- nale for the dropping of the idea—which, for example, one tous with the development of social media, which by de- finds in Locke—that people have a right to subsistence from sign serves simply to reinforce people’s prejudices, and also the surplus of others.21 Another striking example of this when people put their expertise up for sale in settings where kind of argument from social theory to ideas about rights, it is removed from scrutiny by their professional peers.23 COSMOS + TAXIS + TAXIS COSMOS is offered in Hayek’s criticism—which seems to me devas- Here I think that it would be useful to look again at the tating—of the U. N. Declaration of Human Rights, in his ideas of that much-neglected classical liberal thinker, Har- Appendix to Chapter 9, ‘Justice and Individual Rights’, to ry Burrows Acton (1974). I have in mind here some of the volume 2 of Law, Legislation and Liberty. In this, Hayek ar- views that he set out in his published lecture, The Idea of gues that a key problem about the U. N. system, was that it a Spiritual Power. His concern in this was not with reli- was a political compromise between people who favoured gious ideas but, rather, with the institutionalization of our different social orders, and that, as a result, they ended best ideas, a theme that he traces through Saint-Simon, up including some rights which—depending on which of Coleridge and John Stuart Mill. (Mill—the author of the the two systems one favoured—made no sense. To offer fallibilist On Liberty—stressed the importance of the liber- such criticism—to say nothing of the kind of criticism of ty of discussion; but—he was also concerned with our prob- the inflated lists of ‘human rights’ which are so popular as lem: it lies behind his not particularly felicitous ideas about I write—seems to me to depend on our having to hand a plural voting for those with university degrees in his Repre- broad conception of what the key structural features of our sentative Government.) The problem—which if what I have current social system amount to (as well as a similar con- argued here is correct, is very much that of the Hayekian, ception of what kinds of changes to this are and are not fea- and which more generally faces us particularly strongly sible, as things stand). But this is something that, as far as today—is that the connection between the worth of ideas I can see, needs to be deliberately worked towards, rather and their social influence seems to have broken down dra- than something that ‘spontaneously’ arises from the opera- matically. It is this—along with what seems to me a marked tions of our current system of the organization of academic failure on the part of those most concerned with policy- knowledge. making to address some of the key issues which face people A second and rather different problem, is exemplified by today24—which has opened our political system up to popu- the report upon Trump’s White House to which I referred, lism. And it is this which makes me uneasy about Boettke’s

A Problem of Knowledge for Hayek ------, First Treatise Essays on the History (2018), which discusses (2018), (1977, ch. 6), who ch. Har quote R. 6), F. (1977, Expert Failure (2010). Two Treatises of GovernmentTwo Democracy in Deficit by wealthyby individuals with strong classical liberal concerns bly Roger Koppl’s between an acknowledgement the of importance such of the influenceof traditional Christianideas within whatwere ini institutions which suggested he as possible ways dealing of tions: An Introductory See, Essay.” also, discussion my in tially often explicitly religious-basedfoundations. tutions. this But is an issue which can’t sensibly be tackled in tarian andconservative religious groups and individuals— have beenhave diverted to other purposes is particularly a sad a paper such as this. sues raised in this work, the on present occasion. See, this, on their “Needs and Justice in the Wealth Na of Shearmur (1996). See John Locke, See, this for approach, Shearmur especially (1996), chapter form such reform and their social institutionalization—but I many other bodies, also but the GE, of work which has been ner’s reflect their concerns. The storyfoundations how of up set rod pp. 192-193. (1951), Boettke, 58 refers p. to James Buchanan and Richard Wag education—have been in the creation institutions of which one. While tells Marsden a striking (1994) story the of loss of other