The Encyclopedia of Libertarianism

Spontaneous Order

Spontaneous order theory is properly located in the history of social science. Indeed, the only part of social theory that can genuinely be said to be scientific derives from it. This scientific nature is seen in microeconomics, where the theory of the market describes how the voluntary actions of discrete individuals produce a predictable order from which we explain all the paraphernalia of modern economics. The main features of such an order are not designed by any one person or institution, but emerge spontaneously once individuals are left to pursue their private interests. Attempts to design an economic order, as in socialism, are condemned by Hayek as constructivist rationalism.

The theory of spontaneous order goes beyond economics because it seeks to explain how a range of phenomena, including law, emerged in a similar manner. There is little the government needs to do because essential institutions have been provided, seemingly by nature. The theory derives, however, from a novel distinction between nature and convention. Certain phenomena, like the weather, are purely natural and unalterable, whereas others are conventional and readily changeable, as is a statute. But there is a third range of phenomena, like the market, that are not entirely natural, but are by no means conventional and cannot be easily cast aside.

What is particularly significant for spontaneous order theory is its economical use of reason. Its theorists are anti-rationalists in that they explain effective social order not as a result of conscious planning, but by reference to instincts, habits, experience, and, most important, evolution. These theorists argue that traditional ways of doing things, which have developed gradually, are superior to any schemes conceived a priori. A key element of the theory is the conceptual distinction between law and the state. Law develops spontaneously, whereas the state is entirely artificial. The theory of spontaneous order does not depend on any special qualities of the person for the production of social stability and predictability. Whereas classical republicanism asks individuals to subordinate their private interests to the common good, spontaneous order theory concludes that the common good emerges from self-interested motives: It is an unintended consequence of human actions. These unintended consequences, which emerge almost by accident, are beneficial and are then imitated.

Although freedom is of great social significance, it has no necessary moral value. In spontaneous order theory, liberty is a mechanism through which the coordination of divergent human purposes is achieved. The same holds for individualism, which also is a mechanism for achieving divergent human purposes. Thus, although spontaneous order theory embraces individualism, it remains methodologically rigorous in that it is neither arbitrary nor nihilistic.

The theory of spontaneous order resolves all social action into individual action. Concepts such as society are shorthand expressions for multiple individual actions. Thus, although the doctrine does explain social aggregates, these aggregates are reducible to individual volitions. Although all libertarians accept the theory of spontaneous order, disagreement exists about the extent of this theory’s explanatory power and whether at times its antirationalism may undercut the natural law tradition, which requires the use of reason to determine which actions are morally permissible and which are not.

The origins of the doctrine of spontaneous order are commonly thought to lie in the 18th-century Scottish Enlightenment and the beginnings of modern market economics, but the earliest reflections on the idea that a society could be conceived of as a natural process that required little in the way of central direction long predate this era. The ancient Chinese philosopher Chuang Tzu was perhaps the first to write of such a possibility. He said that “Each individual should pursue his own predilections… . One is led to the ideal of non-governing and to the method of letting the world alone.”

In ancient Greece and Rome, the political was considered the highest human achievement, and the emphasis on the public sphere as the realization of liberty precluded their social theories from meeting the standards of spontaneous order. Indeed, much of spontaneous order theory involves a rejection of the classical ideal of “public spirit.”

In the late medieval period, the first sophisticated expressions of the idea of spontaneous order were suggested in the writings on economics from the school of Salamanca. These 16th-century Jesuit priests, although Aristotelian in intellectual origin, were able to adapt that unpromising doctrine to the features of a market economy. Their theory of spontaneous order derives almost entirely from an understanding of a market economy, characterized by the price mechanism, subjective value, and supply and demand. Against the prevailing cost-of-production, or labor, theory of value, derived from Christian natural law, the Salamanca school was convinced that all economic value emanated from subjective choice and concluded that cost-of-production theories of value provided a bogus rationale for raising prices above market clearing levels. Writers like Molina identified the “just” price with the competitive price. Although there is no notion of the margin among these writers, their theories had enough basic market economics to explain, and evaluate favorably, the spontaneous self-correcting processes of free exchange.

