essays

Dec 1, 1982

F. A. Hayek and the Rebirth of Classical Liberalism

“In recalling [classical liberalism] from what had sometimes seemed an irrecoverable oblivion, Hayek’s work is a hopeful augury for an uncertain future.”

Introduction: The Revival of Interest in Hayek—A Unified Research Program in Hayek’s Writings?

In the recent revival of public and scholarly interest in the values of limited government and the market order, no one has been more centrally significant than Friedrich A. Hayek. His works have figured as a constant point of reference in the discussions both of the libertarian and conservative theories of the market economy; they have also provided a focal point of attack for interventionist and collectivist critics of the market. Hayek’s return to such a pivotal position in intellectual life is remarkable when we recall that for several decades his work was subjected to neglect and obscurity. It was not until 1974 at the age of 75 that he was belatedly acknowledged by being awarded the Nobel Memorial Prize in Economic Science. During the three decades after 1945, when certain Keynesian ideas seemed to have been vindicated by the prevailing government policies of economic interventionism, Hayek may have seemed an intransigent and isolated figure, whose chief importance was that of an indefatigable critic of the spirit of the age. It was, however, during these very same years, in which he turned from economic theory to political thought, that Hayek made his greatest contributions thus far to the formulation of a public philosophy, including most notably his Constitution of Liberty (1960), surely the most powerful and profound defense of individual freedom in our time. It is noteworthy that, in the revival of interest in Hayek’s work, his contributions to political philosophy have attracted as much interest as have his works in economic theory.

The Unity and Coherence of Hayek’s Writings: Conception of Mind & Unity of Knowledge

In all of this revival of scholarly interest, however, Hayek’s work has rarely been viewed as a whole. In fact, it has often been suggested that what we find in his writings is a series of unconnected episodes, in which questions are addressed in a variety of disciplines on a number of disparate historical occasions, rather then a coherent research program implemented over the years. Even Hayek’s friends have sometimes discerned important tensions and conflicts in his writings, leading them to argue that his work encompasses methodological and political positions which are in the last resort incompatible. Against this view, to which I once subscribed myself, I want now to submit that Hayek’s work does indeed disclose a coherent system of ideas. Hayek’s system of ideas may not perhaps be wholly stable, but in this system positions covering a range of academic disciplines are in fact informed and unified by a small number of fundamental philosophical conceptions. Identifying these basic philosophical positions, and showing how they infuse his entire work, is the chief aim of this review of Hayek’s work. It will not be my argument that Hayek’s system lacks difficulties or internal tensions. I will try, however, to show that his work is given a cohesive and unitary character by the claims in theory of knowledge and in theoretical psychology which inform and govern his contributions to many specific debates.

My strategy in this survey of Hayek’s work is to seek the unifying wellspring of his thought in his conception of the mind and in his account of the nature and limits of human knowledge. My argument will be that Hayek’s general philosophy—a highly distinctive development of post-Kantian critical philosophy—informs and shapes his contributions to a variety of academic disciplines (jurisprudence and social philosophy as much as economic theory and the history of ideas), and Hayek’s philosophy does so in ways that have been persistently neglected or misunderstood. In particular, Hayek’s account of the structure of the mind, of the nature and limits of human knowledge, and of the use and abuse of reason in human life pervades his writings down to their last details, and gives to his work over the years and across many disciplinary boundaries the character of a coherent system. We can see the structure of Hayek’s system of ideas and we can realize its capacity to yield an integrated view of man and society only when we have adequately specified its philosophical foundations. It is only once we have grasped these philosophical foundations of his thought, again, that we may fully appreciate his originality as a thinker and the measure of his achievement as a social theorist.

Overview of Topics Covered in This Essay

I begin my survey by examining briefly the chief claims Hayek makes in his centrally important but sadly neglected treatise in theoretical psychology, The Sensory Order(1952), where he most systematically and explicitly develops his account of the mind and of human knowledge. Having set out the principal features of Hayek’s view of the mind and of the forms of human knowledge, I shall try to show how these conceptions inform his account of a spontaneous order in society, and how they condition his distinction between ‘economy’ and ‘catallaxy,’ his elaboration of the argument about economic calculation under socialism, and his distinctive position as to the appropriate theory and methods for economics. I proceed then to examine how Hayek applies his general philosophy to the relations of individual liberty with the rule of law. In the course of this survey I will canvass some of the most important criticisms of Hayek’s system, concentrating particularly on the claim that his conception of a spontaneous order in society is unclear, and his use of it objectionable. It is often argued that, when taken in conjunction with its twin idea of cultural evolution by the natural selection of rival social practices, the idea of spontaneous social order has a conservative rather than any liberal or libertarian implication, since it appears to entail blind submission to the result of any unplanned social process. Against this criticism, which expresses the common view that Hayek’s political thought is an unstable compound of conservative or traditionalist and liberal or libertarian elements, I will argue that the idea of spontaneous social order in Hayek’s work is best seen as a value-free explanatory notion and that invoking this idea illuminates rather than undermines the bases for the commitment to liberty.

In developing my argument by way of an examination of the criticisms of a number of writers in opposed intellectual traditions—Michael Oakeshott, James Buchanan, and Irving Kristol, for example—I will conclude that Hayek’s chief achievement is in his reviving the intellectual tradition of classical liberalism of which varied strands in contemporary conservatism and libertarianism are quarreling offspring. In the course of this survey I will, also, identify three principal achievements of Hayek’s social philosophy: (1) his demonstration of the import for social theory of an erroneous Cartesian theory of the mind and the role of this theory in inspiring modern attempts at the rational design of social life; (2) his theory of the liberal order, which is a synthesis of the theories of justice of Immanuel Kant (1724–1804) and David Hume (1711–1776) with a devastating critique of contemporary conceptions of distributive justice; and (3) his proposal for a resolution of a central difficulty of classical liberal theory in the intriguing ideas of a market in traditions.

The upshot of my assessment of Hayek’s thought will be that, whereas his critics have identified ambiguities, tensions, and unclarities in some of his formulations, the interest and appeal of his system remains unimpeached. Despite (or even because of) its problematic aspects, Hayek’s system of ideas remains a powerful and compelling research program—in my own opinion, the most promising we have at our disposal—for classical liberal social philosophy.

Hayek’s General Philosophy—The Kantian Heritage

The entirety of Hayek’s work—and, above all, his work in epistemology, psychology, ethics, and the theory of law—is informed by a distinctively Kantian approach. In its most fundamental aspect, Hayek’s thought is Kantian in its denial of our capacity to know things as they are or this world as it is. It is in his denial that we can know things as they are, and in his insistence that the order we find in our experiences, including even our sensory experiences, is the product of the creative activity of our minds rather than a reality given to us by the world, that Hayek’s Kantianism consists. It follows from this skeptical Kantian standpoint that the task of philosophy cannot be that of uncovering the necessary characters of things. The keynote of critical philosophy, after all, is the impossibility of our attaining any external or transcendental standpoint on human thought from which we could develop a conception of the world that is wholly uncontaminated by human experiences or interest. We find Kant’s own writings—above all the Critique of Pure Reason (1781)—a case against the possibility of speculative metaphysics which Hayek himself has always taken to be devastating and conclusive. It is a fundamental conviction of Hayek’s, and one that he has in common with all those who stand in the tradition of post-Kantian critical philosophy, that we cannot so step out of our human point of view as to attain a presuppositionless perspective on the world as a whole and as it is in itself. The traditional aspiration of western philosophy—to develop a speculative metaphysics in terms of which human thought may be justified and reformed—must accordingly be abandoned. The task of philosophy, for Hayek as for Kant, is not the construction of any metaphysical system, but the investigation of the limits of reason. It is a reflexive rather than a constructive inquiry, since all criticism—in ethics as much as in science—must in the end be immanent criticism. In philosophy as in life, Hayek avers, we must take much for granted, or else we will never get started.

Hayek’s uncompromisingly skeptical Kantianism is strongly evidenced in The Sensory Order (see Hayek bibliography, B-10). There Hayek disavows any concern as to “how things really are in the world,” affirming that “…a question like ‘what is X?’ has meaning only within a given order, and…within this limit it must always refer to the relation of one particular event to other events belonging to the same order.” Above all, the distinction between appearance and reality, which Hayek sees as best avoided in scientific discourse, is not to be identified with the distinction between the mental or sensory order and the physical or material order. The aim of scientific investigation is not, then, for Hayek, the discovery behind the veil of appearance of the natures or essences of things in themselves, for, with Kant and against Aristotelian essentialism, he stigmatizes the notion of essence or absolute reality as useless or harmful in science and in philosophy. The aim of science can only be the development of a system of categories or principles, in the end organized wholly deductively, which is adequate to the experience it seeks to order.

Hayek as a Skeptical Kantian

Hayek is a Kantian, then, in disavowing in science or in philosophy any Aristotelian method of seeking the essences or natures of things. We cannot know how things are in the world, but only how our mind itself organizes the jumble of its experiences. He is Kantian, again, in repudiating the belief, common to empiricists and positivists such as David Hume and Ernst Mach, that there is available to us a ground of elementary sensory impressions, untainted by conceptual thought, which can serve as the foundation for the house of human knowledge. Against this empiricist dogma, Hayek is emphatic that everything in the sensory order is abstract, conceptual and theory-laden in character: “It will be the central thesis of the theory to be outlined that it is not merely a part but the whole of sensory qualities which is…an ‘interpretation’ based on the experience of the individual or the race. The conception of an original pure core of sensation which is merely modified by experience is an entirely unnecessary fiction.” Again, he tells us that “the elimination of the hypothetical ‘pure’ or ‘primary’ core of sensation, supposed not to be due to earlier experience, but either to involve some direct communication of properties of the external objects, or to constitute irreducible mental atoms or elements, disposes of various philosophical puzzles which arise from the lack of meaning of these hypotheses.” The map or model we form of the world, in Hayek’s view, is in no important respect grounded in a basis of sheer sense-data, themselves supposed to be incorrigible. Rather, the picture we form of the world emerges straight from our interaction with the world, and it is always abstract in selecting some among the infinite aspects which the world contains, most of which we are bound to pass by as without interest to us.