to which work Boettke refers in greater detail than it one, and Sheamur (2010). oretical knowledge, and his concerns about the desirability whatof might one call an uncritical faith in inherited insti Independence. I have arguedI have this for in what is as yet unpublished work. Hochstrasser (2000). Included, example, for in Schneewind’s I have inI have mind, here, just not the efforts of FEE, IHS and documented in such an interesting way in Evans (2006). is,It here,striking just ineffectual how conservative, liber who been have significant sourcesof funding for higher will pursue not this here! was possible Boettke for to do in his Hayek. See also Desch with this. with Compare, in this context, the U.S. Declaration of Clearly, there is also, here, the issue what of views should in Compare, example, for Knud Haakonssen J. and T. (1996) ofMoral Philosophy (2019). I cannotI even attempt to do justice(2019). to the range is of §42; compare Peter Laslett’s edition, 170. p. There is also a body to work of which Boettkerefers, nota There is obviously an issue about the inter-relation, in Hayek,

9 20 21 19 13 14 15 16 17 18 10 11 12 ------tradition, and volume 3 (Hayek 1979), volume 3 (Hayek 1979), Rechtsstaat (Hayek 1988)—develop his ideas in Law, LegislationLaw, and Liberty TheFatal Conceit

been explicit about his championing the of rule as law of it lection’ are seem clearly to to me make don’t problematic), logue’ to legal scholar Hayek,should it beJoseph said, Raz has (1972). time,the weakness what of ishe claiming is also (as the case the loosest ways; of recent efforts to criticize himby showing that his views fit specific don’t models ofevolution to which he sometimeshe which, refers (and as in the case ‘group se of also to be noted. and ars with expertise in the field understandby the ruleof law, sible corruption his of guardians, and the highly distinctive serves to emphasise the point that I am making in text. my standing the of rule has law of been argued to be, e.g. the by See, this, on Shearmur (2018). for Hume thefor on development ideas of about justice), needs much impressionmuch his on underlying argument. the At same rationalist’ strand in his work, to which I am here referring. economic purposes, and in terms the of liberty the of indi Recall in this context just contentious how Hayek’s under It is worthIt bearing in concerns mind about Plato’s the pos It is importantIt to note that Hayek uses the term in ‘evolution’ I say ‘most’ because some strands in his work—e.g. the ‘Epi I have discussedI have this some at length in Sheamur (1996). I would agree that this is particularof importance both for ways which may be difficult to squarewith ‘criticalmore the was understood in the Kantian Compare the important issues opened in up Hayek (1954). Compare See 1996). Caldwell also Sheamur (1988). (1987, vidual.the But distance between this and what other schol

All this seem may strange. the on But basis that I have sequence, an exciting—task. liberty, simply open us or domination to other by people. lible—knowledgecan exercisesignificant influenceboth project for theirproject for our reform. of One key I’d problems, have ety, andety, means by mechanisms of sacrifice whichour don’t our society, in that such a way fal our best—but, obviously, address this issue is surely a challenging—but also, in con 8 NOTES tionin if are go, to whichwe justicedo have to we theto full thought, is in fact try to reconstruct to the elites of role in indicated briefly in it this seemsme a to shortdirec paper, joining in the criticism elites, of rather than engaging in a rangeissues work. of If Hayek’s amI by openedup right, to 5 6 within academic disciplines also but generally more in soci 7 2 3 4 1 VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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22 It is perhaps worth noting that, in the light of this, the prob- Haakonssen, K. 1996. Natural Law and Moral Philosophy. lem addressed by Milgram (1974) in his Obedience to Author- Cambridge: Cambridge University Press. Harrod, R. F. 1951. The Life of John Maynard Keynes. London: ity, seems to me in some ways misconceived. For in a soci- Macmillan. ety of any sophistication, we have to depend on the authority Hayek, F. A. (ed.) 1954. Capitalism and the Historians. Chicago: of those with specialized knowledge, and in ordinary social University of Chicago Press. situations this means relying on those bearing the appropri- . 