A major achievement of the Salamanca school was its discovery of the quantity theory of money. Sixteenth- and 17th-century Spain had experienced a massive inflation, a result of the influx of gold and silver from the New World. Molina and other Salamanca writers developed a theory of inflation that, in turn, led to their justifying banking; profits on exchange dealings were not usurious, they argued, because they contributed to production and were not against natural law—despite the fact that both canon and civil law forbade usury.

It has always been a strong theme of spontaneous order that the automatic coordinating and self-correcting mechanisms in society extended not just to economics, but to other areas. In the 17th century, it was extended to a theory of common law by Sir Matthew Hale, who concluded that law did not derive from abstract reason, but rather required a kind of practical reasoning. Law depended on the application of general principles to particular cases, and this elaboration was largely a function of experience. It is better to rely on a body of stable and known rules “though the particular reason for them appear not.” Hale attacked Hobbes’s theory of sovereignty. While conceding that the final authority of law rested on the King or Parliament, he did not think that they should be unconstrained. He was writing in an English tradition that regarded common law as superior to statue, a battle that the judiciary eventually lost after 1688 when the British constitution became associated with the unlimited power of a sovereign Parliament. It is, of course, true that the common law system has survived, but that raises a fundamental problem regarding spontaneous order theory—namely, whether it simply celebrates the unaided survival of a social order or whether it also protects the liberty of the individual. It might not prove sufficient to ensure a free society to solely rely on institutions that are the result of social evolution. It is possible that a written constitution determined by an abstract reason may be needed for the preservation of the spontaneous order. Moreover, was not the sovereignty of Parliament the result of spontaneous order inasmuch as it was established in Britain by a series of common law decisions that are consistent with Hale’s jurisprudence?

Spontaneous order theory proposed that orderly societies could emerge from the self-interested actions of decentralized individuals who had no direct concern with the common good. Yet political philosophy had always assumed that the pursuit of the common good depends on the suspension of self-interest. Therefore, what is needed is a theory that makes self-interest consistent with socially valuable action. The foundations for that approach were laid down by Bernard Mandeville. He was the author of the “amoral” “Fable of the Bees,” published in 1714. Mandeville was writing at a time of moral fervor when egoism was condemned and people were urged to act altruistically by sacrificing their self-interest in favor of the public interest. Mandeville contended that this endeavor was vain and pointless and that self-interest unintentionally generated social well-being. The “bees,” when acting egoistically, he observed, produced the division of labor, the free market, and international trade. This object lesson led him to contrast virtue and commerce and to praise egoism: “Thus every part was full of vice/Yet the whole mass a paradise.” The actions of the vilest contributed something valuable. “The worst of all the multitude/Did something for the common good.”

However, Mandeville did not offer a broader explanation of how self-interest could generate social harmony in economics and society. That problem was solved by David Hume, who, while destroying the rational foundations of ethics, was yet able to produce a compelling morality and one appropriate for spontaneous order. His claim was to “whittle” down the claims of reason. He maintained that “it is not contrary to reason to prefer the destruction of the world to the scratching of my finger,” but this paradox did not preclude a demonstration of spontaneous order. Further, Hume conceived of self-interest as more or less constant: “As it is impossible to change or correct anything material in our nature, the utmost we can do is to change our circumstances and situation and render the observance of the laws of justice our nearest interest and their violation the most remote.”