Three Influences on Hayek’s Skeptical Kantianism: Mach, Popper, and Wittgenstein

Hayek’s theory of knowledge is Kantian, we have seen, in affirming that the order we find in the world is given to it by the organizing structure of our own mind and in claiming that even sensory experiences are suffused with the ordering concepts of the human mind. His view of the mind, then, is Kantian in that it accords a very great measure of creative power to the mind, which is neither a receptacle for the passive absorption of fugitive sensations, nor yet a mirror in which the world’s necessities are reflected.

1. Ernst Mach and Metaphysical Neutrality

There are a number of influences on Hayek, however, which give his Kantianism a profoundly distinctive and original aspect. The first of these influences is the work of Ernst Mach (1838–1916), the positivist philosopher whose ideas dominated much of Austro-German intellectual life in the decades of Hayek’s youth. Hayek’s debts to Mach are not so much in the theory of knowledge, as in the attitude both take to certain traditional metaphysical questions. I have observed already that Hayek dissented radically from the Humean and Machian belief that human knowledge could be reconstructed on the basis of elementary sensory impressions, and throughout his writings Hayek has always repudiated as incoherent or unworkable the reductionist projects of phenomenalism in the theory of perception and behaviorism in the philosophy of mind. In these areas of philosophy, then, Hayek’s work has been strongly antipathetic to distinctively positivistic ambitions for a unified science. At the same time, while never endorsing the dogma of the Vienna Circle that metaphysical utterances are literally nonsensical, Hayek has often voiced the view that many traditional metaphysical questions express “phantom-problems.”

In both The Sensory Order and later in The Constitution of Liberty, Hayek affirms that the age-old controversy about the freedom of the will embodies such a phantom-problem. Hayek’s ‘compatibilist’ standpoint in respect of freedom of the will—his belief that the casual determination of human actions is fully compatible with ascribing responsibility to human agents for what they do—is analogous with his stance on the mind-body question. In both controversies Hayek is concerned to deny any ultimate dualism in metaphysics or ontology, while at the same time insisting that a dualism in our practical thought and in scientific method is unavoidable for us. Thus he says of the relations of the mental and the physical domains that “While our theory leads us to deny any ultimate dualism of the forces governing the realms of the mind and that of the physical world respectively, it forces us at the same time to recognize that for practical purposes we shall always have to adopt a dualistic view.” And Hayek concludes his study of the foundations of theoretical psychology in The Sensory Order with the claim that “to us mind must remain forever a realm of its own, which we can know only through directly experiencing it, but which we shall never be able to fully explain or to ‘reduce’ to something else.”

Hayek’s thought has a Machian positivist aspect, then, not in the theories of mind or perception, but in its attitude to traditional metaphysical questions, which is dissolutionist and deflationary. There is yet another link with positivism. Notwithstanding Hayek’s opposition to any sort of reductionism, whether sensationalist or physicalist, he seems to be a monist in ontology, averring that “mind is thus the order prevailing in a particular part of the physical universe—that part of it which is ourselves.” Hayek may seem here to be qualifying or withdrawing from that stance of metaphysical neutrality which in Machian spirit he commends, but this appearance may be delusive. There is much to suggest that, when Hayek denies any ultimate dualism in the nature of things, he is not lapsing into an idiom of essences or natural kinds, but simply observing—much in the fashion of the American pragmatist philosopher, W. V. Quine—that nothing in our experience compels us to adopt ideas of mental or physical substance. Though Hayek has not to my knowledge ever pronounced explicitly on the question, the whole tenor of his thought inclines to a Quinean pragmatist view of ontological commitments. In his skeptical and pragmatist attitude to ultimate questions in metaphysics and ontology, Hayek lines up with many positivists rather than with Kantian critical philosophy—though positivists themselves sometimes claim, with some justification, to be treading a Kantian path.

2. Karl Popper: The Growth of Knowledge

A second influence on Hayek’s general philosophy which gives it a distinctive temper is the thought of his friend, Karl Popper (b. 1902). I mean here, not Popper’s hypothetico-deductive account of scientific method, which there is evidence that Hayek held prior to his meeting with Popper, nor yet Popper’s proposal (which Hayek was soon to accept) that falsifiability rather than verifiability should be adopted as a criterion of demarcation between the scientific and the non-scientific. Again, Hayek has under Popper’s influence come to make an important distinction between types of rationalism, such that “critical rationalism” is commended and “constructivistic rationalism” condemned. But this is not what I have in mind. I refer rather to certain striking affinities between Hayek’s view of the growth of knowledge and that adumbrated in Popper’s later writings on “evolutionary epistemology.” As early as the manuscript which later became The Sensory Order(published in 1952, but composed in the twenties), Hayek made it clear that the principles of classification embodied in the nervous system were not for him fixed data; experience constantly forced reclassification on us. In his later writings, Hayek is explicit that the human mind is itself an evolutionary product and that its structure is therefore variable and not constant. The structural principles or fundamental categories which our minds contain ought not, then, to be interpreted in Cartesian fashion as universal and necessary axioms, reflecting the natural necessities of the world, but rather as constituting evolutionary adaptations of the human organism to the world that it inhabits.

The striking similarity between Popper’s later views, and those expounded by Hayek inThe Sensory Order, is shown by Popper’s own application of the evolutionist standpoint in epistemology to the theory of perception:

…if we start from a critical commonsense realism…then we shall take man as one of the animals, and human knowledge as essentially almost as fallible as animal knowledge. We shall suppose the animal senses to have evolved from primitive beginnings; and we shall look therefore on our own sense, essentially, as part of a decoding mechanism—a mechanism which decodes, more or less successfully, the encoded information about the world which manages to reach us by sensory means.

J.W.N. Watkins’ comment on this view is as apposite in the respect of Hayek as it is of Popper:

Kant saw very clearly that the empiricist account of sense experience creates and cannot solve the problem of how the manifold and very various data which reach a man’s mind from his various senses get unified into a coherent experience.

Kant’s solution consisted, essentially, in leaving the old quasimechanistic account of sense-organs intact, and endowing the mind with a powerful set of organizing categories—free, universal and necessary—which unify and structure what would otherwise be a mad jumble.

Popper’s evolutionist view modifies Kant’s view at both ends: interpretative principles lose their fixed and necessary character, and sense organs lose their merely causal and mechanistic character.

Hayek’s account of sense perception anticipates Popper’s later views in a most striking fashion, because in both sensation is conceived as a decoding mechanism, which transmits to us in a highly abstract fashion information about our external environment. Again, both Hayek and Popper share the skeptical Kantian view that the order we find in the world is given to it by the creative activity of our own minds: as Hayek himself puts it uncompromisingly in The Sensory Order, “The fact that the world which we know seems wholly an orderly world may thus be merely a result of the method by which we perceive it.” One difference between Hayek and Popper is in the fact that, at any rate in his published work to date, Hayek has not followed Popper in his ontological speculations about a world of abstract or virtual entities or intelligibles.

3. Wittgenstein & Hayek

A third influence on Hayek’s thought which gives his view of knowledge and the mind a very distinctive character is that of his relative, Ludwig Wittgenstein (1899-1951). This influence runs deep, and is seen not only in the style and presentation of The Sensory Order, which parallels in an obvious way that of Wittgenstein’s Tractatus, but in many areas of Hayek’s system of ideas. It is shown, for example, in Hayek’s recurrent interest in the way in which the language in which we speak shapes our thoughts and forms our picture of the world. In fact, Hayek’s interest in language, and in a critique of language, predates Wittgenstein’s work, inasmuch as he had an early preoccupation with the work of Fritz Mauthner, the now almost forgotten philosopher of radical nominalism whom Wittgenstein mentions (somewhat dismissively) in the Tractatus. There are, however, many evidences that Wittgenstein’s work reinforced Hayek’s conviction that the study of language is a necessary precondition of the study of human thought, and an indispensable prophylactic to the principal disorders of the intellect. Examples which may be adduced are Hayek’s studies of the confusion of language in political thought and, most obviously, perhaps, of his emphasis on the role of social rules in the transmission of practical knowledge.

It is on this last point that one of the most distinctive features of Hayek’s Kantianism, its pragmatist aspect, is clearest. Of course there is a recognition in Kant himself that knowledge requires judgment, a special faculty, the Urteilskraft, which cannot be given any complete or adequate specification in propositional terms, and whose exercise is necessary for the application of any rule. In the sense that we must exercise this faculty of judgment even before we can apply a rule, it is action which is at the root of our very knowledge itself. Hayek’s concern is not with this ultimate dependency of rule following upon judgment—which the later Wittgenstein, perhaps following Kant, emphasizes—but rather with the way that knowledge of all sorts, but especially social knowledge, is embodied in rules. Our perceptual processes, indeed all our processes of thought, are governed by rules which we do not normally articulate, which in some cases are necessarily beyond articulation by us, but which we rely upon for the efficiency of all our action in the world. Indeed, it is not too much to say that, for Hayek (notwithstanding his stress on the abstract or conceptual character of our sensory knowledge) all our knowledge is at bottom practical or tacit knowledge: it consists, not in propositions or theories, but in habits and dispositions to act in a rule-governed fashion. There is here an interesting parallel with Popper’s view, which sees even our sense organs as being themselves embodied theories.

There is much in Hayek’s writings to suggest that he takes what Gilbert Ryle calls “knowing how,” what Michael Polanyi calls tacit knowing, what Michael Oakeshott calls the traditional knowledge, to be the wellspring of all our knowledge. It is in this sense—in holding the stuff of knowledge to be at bottom practical—that Hayek may be said to subscribe to a thesis of the primacy of practice in the constitution of human knowledge. It is not indeed that Hayek disparages the enterprise of theory-building, but he sees the theoretical reconstruction of our practical knowledge as necessarily incomplete in its achievements.