1979. Law, Legislation and Liberty, Vol. 3, The Political Order of a Free People. Chicago: University of Chicago Press. ate marks of authority. If, say, a building is burning, we need . 1988. The Fatal Conceit: The Errors of Socialism. In: Bartley, to rely on what we are told by those who are dressed in fire- W. W. III (ed.) The Collected Works of F. A. Hayek, Vol. 1. Chicago: fighters uniforms, and so on. This does not mean that they University of Chicago Press. are infallible, that there might not be occasions on which it Hochstrasser, T. H. 2000. Natural Law Theories in the Early would be right for a lay person to question them or to dis- Enlightenment. Cambridge: Cambridge University Press. Hont, I. and Ignatieff, M. 1983. Needs and Justice in the Wealth obey them, or, indeed, that there should not be heavy pun- of Nations: An Introductory Essay. In: Hont, I. and Ignatieff, M. ishments for those who pretend to authority that they do not, (eds.) Wealth and Virtue: The Shaping of Political Economy in the in fact, possess. There is also a crucial need for institutions Scottish Enlightenment. Cambridge: Cambridge University Press, which allow for the possibility—outside of a particular emer- pp. 1-44. Koppl, R. 2018. Expert Failure. Cambridge: Cambridge University gency situation—of the critical questioning of existing poli- Press. cies and “knowledge.” Lilla, M. 2018. The Once and Future Liberal. London: Harper. 23 It seemed to me that it was this latter problem which was the Marsden, G. M. 1994. The Soul of the American University. New York: starting-point of Roger Koppl’s (2018) interesting work in Oxford University Press. McNamee, R. 2019. Zucked: Waking Up to the Facebook Catastrophe. his Expert Failure, while just how problematic the structur- New York: Penguin. ing of information by Facebook etc is, is brought out if one Milgram, S. 1974. Obedience to Authority: An Experimental View. 81 compares what is said in passing about the structuring of in- New York: Harper and Row. formation by Facebook in Roger McNamee’s (2019) Zucked, Murray, C. 2012. Coming Apart: The State of White America. New York: Crown Forum. with Popper’s (1963) account of some basic epistemological Popper, K. 1963. Conjectures and Refutations: The Growth of issues in his “On the Sources of Knowledge and of Ignorance” Scientific Knowledge. London: Routledge. and “Science: Conjectures and Refutations.” Putnam, R. 2015. Our Kids: The American Dream in Crisis. New COSMOS + TAXIS + TAXIS COSMOS 24 I will not burden what is already an over-compressed paper York: Simon & Schuster. Raz, J. 1972. The Rule of Law and Its Virtue. In: Cunningham, R. by discussing the substance of this here. But it is striking L. (ed.) Liberty and the Rule of Law. College Station: Texas A&M that Robert Putnam (2015) and Charles Murray (2012) of- Press, pp. 8-21. fer similar diagnoses of some of our current problems, while Runciman, D. 2019. Where Power Stops. London: Profile. Mark Lilla (2018) and John Sides et al. (2018) indicate what Schneewind, J. B. 2010. Essays on the History of Moral Philosophy. is problematic about how these issues have been recently ap- Oxford: Oxford University Press. Shearmur, J. 1987. The Political Thought of F. A. Hayek. University of proached. A similar story, it seems to me, can be told about London, Ph.D. thesis. problems of climate change and large-scale migration. . 1996. Hayek and After: Hayekian Liberalism as a Research Programme. London: Routledge. . 2010. Why the ‘Hopeless War’?: Approaching Intelligent Design. Sophia. 49 (4): 475-488. REFERENCES . 2018. Hayek and the Methodenstreit at the LSE. Globalizations. 15 (7): 1033-1044. Acton, H. B. 1974. The Idea of a Spiritual Power. London: Athlone Sides, J., Tesler, M. and Vavreck, L. 2018. Identity Crisis: The 2016 Press. Presidential Campaign and the Battle for the Meaning of America. Buchanan, J. M. and Wagner, R. E. 1977. Democracy in Deficit. New Princeton: Princeton University Press. York: Academic Press. Caldwell, B. 1988. Hayek’s “The Trend of Economic Thinking”.The Review of Austrian Economics. 2 (1): 175-178. Desch, M. 2019. Cult of the Irrelevant. Princeton: Princeton University Press. Evans, T. W. 2006. The Education of Ronald Reagan. New York: Columbia University Press. Griffiths, S. 2014.Engaging Enemies: Hayek and the Left. New York: Rowman & Littlefield.