Hume observed that we learn the laws of justice by constant interaction, often through trading with others, which quickly leads to the establishment of three social rules whose origins are in convention—the stability of ownership, its transference by consent, and the performance of contract. Whereas Hobbes saw the social game as a once- and-for-all experience in which desperate people surrender all their rights to a sovereign, Hume envisaged repeat games in which people learn the advantages of cooperation. However, the nature of these rules does not change; they are derived from “the confined generosity of man, along with the scant provision nature has made for his wants.” The conventions that develop through repeated social interaction are artificial, but still natural to man. Men also develop the capacity for reciprocity by which selfish men can advance their interests by occasionally acting generously: “I learn to do a service for another,” he wrote, “without bearing any real kindness because I foresee that (the other) will return my service.”

Adam Smith, like Hume, was highly skeptical of the role of reason in human affairs, especially of attempts to make society conform to an abstract plan divorced from experience: The legislator, he maintained, would not have the knowledge of time and place that individuals, with their natural liberty, employ to coordinate human actions. Most valuable social institutions are not the product of reason. The division of labor is not the effect of human wisdom, but is the necessary consequence of “a certain propensity to truck, barter and exchange one thing for another.” In general, if people are permitted to exercise their natural liberty, a social order will emerge that is far more complex than anything deliberately designed. Indeed, Smith was alert to the fact that social well-being was the product of unintended action. He famously wrote of man that “by pursing his own interest … he frequently promotes that of society more effectually than when he really intends to promote it.” He observed that the market coordinated human action spontaneously and the state could not improve on its efficiency: “No regulation of commerce can increase the quantity of industry in any part of society beyond what its capital can maintain.”

However, spontaneity—without conscious intervention—was not sufficient for Smith. He thus offered an elementary theory of public goods, those it would not profit any private agent to produce. Smith also modified his antirepublican individualism when he suggested that an obsessive concern with commerce might undermine communal loyalty and produce antisocial effects. People might become alienated and fail to internalize those rules that are necessary for the maintenance of spontaneous order. In addition, Smith never saw the advantages of certain spontaneously generated commercial institutions, such as the joint stock company. Yet, despite the qualifications set forth, Smith presented a compelling case for spontaneous order.

In addition to Hume and Smith, the Scottish social philosopher Adam Ferguson wrote firmly in the antirationalist tradition. He viewed society as coterminous with man and its bonds arising “from the instincts, not the speculations of men.” Societies, he noted, progress by a process of evolution, and “nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design.” An especially important factor in the evolutionary process was the development and protection of private property. After Smith and Ferguson, the Scottish school declined in significance for spontaneous order theory partly because they became associated with the labor theory of value, which found its fullest expression in the work of David Ricardo and, ultimately, Karl Marx.

Among more recent writers, the notion of spontaneous order was taken up by many modern economists, most notably among the writers of the Austrian School. Carl Menger’s Problems in Sociology and Economics sought to refute the claims of the German historicists who denied the validity of abstract, universal laws of economics, claiming that economics concerned itself with historical truths limited by time and circumstance. Menger employed spontaneous order theory to support his conclusions regarding the universal laws of economics. He used the method of abstraction to explain the emergence of money, markets, language, and law. They were what Menger called organic phenomenabecause they were the results of almost natural processes. He contrasted them with pragmatic institutions that are the result of human deliberation: “Markets, competition, money and numerous other social structures are already met with in epochs of history where we cannot properly speak of purposive activity of the community … directed towards establishing them,” he wrote. In one example, money, Menger showed how actions that resulted from self-interest led to the establishment of one good (e.g., gold, as a medium of exchange, which was useful in many transactions and had none of the inefficiencies of barter).

Menger, however, never dogmatically claimed that organic institutions were superior to pragmatic ones. Explaining common law, for example, he wrote that it “proved harmful to the common good often enough … and legislation has just as often changed common law in a way benefiting the common good.” Still Menger provided the methodological materials with which Friedrich A. Hayek constructed a systematic normative theory of spontaneous order.