Why is this? Hayek argues that, not only human social life, but the life of the mind itself is governed by rules, some of which cannot be specified at all. Note that Hayek does not contend merely that we cannot in fact specify all the rules which govern both social and intellectual life: he argues that there must of necessity be an insuperable limit beyond which we are unable to specify the rules by which our lives are governed. As he puts it:

So far our argument has rested solely on the uncontestable assumption that we are not in fact able to specify all the rules which govern our perceptions and actions. We still have to consider the question whether it is conceivable that we should ever be in a position discursively to describe all (or at least any one we like) of these rules, or whether mental activity must always be guided by some rules which we are in principle not able to specify.

If it should turn out that it is basically impossible to state or communicate all the rules which govern our actions, including our communications and explicit statements, this would imply an inherent limitation of our possible explicit knowledge and, in particular, the impossibility of ever fully explaining a mind of the complexity or our own.

Hayek goes on to observe of the inability of the human mind reflexively to grasp the most basic rules which govern its operations that “this would follow from what I understand to Georg Cantor’s theorem in the theory of sets according to which in any system of classification there are always more classes than things to be classified, which presumably implies that no system of classes can contain itself.” Again, he remarks that “it would thus appear that Gödel’s theorem is but a special case of a more general principle applying to all conscious and particularly all rational processes, namely the principle that among their determinants there must always be some rules which cannot be stated or even be conscious.” Hayek concludes this development of themes first explored in his Sensory Order with the fascinating suggestion that conscious thought must be presumed to be governed by “rules which cannot in turn be conscious—by a “supraconscious mechanism,” or, as Hayek prefers sometimes to call it, a “metaconscious mechanism”—“which operates on the contents of consciousness but which cannot itself be conscious.”

The third source of influence on Hayek’s skeptical Kantianism, which I have ascribed primarily to the work of his relative Wittgenstein, plainly comprehends other influences as well. Hayek cites Ryle in support of his observations that “‘know how’ consists in the capacity to act according to rules which we may be able to discover but which we need not be able to state in order to obey them,” and glosses the point with reference to Michael Polanyi. Here the insight is that all articulated or propositional knowledge arises out of tacit or practical knowledge, the knowledge of how to do things, which must be taken as fundamental. Nothing is said in Ryle or Polanyi thus far about rule-governedness as a distinctive mark of human (and, it may well be, not only human but also animal) intelligent behavior.

It is for the insight that practical knowledge is transmitted mimetically through the absorption of social rules that we need to turn to Wittgenstein, from whom Hayek may have taken it. (There are, to be sure, contrasts between Hayek’s view of rule-governed behavior and Wittgenstein’s, particularly in regard to the skepticism about rule-following expressed in Wittgenstein’s On Certainty and the dependency of social rules upon forms of life, stressed in Wittgenstein but not discussed by Hayek; but these contrasts need not concern us here.) What is original and novel in Hayek’s account, and (so far as I know) is nowhere to be found in Wittgenstein, is his account, firstly, of the hierarchy of rules in perception and action, with the most fundamental rules being meta-conscious rules beyond the possibility of identification and articulation; and, secondly, Hayek’s systematic exploration of the selection of these rules in a process of evolutionary adaptation. According to Hayek, in other words, the rules of action and of perception by which both intellectual and social life are governed are in the first place stratified or ordered in a hierarchy, with the most fundamental rules (which shape the basic categories of our understanding) always eluding conscious articulation. But secondly, all of these rules, including even the most fundamental of them are products of a process of evolutionary selection, by which they may be further altered or eliminated. Systems of rules conferring successful behavior are adopted by others without conscious reflection. It is this disposition to emulate or copy successful behaviors which explains the cultural evolution of which Hayek speaks, and which (though he recognizes its primitive beginnings in the social lives of animals) Hayek regards as the distinguishing mark of human life.

Hayek on Knowledge and Mind:
Implications for Social Theory

Hayek’s Kantian Philosophy of Mind

I began by nothing the striking Kantian attributes of Hayek’s epistemology and philosophy of mind—aspects which Hayek himself does not stress, perhaps because he conceives the formative influence of Kantian philosophy on his thought to be self-evident. As he puts it himself in a footnote to his discussion in a recent volume of the government of conscious intellectual life by super-conscious abstract rules: “I did not mention…the obvious relation of all this to Kant’s conception of the categories that govern our thinking—which I took rather for granted.”

Hayek’s Kantianism is seen, first in his repudiation of the empiricist view that knowledge may be constructed from a basis of raw sensory data and, second, in his uncompromising assertion of the view that the order we find in the world is a product of the creative activity of the human mind (rather than a recognition of natural necessity). His Kantian view is distinctive in that it anticipates Popper in affirming that our mental frameworks by which we categorize the world are neither universal nor invariant, but alterable in an evolutionary fashion; his Kantian view also follows Wittgenstein in grasping the role of social rules in the transmission of practical knowledge. Hayek’s Kantian view is original, finally, in recognizing a hierarchy in the rules that govern our perceptions and actions, and in insisting that the most fundamental of these rules are “super-conscious” and beyond any possibility of specification or articulation.

Hayek’s Philosophy of Mind & His Social Theory: Beyond Kantianism

Hayek himself is emphatic that these insights in the theories of mind and knowledge have the largest consequences for social theory. The inaccessability to reflexive inquiry of the rules that govern conscious thought entails the bankruptcy of the Cartesian rationalist project and implies that the human mind can never fully understand itself, still less can it ever be governed by any process of conscious thought. The considerations adduced earlier, then, establish the autonomy of the mind, without ever endorsing any mentalistic thesis of mind’s independence of the material order. Where Hayek deviates from Descartes’ conception of mind, however, is not primarily in his denying ontological independence to mind, but in his demonstration that complete intellectual self-understanding is an impossibility.

Hayek’s conception of mind is a notion whose implications for social theory are even more radical than are those of Hayek’s Kantianism. It is the chief burden of the latter, let us recall, that no external or transcendental standpoint on human thought is achievable, in terms of which it may be supported or reformed. In social theory, this Kantian perspective implies the impossibility of any Archimedean point from which a synoptic view can be gained of society as a whole and in terms of of which social life may be understood and, it may be, redesigned. As Hayek puts it trenchantly: “Particular aspects of a culture can be critically examined only within the context of that culture. We can never reduce a system of rules or all values as a whole to a purposive construction, but must always stop with our criticism of something that has no better grounds for existence than that it is the accepted basis of the particular tradition.” This is a useful statement, since it brings out the Kantian implication for social theory: that all criticism of social life must be immanent criticism, just as in all philosophy inquiry can only be reflexive and never transcendental.

Hayek goes beyond Kantianism, however, in his recognition that, just as in the theory of mind we must break off when we come to the region of unknowable ultimate rules, so in social theory we come to a stop with the basic constitutive traditions of social life. These latter, like Wittgenstein’s forms of life, cannot be the objects of further criticism, since they are at the terminus of criticism and justification: they are simply given to us, and must be accepted by us. But this is not to say that these traditions are unchanging, nor that we cannot understand how it is that they do change.

In social theory, Hayek’s devastating critique of Cartesian rationalism entails that, whatever else it might be, social order cannot be the product of a directing intelligence. It is not just that too many concrete details of social life would always escape such an intelligence, which could never, therefore, know enough. Nor (though we are nearer the nub of the matter here) is it that society is not a static object of knowledge which could survive unchanged the investigations of such an intelligence. No, the impossibility of total social planning does not rest for Hayek on such Popperian considerations, or, at any rate, not primarily on them.

Such an impossibility of central social planning rests, firstly, on the primordially practical character of most of the knowledge on which social life depends. Such knowledge cannot be concentrated in a single brain, natural or mechanical, not because it is very complicated, but rather because it is embodied in habits and dispositions and governs our conduct via rules which are often inarticulable. But, secondly, the impossibility of total social planning arises from the fact that, since we are all of us governed by rules of which we have no knowledge, even the directing intelligence itself would be subject to such government. It is naive and almost incoherent to suppose that a society could lift itself up by its bootstraps and reconstruct itself, in part at least because the idea that any individual mind—or any collectivity of selected minds—could do that, is no less absurd.

The Idea of a Spontaneous Social Order

If the order we discover in society is in no important respect the product of a directing intelligence, and if the human mind itself is a product of cultural evolution, then it follows that social order cannot be the product of anything resembling conscious control or rational design. As Hayek puts it:

The errors of constructivist rationalism are closely connected with Cartesian dualism, that is, with the conception of an independently existing mind substance which stands outside the cosmos of nature and which enabled man, endowed with such a mind from the beginning, to design the institutions of society and culture among which he lives…The conception of an already fully developed mind designing the institutions which made life possible is contrary to all we know about the evolution of man.

The master error of Cartesian rationalism lies in its anthropomorphic transposition of mentalist categories to social processes. But a Cartesian rationalist view of mind cannot explain even the order of mind itself. Hayek himself makes this point when he remarks on “the difference between an order which is brought about by the direction of a central organ such as the brain, and the formation of an order determined by the regularity of the actions towards each other of the elements of a structure.” He goes on:

Michael Polanyi has usefully described this distinction as that between a monocentric and a polycentric order. The first point which it is in this connection important to note is that the brain of an organism which acts as the directing centre for the organism is in turn a polycentric order, that is, that its actions are determined by the relation and mutual adjustment to each other of the elements of which it consists.

Hayek states his conception of social theory, and of the central importance in it of undesigned or spontaneous orders, programmatically and with unsurpassable lucidity:

It is evident that this interplay of the rules of conduct of the individuals with the actions of other individuals and the external circumstances in producing an overall order may be a highly complex affair. The whole task of social theory consists in little else but an effort to reconstruct the overall orders which are thus formed…It will also be clear that such a distinct theory of social structures can provide only an explanation of certain general and highly abstract features of the different types of structures…Of theories of this type economic theory, the theory of the market order of free human societies, is so far the only one which has been developed over a long period…

Because it is undesigned and not the product of conscious reflection, the spontaneous order that emerges of itself in social life can cope with the radical ignorance we all share of the countless facts on knowledge of which society depends. This is to say, to begin with, that a spontaneous social order can utilize fragmented knowledge, knowledge dispersed among millions of people, in a way a holistically planned order (if such there could be) cannot. “This structure of human activities” as Hayek puts it “consistently adapts itself, and functions through adapting itself, to millions of facts which in their entirety are not known to everybody. The significance of this process is most obvious and was at first stressed in the economic field.” It is to say, also, that a spontaneous social order can use the practical knowledge preserved in men’s habits and dispositions and that society always depends on such practical knowledge and cannot do without it.