A Problem of Knowledge for Hayek ------I do I do 1 definitive argu the occasion. The fact is,do I take that or this This has consequences my shortcomingsas might some concerned with build to how a productive academic career was that grips to must come one with the reality that we are in not the business writing of down all for ment time. All academic in is work work, progress. right, get it And, written. get it don’t And finally, thinking without writing is day-dreaming. So, bottom line, each of commentators with provide me my material that must be pursued down the road in the next effortto clarify Hayek’s an urgency in quest understand my to the human condition via the disciplinary framework economics of and political Sometimes thateconomy. sense urgency of fuels curi my other at times, but osity, fuels perhaps it zealotry. my hard trywork to tame to the and latter, embrace the former, I ambut certainly so self-unaware not claim to that I never fall short the of ideal scholarly values I so aspire reflect. to remains should behave one how model of my in this business. I am woefully shortcomings aware my of in this regard, like but with research itself, view as me a work progress. in times appear in the missing form of differentof sides an argument that I should perhaps attentive been or more to, failure pursue to an angle that might from a different per spective be productive.judged as more Buchanan taught earlyme in career my the about benefitslookingof through But realitydifferent the “windows”. is you that cannotlook through all the different leastat once,or at windows I can not, and are so choose to we forced which window will we throughlook on criticism that has me but meant for seriously, that I need grappleto with those issues in next my project.other The important lessons I learned from studying with Buchanan economy duringeconomy its finesthours, but also threatento turn modern practitioners into potential tyrants their over fel citizens low and destroyers the of very civilization that po litical economists had helped build. to Once again, as read other my works will book (and my ers of be surprised) not I am agreement in with profound this. on Hayek So, there is

------, and the to various only contributors not who took

Second, I would like stress to that I wrote this book with

his concern that unless address we this philosophical er only would not we cause thisloss a of ror, scientific and scholarly capital accumulated from the practice political of entism the to detriment the of scientific and scholarlyprac tice in the distinct related but disciplines economics of and political Lecture, In Nobel Hayek’s economy. expressed he ism combined with excessive aggregation, wrapped in a package excessive of empiricism, resulted, in interpre my tation, in an unhealthy alliance between statism and sci odand into the early neoclassical period has beenlargely squandered a set to deep due of philosophical errors that impacted have the disciplinary practice.Excessive formal Furthermore, like I am Hayek, frustrated with the practice theof discipline, and believe that the accumulated intel lectual capital that was built during up the classical peri the end of the day, I am bound (for good and I am my to the bad) the bound of end (for day, disciplinary trainingand professional interest in modern scientific economics and scholarship in political economy. ademiceconomics was political Hayek and/or an economy. interdisciplinary and scholar, I aspire myself, be to one but like what I suggest as Hayek being about an economist at a particular audience in contemporary mind—namely, stu economicsdents of that are pursue to hoping a career in ac as sins my commission, of that been have identifiedmy by readers, I can only ask forgiveness for and promise I will try better. do to have beenhave pursued. In so many ways myself I found agree ing with the identifiedweaknesses and even promise the of the alternative directions. sins my omission, of For as well great care in reading book, also my but in crafting their criticisms and suggestions in terms improvements for of ownmy exposition, different or directions project the could and remarks generous in the introduction book, my on A. Hayek: Economics,F. Political Economy and Social Phi losophy First, express let me gratitude my Mikayla to Novak for organizing and editing this symposia, and the very warm Web: https://www.peter-boettke.com Web: PETER J. BOETTKEPETER J. University Mason George Email: [email protected] Response Response VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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project and what it means for the way we practice econom- more mainstream work in contemporary political economy ics and political economy in our age, and against this par- in a more Hayekian direction it would yield significant re- ticular historical context. And for that, as well as the care sults in our quest for understanding the human condition. and effort they put into grappling with this effort of mine to My discourse effort is directed at works such as Acemoglu understand Hayek’s project, I