Major Contributors

Major Contributors

Adam Smith

Jean-Baptiste Say

Friedrich A. Hayek

Hayek argues that people interpret the events they experience through the light of a preexisting system of classification, which is built through a process of cultural evolution and individual learning. The experiences people pass through have a crucial influence in them building a “growth of knowledge” process, which will define their future responses to various situations they will be facing. It is thus misleading to believe that humans can simply design a set of rules and impose it upon their environment, as is it the environment in which they live that shapes their behavior. Hayek considers that humans did not adopt laws and institutions because they were able to foresee the benefits these would bring. Rather, their adoption was due to spontaneous order, as they evolved through a process of the logic of choice. People’s behavior follows patterns that have previously been accepted by their society; this allows them to not only pursue their own means but the means of others as well.

Hayek considers that the market is not simply a guide or a communication tool, but a complex mechanism which allows participants to spontaneously adopt their actions to circumstances and events they previously had no knowledge of. The market is not a social institution but a “value-free result of the Logic of Choice”, which not only makes use of the existing knowledge market participants have but continuously generates new knowledge. The market operates as a mode of coordination and information is being transmitted through a series of general mechanisms (i.e. the price mechanism).

Hayek believes that rules constructed through the process of spontaneous order are significantly more effective than those constructed through a rational process: “It is unlikely that any individual would succeed in rationally constructing rules which would be more effective for their purpose than those which have been gradually evolved” (The Constitution of Liberty, 66).

Hayek argues that spontaneous rules are a result of human action but not human design and evolve through a process of cultural evolution, whose outgrowths lie between instinct and reason (Bouckaret 34).

“I want to call attention to what does indeed lie between instinct and reason, and which on that account is often overlooked just because it is assumed that there is nothing between the two. That is, I am chiefly concerned with cultural and moral evolution, evolution of the extended order, which is on the one hand…beyond instinct and often opposed to it, and which is, on the other hand…, incapable of being created or designed by reason” (The Fatal Conceit: The Errors of Socialism, 21).

“Just as instinct is older then custom and tradition, so then are the latter older than reason: custon and tradition stand between instinct and reason – logically, psychologically, temporally" (The Fatal Conceit: The Errors of Socialism, 23).

Samuel Bowles

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General Overview | Major Contributors | Game Theory Models | Objections/Arguments