Hayek’s theory of spontaneous order derives from his philosophical assaults on rationalism and scientism. Hayek rejected the idea that the social world was governed by laws analogous to physical laws and that reason can uncover them, thus allowing society to be reorganized according to rational principles. We lack the knowledge to make the predictions on which such planning depends. The future is unknowable because knowledge is dispersed across possibly millions of actors and is not available to any one person or institution, but has to be coordinated by the market. Hayek describes a spontaneous market order as a catallaxy. Unlike an economy, which has a designed purpose, a catallaxy has none. It is simply a network of individual agents, households, and firms each pursuing its own ends and purposes. However, their decentralized actions are coordinated through the exchange system. A catallaxy rests on “the reconciliation of different purposes for the mutual benefit of the participants.” Such an order produces a tendency to equilibrium primarily through competition and entrepreneurship.

The postwar period became dominated by Keynesian economics, which held, in sharp contrast to the idea that there existed a spontaneous economic order, that a properly functioning economic system required substantial government intervention. It was the inflation of the 1970s that eventually brought some kind of change to views of the market. The gradual reduction of government intervention in many areas of the economy and the adoption of a tighter monetary policy that slowed inflation gave the idea of the spontaneous market order some respectability.

During the Second World War, Hayek realized that the case for a free society could not be made on the basis of economics alone, and in The Road to Serfdom he extended the theory of spontaneous order to cover law, politics, and the constitutional structure of nations. He maintained that, under the rules of just conduct, a complex social order will be generated by free action. He described these rules in two major works, The Constitution of Liberty and the three-volume Law, Legislation and Liberty. In The Constitution of Liberty, Hayek suggested that, although it was possible that a deliberately designed code of law could provide rules for a free society, evolution was a most appropriate mechanism for the formation of these laws. This evolutionary development was the case with the English common law, which was never consciously designed, but developed in a case-by-case manner with no purpose beyond meeting the immediate needs of the contending parties. The result was an unintended order that was compatible with a free society. The design of a code, he contended, was an example of constructivist rationalism, doomed to failure inasmuch as men did not possess sufficient knowledge to formulate such rules.

The theory of spontaneous order serves as a crucial underpinning to any libertarian theory of society because it dictates that ordered arrangements and cooperative endeavors do not require an orderer and that, in fact, such attempts to plan social institutions, such as the economy, are doomed to failure.

 

Further Readings

Barry, Norman, P. “The Tradition of Spontaneous Order.” Literature of Liberty 5 (Summer 1982): 7–58.

Constant, Benjamin. The Principles of Politics Applicable to All Governments. Dennis O’Keeffe, trans. Indianapolis, IN: Liberty Fund, 2003.

Ferguson, Adam. An Essay on Civil Society. Edinburgh: Edinburgh University Press, 1966.

Grice Hutchinson, Marjorie. Early Economic Thought in Spain. London: Allen & Unwin, 1993.

Hamowy, Ronald. The Scottish Enlightenment and the Theory of Spontaneous Order. Carbondale: Southern Illinois University Press, 1984.

Hayek, Friedrich A. The Constitution of Liberty. Chicago: University of Chicago Press, 1960.

–––––. The Counter-Revolution of Science: Studies in the Abuse of Reason. Indianapolis, IN: Liberty Classics, 1979.

–––––. The Mirage of Social Justice. Chicago: University of Chicago Press, 1976.

–––––. Monetary Theory and the Trade Cycle. New York: A. M. Kelley, 1933.

–––––. Rules and Order. Chicago: University of Chicago Press, 1973.

–––––. Studies in Philosophy, Politics and Economics. Chicago: University of Chicago Press, 1964.

Hume, David. A Treatise of Human Nature. L. Selby Brigg, ed. Oxford: Clarendon Press, 1987.

Mandeville, Bernard. The Fable of the Bees. F. B. Kaye, ed. London: Oxford University Press, 1924.

Menger, Carl. Investigations into the Methods of the Social Sciences with Special Reference to Economics. New York: New York University Press, 1985.

Smith, Adam. An Enquiry into the Nature and Causes of the Wealth of Nations. R. H. Campbell and A. S. Skinner, eds. London: Oxford University Press, 1976.

Originally published .