am truly grateful. and Robinson’s Why Nations Fail or their more recent The Adam Martin makes a wonderful observation that is rel- Narrow Corridor rather than the very impressive list of po- evant in this discussion when he points out “Writing a book tential discourse partners that Paul Lewis provides in his about economics is itself an economic act: it involves trad- commentary that I entirely miss in this book. Remember, eoffs and scarcity.” This is particularly relevant, I’d argue, we look through different “windows.” in this context. Because Hayek was a scholar who roamed I might be wrong about that judgement, but that judge- so widely, in trying to make sense of his roaming for a proj- ment in addition to my sincere belief that I have accurately ect that impresses on his core, I sought to find a coherent described the arc of Hayek’s professional career as an econ- thread. To me, that coherent thread was in Hayek’s explo- omist, political economists and social philosopher, contex- rations of the institutional infrastructure within which so- tualized it in his time, and identified a coherent theme that cial life (including commercial life) takes place. And, in we can work with in our own work explains what I did in particular, his explanation of how alternative institutional the book. I identified four distinct stages in Hayek’s career – arrangements impact on our human capacity to realize so- Economics as a Coordination Problem; the Abuse of Reason cial cooperation through specialized production and mu- Project; the Restatement of Liberalism; and the Philosophi- tually beneficial exchange. While not denying the impact cal Anthropology of Man. I then try to explain the common on the structure of incentives that human actors face in theme that links all of these. I certainly underdeveloped my making decisions that are produced by the relevant insti- discussion of the fourth phase in his arc, and thus do not 83 tutions, Hayek’s unique emphasis was on how these alter- do justice to either the tensions in Hayek’s project that Jer- native institutional arrangements served as the background emy Shearmur correctly stresses, or the issues which David to the discovery, utilization, dissemination, and continual Prychitko asks me to consider concerning the philosophical updating of the relevant knowledge that human actors need anthropology of man. I have my own way of attempting to to pursue their interests in an effective manner. In short, resolve the tensions, or at least ameliorate them, and work- COSMOS + TAXIS + TAXIS COSMOS Hayek asked us to think about how individuals learn the ing out the radical implications for social theory along the relevant knowledge so that they can coordinate their activi- lines suggested by Prychitko but those need to be worked ties with others, in order to pursue the productive special- out in a far more sophisticated way than I have done to date. ization and realize the peaceful social cooperation that is Again, all work, is work in progress. the underlying basis for the progress of civilization. I dub One could identify a major glaring interpretative error, this in the book as Hayek’s epistemic institutionalism. And which is the following: rather than dividing Hayek’s career this had the consequence of directing my message largely to into these four phases under the theme of epistemic insti- an audience of practitioners and graduate students appren- tutionalism, one could just as easily and justifiably divide ticing to be practitioners of Rational Choice Institutional- Hayek’s career into two phases, the first being his early in- ism and Historical Institutionalism in the related but dis- sistence on methodological dualism based on the divide be- tinct disciplines of economics and political economy. Think tween the human science and the natural science and his Daron Acemoglu, not necessarily Sam Bowles or Herb Gini- later being the methodological distinction between the sci- tis; think Alberto Alesina, not Paul Davidson. This isnot an ences of simplicity and the sciences of complexity. Both ideological choice on my part, as Paul Lewis and Ted Burc- Paul Lewis and Gerald Gaus prefer to move the conversa- zak come close to suggesting. My conversation partners are tion concerning Hayek and his contribution in that direc- selected on shared research focus on institutions and politi- tion focusing on evolution and complexity. I completely cal economy, and my strong conviction that these leading agree that is a very productive direction. It is just not the practitioners of economics and political economy are not conversation I was going to pursue in this book. But it is a getting it quite right. They are still not quite getting Hayek’s conversation that should take place, and I will want to join point about the contextual nature of our knowledge, and that conversation at some future date, and hopefully at that thus the social epistemology point about alternative insti- time both Lewis and Gaus will see how much I have learned tutions that I am emphasizing. Therefore, if we nudged that from their work and the work they favorably cite when I do.