Examples abound in Hayek’s writings of spontaneous orders apart from the market order. The thesis of spontaneous order is stated at its broadest when Hayek says of Bernard Mandeville (1670–1733) that “for the first time [he] developed all the classical paradigmata of the spontaneous growth of orderly social structures: of law and morals, of language, the market and money, and also the growth of technological knowledge.” Note that whereas Hayek acknowledges that spontaneous order emerges in natural processes—it may be observed, he tells us, not only in the population biology of animal species, but in the formation of crystals and even galaxies—it is the role of spontaneous order in human society that Hayek is most concerned to stress. For applying what Hayek illuminatingly terms “the twin ideas of evolution and of the spontaneous formation of an order” to the study of human society enables us to transcend the view, inherited from Greek, and, above all, from Sophist philosophy, that all social phenomena can be comprehended within the crude dichotomy of the natural (physis) and the conventional (nomos). Hayek wishes to focus attention on the third domain of social phenomena and objects, neither instinctual in origin nor yet the result of conscious contrivance or purposive construction, the domain of evolved and self-regulating social structures. It is the emergence of such self-regulating structures in society via the natural selection of rules of action and perception that is systematically neglected in much current sociology (though not, it may be noted, in the writings of Herbert Spencer, one of sociology’s founding fathers). It is because he thinks that the sociobiologists view social order as being a mixture of instinctive behavior and conscious control, and so neglect the cultural selection of systems of rules, that Hayek has subjected this recent strain of speculation to a sharp criticism. It may be noted, finally, that Hayek’s repudiation of the Sophistic natureconvention dichotomy sets him in opposition to Popper and his talk of the critical dualism of facts and decisions and brings him close to the Wittgensteinian philosopher, Peter Winch, for whom the distinction is essentially misconceived.

The Application of Spontaneous Order in Economic Life: The Catallaxy

The central claim of Hayek’s philosophy, as we have expounded it so far, is that knowledge is, at its base, at once practical and abstract. It is abstract inasmuch as even sensory perception gives us a model of our environment which is highly selective and picks out only certain classes of events, and it is practical inasmuch as most knowledge is irretrievably stored or embodied in rules of action and perception. These rules, in turn, are in Hayek’s conception the subject of continuing natural selection in cultural competition. The mechanism of this selection, best described in Hayek’s fascinating “Notes on the Evolution of Systems of Rules of Conduct,” is in the emulation by others of rules which secure successful behavior. It is by a mimetic contagion that rules conferring success—where success means, in the last resort, the growth of human numbers—come to supplant those rules which are maladapted to the environment. Finally, the convergence of many rule-following creatures on a single system of rules creates those social objects—language, money, markets, the law—which are the paradigms of spontaneous social order.

It is a general implication of this conception that, since social order is not a purposive construction, it will not in general serve any specific purpose. Social order facilitates the achievement of human purposes: taken in itself, it must be seen as having no purpose. Just as human actions acquire their meaning by occurring in a framework that can itself have no meaning, so social order will allow for the achievement of human purposes only to the extent that it is itself purposeless. Nowhere has this general implication of Hayek’s conception been so neglected as in economic life. In the history and theory of science, to be sure, where the idea of spontaneous order was (as Hayek acknowledges) put to work by Michael Polanyi, false conceptions were spawned by the erroneous notion that scientific progress could be planned, whereas, on the contrary, any limitation of scientific inquiry to the contents of explicit or theoretical knowledge would inevitably stifle further progress. In economics, however, the canard that order is the result of conscious control had more fateful consequences. It supported the illusion that the whole realm of human exchange was to be understood after the fashion of a household or an hierarchical organization, with limited and commensurable purposes ranked in order of agreed importance.

This confusion of a genuine hierarchical ‘economy’—such as that of an army, a school or a business corporation—with the whole realm of social exchange, the catallaxy, informs many aspects of welfare economics and motivates its interventionist projects via the fiction of a total social product. This confusion between ‘catallaxy’ and ‘economy’ is, at bottom, the result of an inability to acknowledge that the order which is the product of conscious direction—the order of a management hierarchy in a business corporation, for example—itself always depends upon a larger spontaneous order. The demand that the domain of human exchange taken as a whole should be subject to purposive planning is, therefore, the demand that social life be reconstructed in the character of a factory, an army, or a business corporation—in the character, in other words, of an authoritarian organization. Apart from the fateful consequences for individual liberty that implementing such a demand inexorably entails, it springs in great measure from an inability or unwillingness to grasp how in the market process itself there is a constant tendency to self-regulation by spontaneous order. When it is unhampered, the process of exchange between competitive firms itself yields a coordination of men’s activities more intricate and balanced than any that could be enforced (or even conceived) by a central planner.

The Catallactic Order, Practical Knowledge,
and the Calculation Debate

The relevance of these considerations to Hayek’s contributions to the question of the allocation of resources in a socialist economic order is central, but often neglected. It is, of course, widely recognized that one of Hayek’s principal contributions in economic theory is the refinement of the thesis of his teacher, Ludwig von Mises (1881–1973), that the attempt to supplant market relations by public planning cannot avoid yielding calculational chaos. Hayek’s account of the mechanism whereby this occurs has, however, some entirely distinctive and original features. For Hayek is at great pains to point out that the dispersed knowledge which brings about a tendency to equilibrium in economic life and so facilitates an integration of different plans of life, is precisely not theoretical or technical knowledge, but practical knowledge of concrete situations—“knowledge of people, of local conditions, and of special circumstances.” As Hayek puts it: “The skipper who earns his living from using otherwise empty or half-filled journeys of tramp-steamers, or the estate agent whose whole knowledge is almost exclusively one of temporary opportunities, or the arbitrageur who gains from local differences of commodity prices—are all performing eminently useful functions based on special knowledge of circumstances of the fleeting moment not known to others.” Hayek goes on the comment: “It is a curious fact that this sort of knowledge should today be regarded with a kind of contempt and that anyone who by such knowledge gains an advantage over somebody better equipped with theoretical or technical knowledge is thought to have acted almost disreputably.” The “problem of the division of knowledge,” which Hayek describes as “the really central problem of economics as a social science,” is therefore not just a problem of specific data, articulable in explicit terms, being dispersed in millions of heads: it is the far more fundamental problem of the practical knowledge on which economic life depends being embodied in skills and habits, which change as society changes and which are rarely expressible in theoretical or technical terms.

One way of putting Hayek’s point, a way we owe to Israel Kirzner rather than to Hayek himself but which is wholly compatible with all that Hayek has said on these questions, is to remark as follows: if men’s economic activities really do show a tendency to coordinate with one another, this is due in large part to the activity of entrepreneurship. The neglect of the entrepreneur in much standard economic theorizing, the inability to grasp his functions in the market process, may be accounted for in part by reference to Hayek’s description above of the sort of knowledge used by the entrepreneur. As Kirzner puts it, “Ultimately, then, the kind of ‘knowledge’ required for entrepreneurship is ‘knowing’ where to look for ‘knowledge’ rather than knowledge of substantive market information.” It is hard to avoid the impression that the entrepreneurial knowledge of which Kirzner speaks here is precisely that practical or dispositional knowledge which Hayek describes.

It is the neglect of how all economic life depends on this practical knowledge which allowed the brilliant but, in this respect, fatally misguided Joseph Schumpeter (1883–1950) to put a whole generation of economists on the wrong track, when he stated in hisCapitalism, Socialism and Democracy (1942) that the problem of calculation under socialism was essentially solved. It is the neglect of the same truth that Hayek expounded which explains the inevitable failure in Soviet-style economies of attempts to simulate market processes in computer modeling. All such efforts are bound to fail, if only because the practical knowledge of which Hayek speaks cannot be programmed into a mechanical device. They are bound to fail, also, because they neglect the knowledge-gathering role of market pricing. Here we must recall that, according to Hayek, knowledge is dispersed throughout society and, further, it is embodied in habits and dispositions of countless men and women. The knowledge yielded by market pricing is knowledge which all men can use, but which none of them would possess in the absence of the market process; in a sense, the knowledge embodied or expressed in the market price is systemic or holistic knowledge, knowledge unknown and unknowable to any of the elements of the market system, but given to them all by the operation of the system itself. No sort of market simulation or shadow pricing can rival the operation of the market order itself in producing this knowledge, because only the actual operation of the market itself can draw on the fund of practical knowledge which market participants exploit in the their activities.

Hayek’s Refinements of the Misesian Calculation Debate

Three further points may be worth noting in respect of Hayek’s refinements of the Misesian calculation debate. First, when Hayek speaks of economic calculations under socialism as a practical impossibility, he is not identifying specific obstacles in the way of the socialist enterprise which might someday be removed. Socialist planning could supplant market processes only if practical knowledge could be replaced by theoretical or technical knowledge at the level of society as a whole—and that is a supposition which is barely conceivable. The kind of omniscience demanded of a socialist planner could be possessed only by a single mind, entirely self-aware, existing in an unchanging environment—a supposition so bizarre that we realize we have moved from any imaginable social world to a metaphysical fantasy in which men and women have disappeared altogether, and all that remain are Leibnizian monads, featureless and unhistorical ciphers.

Fortunately, such a transformation is possible, if at all, only as a thought-experiment. In practice, all supposedly socialist economies depend upon precisely that practical knowledge of which Hayek speaks, and which though dispersed through society is transmitted via the price mechanism. It is widely acknowledged that socialist economies depend crucially in their planning policies on price data gleaned from historic and world markets. Less often recognized, and dealt with in detail only, so far as I know, in Paul Craig Roberts’ important Alienation in the Soviet Economy, is that planning policies in socialist economies are only shadows cast by market processes distorted by episodes of authoritarian intervention. The consequence of the Hayekian and Polanyian critiques of socialist planning is not inefficiency of such planning but rather its impossibility: we cannot analyze the “socialist” economies of the world properly, unless we penetrate the ideological veil they secrete themselves behind, and examine the mixture of market processes with command structures which is all that can ever exist in such a complex society.

