Friedrich A. Hayek
Biographical Information
Hayek considers that human values can be - genetically determined (innate) - products of rational thought - the result of cultural evolution
Rationally Designed vs Spontaneous Orders
Hayek argues that rationalism can be both constructive and evolutionary and that there are two kinds of orders: one that is rationally designed and one that is spontaneous. While constructive rationalism has proved efficient in less complex situations (i.e. deciding on a factory's production level or deciding on how many houses to build) it is a mistake, Hayek argues, to consider that institutions should solely be the product of human rationale, as human beings are unable to have a complete understanding of the intricacies of social institutions. Rather, Hayek advocates the importance of evolutionary rationalsim and that of spontaneous order, which are significantly more efficient that the rational design, in that they evolved over the course oh human history and allow one to better understand the society in which we live. While both types of orders are employed in everyday life, it if the spontaneous order that takes precedence, as it can transmit information to players in a non-centrlized way, and thus overcome the constraints of rational planning. In addition, spontaneous orders have the ability to evolve and thus overcome any inaccuracies they might have:
"If the enlightenment has discovered that the role assigned to human reason in intelligent construction had been too small in the past, we are discovering that the task which our age is assigning to the rational construction of new institutions is far too big. What the age of rationalism - and modern positivism - has taught us to regard as senseless and meaningless formations due to accident or human caprice, turn out in many instances to be the foundations on which our capacity for rational thought rests. Man is not and never will be the master of his fate: his very reason always progresses by leading him into the unknown and unforeseen where he learns new things" cite 2
It is not important for human beings to always rationalize and perfectly understand the rules they follow. Many of human behaviors are inherited and followed for what they are-- humans adapt to rules not because they always understand them but because they fain benefits for doing so. For example, a very small percentage of the population actually understands how the language they speak came into being (i.e. grammar, vocabulary, linguistic influences, etc). However, they all adopted the rule of speaking the same language as it brings them benefits.
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 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.......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).
The Market as a Spontaneous Order
Hayek considers that the market economy is a clear example of spontaneous order. 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” (Hayek Revisited), which not only makes use of the existing knowledge market participants have but continuously generates new knowledge. Thus, although market players might employ rationalism to plan their actions, they cannot coordinate their actions solely on previously planned strategies; rather, they have to adapt to the actions of the other players in order to gain the highest payoffs. 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 agues that the role of the government and other legal institution has to be limited solely to implementing legislation that allows the market to work efficiently (i.e. laws of property, contract and tort). Any other intervention might result in unfavourable outcomes. Hayek thus strongly advocates the fact 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).
He strongly disapproves with the idea of central economic planning adopted by communist countries, which he calls a "fatal conceit", as no one can have enough information to successfully plan the economy or make decisions regarding production cite 3. It is impossible for resources to be justly allocated as economic rewards are part of an unplanned plan, Hayek argues, and are determined by one's effort, skill, and merit but also by luck or unforseeble events cite 3. The notion of "social justice" is misleading, as the only efficient way for distributing resources among the members of the society isthrough the process of spontaneous order.
Hayek on the Use of Knowledge in Society
Hayek considers that the problem of a rational economic order comes from the fact that one cannot obtain “knowledge of the circumstances of which we must make use” cite 4. in a concentrated or integrated form but in dispersed bits of information from various perspectives, which often come in conflict with one another. The “economic problem” of the society is not a matter of how to distribute the given resources; rather it is a problem caused by the fact that not all the members of the society are being given equal amount of information, which makes it hard for them to coordinate their actions. Unfortunately, Hayek considers, this fundamental problem has been mostly disregarded by modern economic theory and misconceptions about the economic problem of the society are causing controversies about the proper economic policies that should be implemented. Planning refers to the way available resources should be allocated. Efficient economic systems often fail to be achieved due to the fact that information regarding the planning process is not directly given to planners but to intermediaries who later convey it to those in charge of planning—the way in which information is being transmitted is not always accurate, so planners are often given incomplete accounts, which result in unfavorable outcomes.
A second problem, Hayek believes, comes from determining whether planning is to be done centrally, by one authority or whether it is to be split among many individuals, who can later bring their work together. While many consider scientific knowledge to be the “sum of all knowledge”, and thus argue in favor of suitably chosen experts being given the responsibility to “command all the best knowledge available” cite 5. Hayek opposes this viewpoint as he believes that not all knowledge is supposed to be given. It is misleading, Hayek argues, to assume that all knowledge should be given to a single mind (i.e. a centralized economic system), as efficiency cannot be achieved. Hayek considers that common individuals—and not just the intellectual elite—posses unique information (“knowledge of the particular circumstances of time and place” cite 6., which can only be made of use to the whole society if these people are given the opportunity to actively get involved in the economic process. Thus, people who would be categorized as “inferior” can actually perform certain functions at significantly higher levels than those considered to master all the knowledge. Hayek thus considers that a fundamental problem lies in how to make, the “knowledge of the particular circumstances of time and place” cite 7. widely available, as it is so broadly dispersed. It is impossible, he argues for this type of knowledge to be translated into statistical form by a central authority.
Since all the players in the market are part of a larger puzzle, and knowledge is distributed among them, a central system running the economy could never achieve the same efficiency as a free market. Hayek believes that the challenge the economic system faces lies in finding a way to incorporate people, each of who has partial knowledge, in the economic system. Thus, planning has to be done is such a way so that ultimate decisions are left to the “man on the spot”, people who are familiar to the circumstances they're dealing with. Hayek argues that in a free market, the way in which players can “communicate” is through the price system, which can inform people of the supply and demand of various resources in the economy. Thus, participants do not need to have a comprehensive understand of the economic system in order to take the right decisions, as the price system can provide them with the adequate information they need in fulfilling their transactions. Spontaneous order thus will make optimal use of knowledge and market efficiency will be attained.
Spontaneous Order and the Rule of Law
Hayek thinks that the rule of law “means that a government in all its actions is bound by rules fixed and announced beforehand -- rules which make it possible to foresee with fair certainty how the authority will use its coercive powers in given circumstances, and to plan one's individual affairs on the basis of this knowledge”''cite 8. Hayek considers that spontaneous systems of rules are significantly more efficient than any other rules (i.e. rules selected by reason) in fulfilling the needs of people, as they were shaped through an evolutionary process, which selected the appropriate rules and institutions cite 9
Thus, rules can only tell people what not to do.
Hayek considers that laws should give people freedom to
This means that the rules and institutions that we inherit are neither (1) the product of a biological causality which is traceable to genetic structures (as the extreme sociobiologists would have it) nor (2) do they emanate from an unaided reason. They are 'learnt rules' which, although they may not yet be formulated explicitly, have been transmitted through a process of cultural evolution. Since an evolutionary order is unpredictable it follows that "we will have less power over the details of such an order that we would of one which we produce by arrangement."[74]