Response ------Nick Cowen’s contributionthis to symposiumCowen’s Nick also puts Mainline economics developed alongside the of evolution nomicsand political then will it economy, its done be have purpose My job. in writing was the remember, book, let’s accurately capture (a) to intellectual Hayek’s development throughout his career from the 1920s the to to 1980s; (b) identify a common-theme in that that work unites his ef forts time and over and across achieve to disciplines; (a) (c) synthesizing by (b) the questions “does economics a have useful past?” and “does the past a useful have economics?”, Hayek andHayek Galbraith, I thank Burczak reminding for of me the potential fruitful that such a comparative avenue analy sis could provide. in analysis the of forefront questions justice. of Buchanan taughtus, again,that the theory justice of was the critical missing in the element nineteenth century classical econ omists which resulted in their vulnerability in intellectu aldiscourse with socialists thinkers. must, us, told he We theory a coherent develop justice of if develop to hope we anargument Those of us the persuadedsociety.” for “good critique Hayek’s by social of justice be should content not withthat negative analysis,our mustown offer but picture the of agenda and liberalismof non-agenda our time. for isCowen building those bridges contempo from to Hayek rary political theory. Stefan raises Kolev the issue the of in stitutional infrastructure in the liberal in order the age of digitalization. stresses He only not the great expansiveness theof new globalized modern to due technology, economy thebut speed with which the globaliza to pressure due felt tion isexperienced in localcommunities. Again, truly fasci nating issues that deserve full treatment and development. promising directions.Very If book truly my could be said stimulated have to thought in these newdirections in eco liberal institutions governance. of This is a I point make in the book, drawing Robbins. Lionel the of on And work the bookdoes strivefrom technical move to economics through timelessto puzzles in the political liberalism. of economy The centralpuzzle with whichit is wrestling is preda the tory propensity in men of the private and Ted public sector. Burczak, invoking by John Kenneth Galbraith successfully mind, my to questionsmoves persuasion of and to power the Thisforefront. demands an examination of countervail ing in forces the private in and not I do public my sector. spend enoughwork time potentials on in abuse power for of the andprivate sector, that isa weakness that I must address in the future, in so much not understanding in but Hayek, getting a fuller the appreciationof liberal our projectfor time. The first realprofessional paper Iever wrote on was ------eco 2 Human . Part meth my of human scienceshuman interaction in the marketplace Smi about is more

Ironically, though, I am still enamored the by unique of economicsof from Adam A. Smith Hayek. F. to and bad economics, as Milton Friedman taught, good but the empiricismeconomics isn’t Friedman of the or formal ism Samuelson. of Instead, is be it to in found the mainline mind, lays this in out his comments with very some useful diagrams thatreaders should focus their attentionand on, think and long hard about. only There is good economics this, and I Paul Samuelson way, didn’t. Economics one went am trying use to pull to Hayek back it in another direction researchof and teaching. Adam Martin my to ingeniously, which they transact with another one and form relation ships with another one if make to hope we any progress in ourquest understand to the human condition. knew Hayek ations and expectations the of creative and clever human beings understand set to we out in our analysis, also but account the for political, legal and social context within thianhiggling and bargaining, than is Beckerian it about optimizing behavior and Arrovian equilibrium states. We must, as economists, only not respect the subjective valu nomic lifenomic well is not captured in models characterized by smooth and continuous and twice differentiable functions. Human adjustingchanging to circumstances and thusin constant guidepostsneedfor