The third and final implication of Hayek’s contribution to the calculation question is his clear statement of the truth that the impossibility of socialism is an epistemologicalimpossibility. It is not a question of motivation or volition, of the egoism or limited sympathies of men and women, but of the inability of any social order in which the market is suppressed or distorted to utilize effectively the practical knowledge possessed by its citizens. Calculational chaos would ensue, and a barbarization of social life result, from the attempt to socialize production, even if men possessed only altruistic and conformist motives. For, in the absence of the signals transmitted via the price mechanism, they would be at a loss how to direct their activities for the social good, and the common stock of practical knowledge would begin to decay. Only the inventiveness of human beings as expressed in the emergence of black and gray markets could then prevent a speedy regression to the subsistence economy. The impossibility of socialism, then, derives from its neglect of the epistemological functions of market institutions and processes. Hayek’s argument here is the most important application of his fundamental insight into the epistemological role of social institutions—an insight I will need to take up again in the context of certain similarities between Hayek’s conception of liberty under law and Robert Nozick’s meta-utopian framework.

Theory and Method in Economic Science

Prediction vs. ‘Complex Phenomena’

Hayek’s conception of knowledge, when taken in conjunction with the idea of a spontaneous social order, has important implications for the proper method for the practice of social science. To begin with, Hayek’s affirmation of “the primacy of the abstract” in all human knowledge means that social science is always a theory-laden activity and can never aspire to an exhaustive description of concrete social facts. More, the predictive aspirations of social science must be qualified: not even the most developed of the social sciences, economics, can ever do more than predict the occurrence of general classes of events. Indeed, in his strong emphasis on the primacy of the abstract, Hayek goes so far as to question the adequacy of the nomothetic or nomological model of science (i.e. exact prediction through ‘laws’), including social science. At least in respect of complex phenomena, all science can aim at is an “explanation of the principle,” or the recognition of a pattern—“the explanation not of the individual events but merely of the appearance of certain patterns or orders. Whether we call these mere explanations of the principle or mere pattern predictions or higher level theories does not matter.” Such recognitions of orders or pattern predictions are, Hayek observes, fully theoretical claims, testable and falsifiable: but they correspond badly with the usual cause-effect structure of nomothetic or law-governed explanation.

In his most important later statement on these questions, “The Theory of Complex Phenomena,” [bibliography, A-109], Hayek tells us that, because social life is made up of complex phenomena, “economic theory is confined to describing kinds of patterns which will appear if certain general conditions are satisfied, but can rarely if ever derive from this knowledge any predictions of specific phenomena.” If we ask why it is that social phenomena are complex phenomena, part of the reason at any rate lies in what Hayek earlier characterized as the subjectivity of the data of the social sciences: social objects are not like natural objects whose properties are highly invariant relatively to our beliefs and perceptions; rather, social objects are in large measure actually constituted by our beliefs and judgments. Social phenomena are non-physical, and Hayek has stated that “Non-physical phenomena are more complex because we call physical phenomena what can be described by relatively simple formulae.” And, because of the subjectivity of its data, social life always eludes such simple formulae.

Hayek’s Opposition to Apriori Science

A number of points may be made briefly about Hayek’s conception of method in social and economic theory. First, whereas he follows his great teachers in the Austrian tradition in emphasizing the subjective aspects of social phenomena, Hayek’s methodology of social and economic science does not belong to that Austrian tradition in which social theory is conceived as an enterprise yielding apodictic truths. Specifically—contrary to T. W. Hutchinson, who periodizes Hayek’s work into an Austrian praxeological and a post-Austrian Popperian period, and also contrary to Norman P. Barry who sees both trends running right through Hayek’s writings—Hayek never accepted the Misesian conception of a praxeological science of human action which would take as its point of departure a few axioms about the distinctive features of purposeful behavior over time. In the Introduction to Collectivist Economic Planning [E-5, 1935] and elsewhere in his early writings, Hayek had (as Hutchinson notes) insisted that economics yields “‘general laws,’ that is, ‘inherent necessities determined by the permanent nature of the constituent elements.’” As Hutchinson himself acknowledges in passing, however, such laws or necessities function in Hayek’s writings as postulates(rather than as axioms), and they continue to do so even in his later writings, in which (as I have already noted) a suspicion of the nomothetic paradigm of social science is expressed. It is clear from the context of the quotations cited by Hutchinson that, in speaking of the general laws or inherent necessities of social and economic life, Hayek meant to controvert the excessive voluntarism of historicism, which insinuates that social life contains no unalterable necessities of any sort, rather than to embrace the view that there can be an apriori science of society or human action. To this extent Barry is right in his observation that, “there is a basic continuity in Hayek’s writings on methodology.”Certainly there seems little substance in a periodization of Hayek’s methodological writings by reference to the supposedly Popperian paper of 1937 on “Economics and Knowledge” (A-34).

At the same time, there seems little warrant for Barry’s claim that throughout his work Hayek tries “to combine two rather different philosophies of social science; the Austrian praxeological school with its subjectivism and rejection of testability in favour of axiomatic reasoning, and the hypothetico-deductive approach of contemporary science with its emphasis on falsifiability and empirical content.” For there is no evidence, so far as I know, that Hayek ever endorsed the Misesian conception of an axiomatic or apriori science of human action grounded in apodictic certainties. Again, as we have seen, Hayek’s view that the social sciences are throughout deductive in form antedates Popper’s influence and is evidenced in the Introduction to Collectivist Economic Planning [E-5, 1935].

Popperian ‘Conjectures & Refutations’

Hayek’s real debts to Popper are, I think, different from those attributed to him by Hutchinson and Barry. It is not that Hayek under Popper’s influence abandoned an apodictic-deductive method that was endorsed (in different versions, Kantian and Aristotelian) by Mises and Menger, but rather that he came to adopt Popper’s proposal that falsifiability be treated as a demarcation criterion of science from non-science. Again, Hayek follows Popper in abandoning his earlier Austrian conviction that there is a radical dualism of method as between natural and social science: this conviction, he tells us, depended on an erroneous conception of method in the natural sciences: as a result of what Popper has taught him, Hayek says, “the differences between the two groups of disciplines has thereby been greatly narrowed.” Hayek’s debts to Popper are, then, in his seeing that it is the falsifiability of an hypothesis rather than its verifiability which makes it testable and empirical, and, secondly, in his acknowledging the unity of method in all the sciences, natural and social, where this method is seen clearly to be hypothetico-deductive.

Even in these Popperian influences, it is to be noted, there are differences of emphasis from Popper himself. Hayek anticipates Lakatos in perceiving that the theoretical sciences may contain a “hard core” of hypotheses, well-confirmed and valuable in promoting understanding of the phenomena under investigation, which are highly resistant to testing and refutation. And Hayek explicitly states that in some fields Popper’s ideas of maximum empirical content and falsifiability may be inappropriate:

It is undoubtedly a drawback to have to work with theories which can be refuted only by statements of a high degree of complexity, because anything below that degree of complexity is on that ground alone permitted by our theory. Yet it is still possible that in some fields the more generic theories are the more useful ones…Where only the most general patterns can be observed in a considerable number of instances, the endeavour to become more ‘scientific’ by further narrowing down our formulae may well be a waste of effort…

In general, then, it seems fair to hold that Hayek acknowledges that the proper method in social and economic studies, as elsewhere, is the hypothetico-deductive method of conjectures and refutations set out by Popper. On the other hand, he continues to recognize that in respect of complex phenomena such as are found in the social studies, testability may be a somewhat high level and protracted process, and the ideal of high empirical content captured in a nomothetic framework—a demanding and sometimes unattainable ideal.

Some Applications of Hayek’s Methodological Views:
Keynes, Friedman, and Shackle on Economic Policy

Hayek’s view that we can at best attain abstract models of social processes, whereas the concrete details of social life will always largely elude theoretical formulation, has large and radical implications in the field of public policy. In brief, it entails that the object of public policy should be confined to the design or reform of institutions within which unknown individuals make and execute their own, largely unpredictable plans of life. In a free society, in fact, whereas there may be a legal policy in respect of economic institutions, there cannot be such a thing as economic policy as it is presently understood, for adherence to the rule of law precludes anything resembling macroeconomic management. Here I do not wish to take up this point, which I will consider later, but rather to spell out the connection between Hayek’s methodological views and his belief that most, if not all economic policy as practiced in the postwar world has had a self-defeating effect.

Hayek contra Constructivism & Social Engineering

We have seen that, for Hayek, the most we can hope for in understanding social life is that we will recognize recurring patterns. Hayek goes on to observe:

Predictions of a pattern are…both testable and valuable. Since the theory tells us under which general conditions a pattern of this sort will form itself, it will enable us to create such conditions and to observe whether a pattern of the kind predicted will appear. And since the theory tells us that this pattern assures a maximisation of output in a certain sense, it also enables us to create the general conditions which will assure such a maximisation, though we are ignorant of many of the particular circumstances which will determine the pattern that will appear.

Hayek’s view stands in sharp opposition to any idea of a policy science or a political technology aimed at producing specific desired effects. Such a policy science demands the impossible of its practitioners, a detailed knowledge of a changing and complex order in society. Even Popper’s conception of “piecemeal social engineering,” Hayek tells us, “suggests to me too much a technological problem of reconstruction on the basis of the total knowledge of the physical facts, while the essential point about the practical improvement is an experimental attempt to improve the functioning of some part without a full comprehension of the structure of the whole.” Indeed Hayek’s central point is that understanding the primacy of the abstract in human knowledge means that we must altogether renounce the modern ideal of consciously controlling social life: a better ideal is that of cultivating the general conditions in which beneficial results may be expected to emerge.

Hayek’s critique of the constructivistic or engineering approach to social life parallels in an intriguing way that of Michael Oakeshott and of the Wittgensteinian philosopher Rush Rhees. Consider Oakeshott’s statement: “The assimilation of politics to engineering is, indeed, what may be called the myth of rationalist politics.” Or Rhee’s observation (made in criticism of Popper): “There is nothing about human societies which makes it reasonable to speak of the application of engineering to them. Even the most important ‘problems of production’ are not problems in engineering.” The conception of social life which talk of social engineering expresses is at fault not only because it presupposes an agreement on goals or ends which nowhere exists but also because it promotes the illusion that political life may become subject to a sort of technical or theoretical control.

Hayek contra Keynes

These general views illuminate much of the rationale of Hayek’s opposition not only to Keynesian policies of macroeconomic demand management but also to Friedmanite monetarism. Of course, in the great debates of the Thirties, Hayek had argued forcefully that Keynes in no way provided a general theory of economic discoordination. Again, Hayek always argued that the policies Keynes suggested, depending as they did for their success upon institutional and psychological irrationalities which their very operation would undermine, were bound over the longer run to be self-defeating. In particular, Hayek maintained that Keynesian policies of deficit financing depended for their success upon a widespread money illusion which the policies themselves could not help but erode. Hayek’s further objection to Keynesian policies is that, in part because they depend on a defective understanding of the business cycle (which is seen as expressing itself in aggregative variations in total economic activity rather than in a discoordination of relative price structures brought about by a governmental distortion of the structure of interest rates) Keynesian policy-makers, because of their holistic and aggregative bias, find it hard to avoid committing a sort of fallacy of conceptual realism: statistical artefacts or logical fictions are allowed to blot out the subtle and complex relationships which make up the real economy.

Now there is plainly much in Hayek’s subtle account of the business cycle, and in his contributions to capital theory, which is difficult and disputable, and to comment on such questions is in any case beyond my expertise. Quite apart from its technical details, however, it is clear that Hayek’s critique of Keynesian policies is of a piece with his emphasis on the primacy of the abstract and with his insight into the indispensability of conventions for the orderly conduct of social life. Policies of macroeconomic demand management ask more in the way of concrete knowledge of the real relationships which govern the economy than any administrator could conceivably acquire, and their operation is in the longer run self-defeating. More generally, Hayek’s challenge to Keynesian theory is a demand that Keynesians specify in detail the mechanisms whereby an unhampered market could be expected to develop severe discoordination. Only if such mechanisms could be clearly described and (crucially) given a plausible historical application, would a serious challenge to Hayek’s own Austrian view—in which it is governmental intervention in the economy which is principally responsible for discoordination—enter the realm of critical debate.

Hayek contra Friedman

In respect to Friedman’s proposals for monetary regulation by a fixed rule, Hayek has argued that in a modern democracy no governmental or quasi-governmental agency can preserve the independence of action essential if such a monetary rule is to be operated consistently. More fundamentally, such a policy of adopting a fixed rule in the supply of money is opposed by Hayek on methodological grounds. Such a policy calls for an exactitude in modeling and measuring economic life, and an unambiguity in the definition of money, which it is beyond our powers to attain. Hayek’s own objection to Friedman’s monetarist proposals is, then, most substantially that money is not the sort of social object that we can define precisely or control comprehensively; Hayek has even suggested that, in recognition of the elusiveness of the monetary phenomenon, we should treat “money” as an adjectival expression, applicable to indefinitely many distinct and disparate instruments. Hayek’s proposals in this area clearly open up technical questions in monetary theory which I am unqualified to adjudicate. It seems clear, though, that Hayek’s proposal favoring currency competition by the private issuance of money would be found objectionable by Friedmanites (who would argue that Hayek exaggerates the effect such competition would have in preventing currency debasement) and by advocates of the classical gold standard. It is clear, nonetheless, that in arguing for the establishment of a monetary catallaxy Hayek has illuminated questions both in monetary theory and in political economy which had hitherto gone largely neglected, but which it is critical that supporters of the market order now examine.

Hayek and Shackle

One objection to Hayek’s view may be worth addressing at this point. There is much in Hayek’s account of the business cycle, as in his more general account of spontaneous social order, to suggest that he believes economic discoordination results always from institutional factors, so that at any rate large-scale disequilibrium would be impossible in a catallaxy of wholly unhampered markets. Against this view, Hayek’s brilliant and largely neglected pupil, G.L.S. Shackle, has argued that the subjectivity of expectations must infect the market process with an ineradicable tendency to disequilibrium. It must be allowed that, if we accept Hayek’s view of equilibrium as a process in which men’s plans are coordinated by trial and error over time, there can be nothing apodictically certain about this process: conceivably, under some conditions of uncertainty in which hither to reliable expectations are repeatedly confounded, large scale discoordination could occur in the market process.

Three counter-observations are in order, however. First, nothing in Shackle’s argument tells against the point, defensible both on theoretical grounds and as an historical interpretation, that in practice by far the most destabilizing factor in the market process is provided by governmental intervention. Secondly, and relatedly, it is unclear that the kind of disequilibrium of which Shackle speaks—disequilibrium generated by divergency in subjective expectations—could amount to anything resembling the classical business cycle, which is more plausibly accounted for in Austrian and Hayekian terms as a consequence of governmental intervention in the interest rate structure.

And thirdly, it is unclear that Shackle’s argument shows the presence in the market process of any tendency to disequilibrium. What we have in the market process is admittedly a ‘kaleidic’ world, in which expectations, tastes, and beliefs constantly and unpredictably mutate. Yet, providing market adaptation is unhampered, what we can expect from the market process is an uninterrupted series of monetary equilibrium tendencies, each of them asymptotic—never quite reaching equilibrium—and each of them soon overtaken by its successor. In this kaleidic world there may well be no apodictic certainty that we shall never face large-scale, endogenous discoordination, but we are nevertheless on safe ground in preferring that the self-regulating tendencies of the process be accorded unhampered freedom and that governmental intervention be recognized as the major disruptive factor in the market process. We are on safe ground, then, in discerning in the tendency to equilibrium in the market process the formation of spontaneous order in the economic realm.

Hayek’s Constitution of Liberty: Ethical Basis of the Juridical Framework of Individual Liberty

Clarifying Hayek’s Moral Theory

Given that we recognize governmental intervention to be the greatest subverter of spontaneous order in the realm of economic exchange, what legal framework is to be adopted for the regulation of economic life? Here we come to one of the most fascinating and controversial of Hayek’s contributions to social philosophy, his account of individual liberty under the rule of law. Before we can address ourselves to some of the problems surrounding Hayek’s contribution to philosophical jurisprudence, however, a few words must be said about Hayek’s moral theory, since few aspects of Hayek’s work are so often misunderstood. Hayek has been characterized as a moral relativist, an exponent of evolutionary ethics and, less implausibly but nonetheless incorrectly, as a rule-utilitarian. Let us see if we can dissipate the confusion.

In the first place, moral life for Hayek is itself a manifestation of spontaneous order. Like language and law, morality emerged undesigned from the life of men with one another: it is so much bound up with human life, indeed, as to be partly constitutive of it. The maxims of morality, then, in no way presuppose an authority, human or divine, from which they emanate, and they antedate the institutions of the state. But, secondly, the detailed content of the moral conventions which spring up unplanned in society is not immutable or invariant. Moral conventions change, often slowly and almost inperceptibly, in accordance with the needs and circumstances of the men who subscribe to them. Moral conventions must (or Hayek’s account of them) be seen as part of the evolving social order itself.

Now at this point it is likely that a charge of ethical relativism or evolutionism will at once be levelled against Hayek, but there is little substance to such criticisms. He has gone out of his way to distinguish his standpoint from any sort of evolutionary ethics. As he put it in his Constitution of Liberty:

It is a fact which we must recognize that even what we regard as good or beautiful is changeable—if not in any recognizable manner that would entitle us to take a relativistic position, then in the sense that in many respects we do not know what will appear as good or beautiful to another generation… It is not only in his knowledge, but also in his aims and values, that man is the creature of his civilization; in the last resort, it is the relevance of these individual wishes to the perpetuation of the group or the species that will determine whether they persist or change. It is, of course, a mistake to believe that we can draw conclusions about what our values ought to be simply because we realize that they are a product of evolution. But we cannot reasonably doubt that these values are created and altered by the same evolutionary forces that have produced our intelligence.

Hayek’s argument here, then, is manifestly not that we can invoke the trend of social evolution as a standard for the resolution of moral dilemmas, but rather that we are bound to recognize in our current moral conventions the outcome of an evolutionary process. Admittedly, inasmuch as nothing in the detailed content of our moral conventions is unchanging or unalterable, this means that we are compelled to abandon the idea that they have about them any character of universality or fixity, but this is a long way from any doctrine of moral relativism. As Hayek observes in his remarks on the ambiguity of relativism:

…our present values exist only as the elements of a particular cultural tradition and are significant only for some more or less long phase of evolution—whether this phase includes some of our pre-human ancestors or is confined to certain periods of human civilization. We have no more ground to ascribe to them eternal existence than to human race itself. There is thus one possible sense in which we may legitimately regard human values as relative and speak of the probability of their further evolution.

But it is a far cry from this general insight to the claims of the ethical, cultural or historical relativists or of evolutionary ethics. To put it crudely, while we know that all these values are relative to something, we do not know to what they are relative. We may be able to indicate the general class of circumstances which have made them what they are, but we do not know the particular conditions to which the values we hold are due, or what our values would be if those circumstances had been different. Most of the illegitimate conclusions are the result of erroneous interpretation of the theory of evolution as the empirical establishment of a trend. Once we recognize that it gives us no more than a scheme of explanation which might be sufficient to explain particular phenomena if we knew all the facts which have operated in the course of history, it becomes evident that the claims of the various kinds of relativists (and of evolutionary ethics) are unfounded.