and “aidsthe to human mind” steerto our course toward peaceful social cooperation. out theout and logic choice of engaged exercisesin situational logic. Institutional context always are matters. fallible, We capable human but are constantly actors. We adapting and and haunting fears, the very act ischoice an of agonizing andone, standard utility maximizing subject constraints to us help wrestlesimply doesn’t with human beings playing andElinor Ostromafter him, canproductively be under stood as a rational theorist choice as if the choosers were human. Human beings are caught between alluring hopes economics. own view My is that like Hayek, Carl Menger and Ludwig Mises von him, before and James Buchanan meaning social to situations. In short, what if the “matter” in our studies human to refers beings? Frantz Roger in es sence raises this question linking by behavioral to Hayek had his readers acting preciselyas a natural scientist, but thenthe subject theirof studiesstarted talkto backthem, to expressto desires,form expectations, to and attribute to entism kills scientificprogress in the studyof man. famously once quipped in addressing these ques tions what --- if matter could talk? His thought experiment problems confrontingproblems the odologicalzealotry firma to is due conviction that sci VOLUME 7 | ISSUE 5 + 6 2020 7 | ISSUE VOLUME

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both to which I answer in the affirmative using Hayek as NOTES the case study demonstrating the productivity of those an- swers; and (d) to draw out the implications of Hayek’s in- 1 This zealotry, I would insist, is not ideologically, it is primar- tellectual journey for political economy and social philoso- ily methodological and analytical with social philosophical phy. If I achieved (a) through (d), then it is my hope that implications. the reader will be prepared to join me in not only our quest 2 I have defined mainline economics on several occasions, but to understand the human condition, but to engage in the sometimes folks think is just a designation I came up with active reimagining and reconstruction of the cosmopolitan to list individuals I like rather than any coherent intellectu- liberal project for our time. al thread. Again, I disagree vehemently with this character- Let me conclude by once again thanking all of my com- ization. I have been very specific through the years—main- mentators. Their comments were so rich that my task of re- line is the substantive propositions of core economic theory sponding in any detailed manner to any of them was im- from Adam Smith onwards, mainstream economics is what possible. I hope readers will take their points and run with is currently scientifically fashionable at any time as reflected them, as I believe there are so many very productive direc- in the top five journals and top five departments as conven- tions they point to. I believe this symposium is a great dem- tionally ranked. The central substantive proposition of main- onstration that Hayek studies is not only alive and doing line economics is the “invisible hand”, and my argument has well, but that it can serve as a catalyst for a renewal of re- always been that what separates mainline economists apart search efforts beyond Hayek and generate new thinking in is that they all derive the “invisible hand” proposition from the contemporary practice of economics, political economy the rational choice postulate via institutional analysis. Any and social philosophy. methodological or analytical move that draws our scientific To Doctor Novak and Cosmos + Taxis, let me just end by attention away from this central proposition must be chal- 85 once again saying — THANK YOU. lenged. Gaus’s discussion in his commentary on the “invis- ible hand” is a very interesting direction in which evolution- ary and complexity models might capture the institutional ACKNOWLEDGMENTS emphasis I am stressing in a more persuasive manner than I have pursued. COSMOS + TAXIS + TAXIS COSMOS I would like to acknowledge the comments and criti- cisms on an earlier draft of this response by my colleagues Rosolino Candela, Chris Coyne and Virgil Storr. The usual caveat applies.

Response

Editorial Information

AIMS AND SCOPE SUBMISSIONS COSMOS + TAXIS Submitting an article to COSMOS + TAXIS implies that it is not un- COSMOS + TAXIS takes its name and inspiration from the der consideration (and has not been accepted) for publication else- Greek terms that F. A. Hayek famously invoked to connote where. COSMOS + TAXIS will endeavor to complete the refereeing the distinction between spontaneous orders and consciously process in a timely manner (i.e. a publication decision will be made planned orders. available within three months). All submissions should be in digital COSMOS + TAXIS COSMOS + TAXIS offers a forum to those concerned that the format, and emailed to: [email protected] central presuppositions of the liberal tradition have been se- Papers should be double-spaced, in 12 point font, Times New verely corroded, neglected, or misappropriated by overly ra- Roman. Accepted papers are usually about 6,000-8,000 words long. tionalistic and constructivist approaches. The hardest-won However, we are willing to consider manuscripts as long as 12,000 achievements of the liberal tradition has been the wrestling of words (and even more under very special circumstances). All self- epistemic independence from overwhelming concentrations identifying marks should be removed from the article itself to facili- of power, monopolies and capricious zealotries. The very pre- tate blind review. In addition to the article itself, an abstract should condition of knowledge is the exploitation of the epistemic vir- be submitted as a separate file (also devoid of author-identifying tues accorded by society’s situated and distributed manifold of information). Submissions should be made in Word doc format. spontaneous orders, the DNA of the modern civil condition. COSMOS + TAXIS COSMOS + TAXIS welcomes proposals for guest edited themed COSMOS + TAXIS is a joint initiative run under the auspices issues and suggestions for book reviews. Please contact the of the Department of Pathology and Laboratory Medicine at Editor-in-Chief to make a proposal: The University of British Columbia and the Political Science [email protected] Department at Simon Fraser University. All content is made freely available. All business issues and typsetting are done under the auspices of COSMOS + TAXIS The University of British Columbia. Inquiries should be addressed COSMOS + TAXIS is not committed to any particular school of to the Managing Editor: [email protected] thought but has as its central interest any discussion that falls within the classical liberal tradition as outlined above. within the classical liberal tradition as outlined above. ELEMENTS OF STYLE COSMOS + TAXIS COSMOS + TAXIS publishes papers on complexity broadly con- ceived in a manner that is accessible to a general multidisci- 1. Submissions should be in English, on consecutively numbered ceived in a manner that is accessible to a general multidisci- pages. American, Canadian and UK spellings and punctuation plinary audience with particular emphasis on political econo- my and philosophy. are acceptable as long as they adhere consistently to one or the my and philosophy. other pattern. COSMOS + TAXIS COSMOS + TAXIS offers a forum distinctively engaging the growing confluence of interest in situated and distributed lib- 2. Citations should be made in author-date format. A reference list growing confluence of interest in situated and distributed lib- of all works cited should be placed at the end of the article. eralism emanating from the Scottish tradition, Austrian and behavioral economics, non-Cartesian philosophy and moral The reference style is as follows: psychology, philosophy of social science, social epistemology, and political philosophy. Author, A. B. 2013. Title. Journal, 1(1): 1-10. and political philosophy. Author, C. D., Author, B., and Author, C. C. 2013. Article Title. COSMOS + TAXIS COSMOS + TAXIS invites submissions on a wide range of topics In: Title. City: Publisher, pp. 1-10. concerned with the dilemma of upholding ethical norms while Author, J. E. and Author, B. (Eds.) Title. City: Publisher, pp. 1-10. also being mindful of unintended consequences. Author, E. F. 2008. Title. City: Publisher. COSMOS + TAXIS COSMOS + TAXIS publishes a wide range of content: refereed 3. All notes should be as end notes. articles, topical issues and book symposia, though to moder- articles, topical issues and book symposia, though to moder- 4. No mathematical formulae in main text (but acceptable in notes ated discussion articles, literature surveys and reviews. If you’d ated discussion articles, literature surveys and reviews. If you’d or as an appendix). like to make a thematic proposal as a guest editor or suggest a Please consult the latest issue of COSMOS + TAXIS to see a fully book review, please contact the managing editor. detailed example of the Journal’s elements of style. COSMOS + TAXIS Books for review should be sent to: acknowledges the generous support of the Lotte Books for review should be sent to: & John Hecht Memorial Foundation. Laurent Dobuzinskis Department of Political Science COPYRIGHT INFORMATION Simon Fraser University Simon Fraser University COSMOS + TAXIS is licensed under a Creative Commons Attri- AQ6069—8888 University Drive AQ6069—8888 University Drive bution 4.0 International License. Beyond the standard “fair use” Burnaby, B.C. Burnaby, B.C. doctrine, reproduction of material in any other publishing modal- Canada V5A 1S6 Canada V5A 1S6 ity requires permission to be obtained from the managing editor of COSMOS + TAXIS. 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