Hume’s Influence on Hayek’s Social Philosophy

Hayek does not, then subscribe to any sort of ethical relativism or evolutionism, but it is not altogether clear from these statements if he thinks humanity’s changing moral conventions have in fact any invariant core or constant content. In order to consider this last question, and to attain a better general understanding of Hayek’s conception of morality, we need to look at his debts to David Hume, whose influence upon Hayek’s moral and political philosophy is ubiquitous and profound.

Hayek follows Hume in supposing that, in virtue of certain general facts about the human predicament, the moral conventions which spring up spontaneously among men all have certain features in common or (in other words) exhibit some shared principles. Among the general facts that Hume mentions in his Treatise, and which Hayek cites in “The Legal and Political Philosophy of David Hume” (in B-13), are men’s limited generosity and intellectual imperfection and the unalterable scarcity of the means of satisfying human needs. As Hayek puts it succinctly: “It is thus the nature of the(se) circumstances, what Hume calls ‘the necessity of human society,’ that gives rise to the ‘three fundamental laws of nature’: those of ‘the stability of possessions, of its transference by consent, and of the performance of promises.’” And Hayek glosses this passage with a fuller citation from Hume’s Treatise: “Though the rules of justice be artificial, they are not arbitrary. Nor is the expression improper to call them Laws of Nature; if by natural we understand what is common to any species, or even if we confine it to mean what is inseparable from the species.”

Hume’s three rules of justice or laws of nature, then, give a constant content to Hayek’s conception of an evolving morality. They frame what the distinguished Oxford jurist, H. L. A. Hart, was illuminatingly to call “the minimum content of natural law.” The justification of these fundamental rules of justice, and of the detailed and changing content of the less permanent elements of morality, is (in Hayek’s view as in Hume’s)that they form indispensable conditions for the promotion of human welfare. There is in Hayek as in Hume, accordingly, a fundamental utilitarian committment in their theories of morality. It is a very indirect utilitarianism that they espouse, however, more akin to that of the late nineteenth-century Cambridge moralist Henry Sidgwick (1838–1900) than it is to Jeremy Bentham or John Stuart Mill. The utilitarian component of Hayek’s conception of morality is indirect in that it is never supposed by him that we ought or could invoke a utilitarian principle in order to settle practical questions: for, given the great partiality and fallibility of our understanding, we are in general better advised to follow the code of behavior accepted in our own society. That code can, in turn, Hayek believes, never properly be the subject of a rationalist reconstruction in Benthamite fashion, but only reformed piecemeal and slowly. In repudiating the claims that utilitarian principles can govern specific actions and that utility may yield new social rules, Hayek shows himself to be an indirect or system utilitarian, for whom the proper role of utility is not prescriptive or practical but rather as a standard of evaluation for the assessment of whole systems of rules.

Hayek’s Utilitarianism & Liberty

Again however, Hayek’s utilitarian outlook is distinctive in that he explicitly repudiates any hedonistic conception of the content of utility itself. How, then, does he understand utilitarian welfare? Just how are we to assess different systems of rules in regard to their welfare-promoting effects? Here Hayek comes close to modern preference utilitarianism, but gives that view an original formulation, in arguing that the test of any system of rules is whether it maximizes an anonymous individual’s chance of achieving his unknown purposes. In Hayek’s conception, we are not bound to accept the historical body of social rules just as we find it: it may be reformed in order to improve the chances of the unknown man’s achieving his goals. It will be seen that this is a maximizing conception, but not one that represents utility as a sort of neutral stuff, a container of intrinsic value whose magnitude may vary. Indeed, in taking as the point of comparison an hypothesized unknown individual, Hayek’s conception (as he recognizes) parallels John Rawls’ model of rational choice behind a veil of ignorance as presented in Rawls’ Theory of Justice.

Mention of Rawls’ contractarian derivation of principles of justice at once raises the question of how Hayek’s indirect or system utilitarian argument is supposed to ground the rules of justice he defends, and, in particular, how Hayek’s defense of the priority of liberty squares with his utilitarian outlook.

Several observations are apposite here. First, Hayek undoubtedly follows Hume in believing that, because they constitute an indispensable condition for the promotion of general welfare, the rules of justice are bound to take priority over any specific claim to welfare. Again, it is to be noted that Hume’s second rule of justice, the transference of property by consent, itself frames a protected domain and so promotes individual liberty. Finally, Hayek argues forcefully that, if individuals are to be free to use their own knowledge and resources to best advantage, they must do so in a context of known and predictable rules governed by law. It is in a framework of liberty under the rule of law, Hayek contends, that justice and general welfare are both served. Indeed, under the rule of law, justice and the general welfare are convergent and not conflicting goals or values.

Justice, Liberty, and the Rule of Law In Hayek’s Constitution of Liberty

These claims regarding the relations between justice, liberty, and the rule of law encompass the most controversial and the most often attacked portion of Hayek’s social philosophy. Common to all criticisms of it is the objection that Hayek expects too much of the rule of law itself, which is only one of the virtues a legal order may display, and a rather abstract notion at that. Among classical liberals and libertarians, this objection has acquired a more specific character. It has been argued that upholding the rule of law cannot by itself protect liberty or secure justice, for these values will be promoted only if the individual rights are respected. Hayek’s theory is at the very least radically incomplete, according to these critics, inasmuch as his conception of the rule of law will have the classical liberal implications he expects of it, only if it incorporates a conception of individual rights, which he seems explicitly to disavow. All these liberals and libertarians fasten upon Hayek’s use of a Kantian test of universalizability to argue that such a test is almost without substance, in that highly oppressive and discriminatory laws will survive it, so long as their framers are ingenious enough to avoid mentioning particular groups or named individuals in them. The upshot of this criticism is that, in virtue of the absence in his theory of any strong conception of moral rights, Hayek is constrained to demand more of the largely formal test of universalizability than it can possibly deliver, and so to conflate the ideal of the rule of law with other political goods and virtues.

Criticisms of Hayek’s Universalizable ‘Rule of Law’

This fundamental criticism of Hayek, stated powerfully by Hamowy and Raz and endorsed in eariler writings of my own, now seems to me to express an impoverished and mistaken view of the nature and role of Kantian universalizability in Hayek’s philosophical jurisprudence. It embodies the error that, in Hayek or indeed in Kant, universalizability is a wholly formal test.

In his “Principles of a Liberal Social Order,” (A-115, in B-13) Hayek tells us: “The test of the justice of a rule is usually (since Kant) described as that if its ‘universalizability,’ i.e. of the possibility of willing that rules should be applied to all instances that correspond to the conditions stated in it (the ‘categorical imperative’).” As an historical gloss, Hayek observes that:

It is sometimes suggested that Kant developed his theory of the Rechtstaat by applying to public affairs his conception of the categorical imperative. It was probably the other way round, and Kant developed his theory of the categorical imperative by applying to morals the concept of the rule of law which he found ready made (in the writings of Hume).

Hayek’s own argument, that applying Kantian universalizability to the maxims that make up the legal order yields liberal principles of justice which confer maximum equal freedom upon all, has been found wanting by nearly all his critics and interpreters. Thus Raz quotes Hayek as follows:

“The conception of freedom under the law that is the chief concern of this book rests on the contention that when we obey laws, in the sense of general abstract rules laid down irrespective of their application to us, we are not subject to another man’s will and are therefore free. It is because the judge who applies them has no choice in drawing the conclusions that follow from the existing body of rules and the particular facts of the case, that it can be said that laws and not men rule… As a true law should not name any particulars, so it should especially not single out any specific persons or group of persons.”

Raz comments on this passage: “Then, aware of the absurdity to which this passage leads, he modifies his line, still trying to present the rule of law as the supreme guarantee of freedom…”

Similarly, discussing Hayek’s criteria that laws should not mention proper names and that the distinctions which the law makes be supported both within and without the group which is the subject of legislation, Hamowy comments:

That no proper name be mentioned in a law does not protect against particular persons or groups being either harassed by laws which discriminate against them or granted privileges denied the rest of the population. A prohibition of this sort on the form laws may take is a specious guarantee of legal equality, since it is always possible to contrive a set of descriptive terms which will apply exclusively to a person or group without recourse to proper names…

How are these standard objections to be rebutted?

Meeting Objections to the Universalizability Test

We must first of all note that, even in Kant and in Kantian writers other than Hayek, such as R.M. Hare and John Rawls, the test of universalizability does far more than rule out reference to particular persons or special groups. The test of universalizability does indeed, in the first instance, impose a demand of consistency as between similar cases, and in that sense imposes a merely formal requirement of non-discrimination. This is the first stage or element of universalization, the irrelevance of numerical differences. But the next stage of universalization is that of asking whether one can assent to the maxim being assessed coming to govern the conduct of other towards oneself: this is the demand of impartiality between agents, the demand that one put oneself in the other man’s place. And this element or implication of universalizability leads on to a third, that we be impartial as between the preferences of others, regardless of our own tastes or ideals of life—a requirement of moral neutrality. I do not need to ask here exactly how these elements of universalizability are related to one another, to ask (most obviously) if the second is entailed by the first in any logically inexorable way, or similarly the third by the second. It is enough to note that there is a powerful Kantian tradition according to which strong implications do link the three phases of universalization, and that this is a tradition to which Hayek himself has always subscribed.

Applying the full test of universalizability to the maxims that go towards making a legal order, we find that, not only are references to particulars ruled out, but the maxims must be impartial in respect of the interests of all concerned, and they must be neutral in respect of their tastes or ideals of life. If it be once allowed that the test of universalizability may be fleshed out in this fashion, it will be seen as a more full-blooded standard of criticism than is ordinarily allowed, and Hayek’s heavy reliance on it will seem less misplaced. For, when construed in this fashion, the universalizability test will rule out (for example) most if not all policies of economic intervention as prejudicial to the interests of some and will fell all policies of legal moralism. Two large classes of liberal policy, supposedly allowable under an Hayekian rule of law, thus turn out to be prohibited by it.

Hayek himself is explicit that the test of universalizability means more than the sheerly formal absence of reference to particulars. As he puts it:

The test of the justice of a rule is usually (since Kant) described as that of its ‘universalizability,’ i.e. of the possibility of willing that the rules should be applied to all instances that correspond to the conditions stated in it (the ‘categorical imperative’). What this amounts to is that in applying it to any concrete circumstances it will not conflict with any other accepted rules. The test is thus in the last resort one of the compatibility or non-contradictoriness of the whole system of rules, not merely in a logical sense but in the sense that the system of actions which the rules permit will not lead to conflict.

The maxims tested by the principle of universalizability, then, must be integrated into a system of nonconflictable or (in Leibniz’ terminology) compossible rules, before any of them can be said to have survived the test.

Again, the compatibility between the several rules is not one that holds in any possible world, but rather that which obtains in the world in which we live. It is here that Hayek draws heavily on Hume’s account of the fundamental laws of justice, which he thinks to be, not merely compatible with, but in a large measure the inspiration for Kant’s political philosophy. As I have already observed, the practical content of the basic rules of justice is given in Hume by anthropological claims, by claims of general fact about the human circumstance. It is by interpreting the demands of universalizability in the framework of the permanent necessities of human social life that we derive Hume’s three laws of natural justice.

Kantian Universalizability & Liberal Justice

Note again that, in Hume, as in Hayek, the laws of justice are commended as being the indispensable condition for the promotion of general welfare, i.e. their ultimate justification is utilitarian. But in order to achieve this result, neither Hayek nor Hume need offer any argument in favor of our adopting a Principle of Utility. Rather, very much in the spirit of R.M. Hare’s Kantian reconstruction of utilitarian ethics, Hayek’s claim is that an impartial concern for the general welfare is itself one of the demands of universalizability. A utilitarian concern for general welfare is yielded by the Kantian method itself and is not superadded to it afterwards. Hayek’s thesis, like Hume’s, is that a clear view of the circumstances of human life shows justice to be the primary condition needed to promote general welfare. But, like Hare and Kant, he thinks concern for both justice and the general welfare to be dictated by universalizability itself.

Hayek’s argument, then, is that the maxims of liberal justice are yielded by applying the Kantian universalizability test to the principles of the legal order. As he puts it:

It will be noticed that only purpose-independent (‘formal’) rules pass this (Kantian) test because, as rules which have originally been developed in small purpose-connected groups (‘organizations’) are progressively extended to larger and larger groups and finally universalized to apply to the relations between any members of an Open Society who have no concrete purposes in common and merely submit to the same abstract rules, they will in the process have to shed all reference to particular purposes.

Again, in listing the essential points of his conception of justice Hayek asserts:

…a) that justice can be meaningfully attributed only to human actions and not to any state of affairs as such without reference to the question whether it has been, or could have been, deliberately brought about by somebody; b) that the rules of justice have essentially the nature of prohibitions, or, in other words, that injustice is really the primary concept and the aim of rules of just conduct is to prevent unjust action; c) that the injustice to be prevented is the infringement of the protected domain of one’s fellow men, a domain which is to be ascertained by means of these rules of justice; and d) that these rules of just conduct which are in themselves negative can be developed by consistently applying to whatever such rules a society has inherited the equally negative test of universal applicability—a test which, in the last resort, is nothing less than the self-consistency of the actions which these rules allow if applied to the circumstances of the real world.

There seem to be several elements, then, in Hayek’s contention that applying the Kantian test to the legal framework yields a liberal order. First, though he does not explicitly distinguish the three stages or phases of universalization I mentioned earlier, he is clear that the universalizability test is not only formal, and that it comprehends the requirement that the scheme of activities it permits in the real world would be conflict-free. Second, at any rate in a society whose members have few if any common purposes, law must have a largely formal character, stipulating terms under which men may pursue their self-chosen activities rather than enjoining any specific activities on them; in the term Hayek adopts from Oakeshott, the form of legal rule appropriate to such an abstract or open society is “nomocratic” rather than “teleocratic,” purpose-neutral rather than purpose-dependent. Third, in a society whose members lack common purposes or common concrete knowledge, only abstract rules conferring a protected domain on each can qualify as rules facilitating a conflictfree pattern of activities. This means that the conditions of our abstract or open society will themselves compel adoption of a rule conferring just claims to liberty and private property—which Hayek rightly sees and indissolubly linked—once these conditions are treated as the appropriate background for the Kantian test.

One crucially important implication of this last point, noted in all of Hayek’s political writings over the last twenty years but spelled out most systematically in the second volume of his recent trilogy, Law, Legislation and Liberty, is that the rules of justice which survive the Kantian test can prescribe justice only in the procedures and never in end-states. As Hayek puts it, explicating Hume: “There can be no rules for rewarding merit, or no rules of distributive justice, because there are no circumstances which may not affect merit, while rules always single out some circumstances as the only relevant ones.”

This pattern of argument is an important and striking one, worth examining in detail on its merits, and not capable of being dismissed as prima facie unworkable. One important point may be worth canvassing, however. Hayek argues that once the legal framework has been reformed in Kantian fashion, it must of necessity be one that maximizes liberty. Hamowy goes so far as to assert that Hayek defines liberty as conformity with the rule of law. Now, whereas not every aspect of Hayek’s treatment of freedom and coercion is clear or defensible, it seems a misinterpretation to say that he ever defines freedom as consisting solely in conformity with the rule of law. Rather, he takes such conformity to be a necessary condition of a free order. His thesis is that applying the Kantian test to the legal order will of itself yield a maxim according equal freedom to all men. So it is not that the rule of law contains freedom as part of its definition, but rather that a freedom-maximizing rule is unavoidably yielded by it. In other terms, we may say that, whereas moral rights do not come into Hayek’s theory as primordial moral facts, the right to a protected domain is yielded by his conception as a theorem of it.

If Hayek is right that his method shows the unacceptability of contemporary patterned conceptions of justice, for example, and if, as I think, he has shown that only procedural justice can be squared with the liberal maxim demanding equal freedom of action, then we can begin to see the measure of his achievement. Certainly, his Kantian derivation of equal freedom deserves close and sympathetic scrutiny, and it cannot be assumed without argument that Hayek’s system cannot protect individual rights or claims to justice simply because such rights do not enter the system at a fundamental level. For the most original and striking claim of Hayek’s legal and political philosophy, which in this respect may be regarded as a synthesis of the theories of justice of Hume and Kant, is that applying the rational test of universalizability to the conditions of our world must of necessity yield a system of rules in which a protected domain of individual liberty is secured.

Some Criticism of Hayek’s System of Ideas: Buchanan and Oakeshott

In regard to his theory of justice, the criticisms we have surveyed appear to be premature, or at least inconclusive. We have yet to consider a much more fundamental criticism of Hayek’s system, directed against it by thinkers in very different traditions, which attends to the highly ambigous role in Hayek’s theory of the idea of spontaneous order.

James Buchanan on Hayek

One of the clearest and deepest statements of some of the difficulties in Hayek’s use of spontaneous order arguments may be found in James M. Buchanan’s writings. In an important paper, Buchanan observes that, in Hayek’s later writings we find:

the extension of the principle of spontaneous order, in its normative function, to the emergence of institutional structure itself. As applied to the market economy, that which emerges is defined by its very emergence to be that which is efficient. And this result implies, in its turn, a policy of nonintervention, properly so. There is no need, indeed there is no possibility, of evaluating the efficiency of observed outcomes independently of the process; there exists no external criterion that allows efficiency to be defined in objectively measurable dimensions. If this logic is extended to the structure of institutions (including law) that have emerged in some historical evolutionary process, the implication seems clear that that set which we observe necessarily embodies institutional or structural ‘efficiency.’ From this it follows, as before, that a policy of nonintervention in the process of emergence is dictated. There is no room left for the political economist, or for anyone else, who seeks to reform social structures, to change laws and rules, with an aim of security instead of efficiency in the large…Any ‘constructively rational’ interferences with the ‘rational’ processes of history are, therefore, to be avoided.

Buchanan’s criticism, then, is that Hayek’s apparent extension of spontaneous order or evolutionary arguments from the market processes to institutional structures is bound to disable the tasks of criticism and reform. We are left with no leverage in Hayek’s account which might be used against the outcomes of the historical process. Instead, it seems, we are bound to entrust ourselves to all the vagaries of mankind’s random walk in historical space.

In an earlier critique, Buchanan noted perceptively the phenomenon of “spontaneous disorder” —the emergence of patterns of activity that thwart the purposes and damage the interests of all who participate in them. Such “spontaneous disorder” is, after all, the core of the idea of the Prisoner’s Dilemma, which has been explored imaginatively in Buchanan’s writing in its political and constitutional applications. The neglect in Hayek’s political work in English of any treatment of the problem this Dilemma poses for his system invites the attempt to accomodate these fundamental objections.

It is clear, however, that as it stands Hayek’s conception of spontaneous order needs revision or at least refinement. Buchanan’s identification of certain states of affairs as manifesting spontaneous disorder suggests the question whether the idea of spontaneous order in Hayek is a value-free explanatory notion or else a moral notion of some sort. If the former—as Hayek’s examples of spontaneous order in nature suggest—then spontaneous order really functions as a cipher for invisible hand explanations of the sort brilliantly discussed by Robert Nozick in his Anarchy, State, and Utopia.

We might then be compelled to regard the growth of interventionism and of the welfare state, and even certain aspects of the functioning of totalitarian regimes, as exemplifying spontaneous order inasmuch as we might be able to explain these social phenomena as the unintended outcomes of human action. If, on the other hand, spontaneous orders are taken as embodying positive moral values—if, that is to say, the idea of a maleficient or destructive spontaneous order is repudiated as incoherent—then it seems clear that Hayek requires a far bolder moral theory than any he has advanced thus far. In particular, such a moral theory would need to bridge the gap between evaluative and descriptive language which is a feature of modern moral philosophy, and in this and other respects it would need to come much closer to natural law ethics than Hayek has ever himself done.

Buchanan’s critique is decisive, then, in compelling Hayek to clarify the idea of spontaneous order as being either a moral notion, which might plausibly be embedded only in some variant of natural law ethics, or else as a value-free explanatory concept whose political uses must then be made more explicit than Hayek has heretofore done.

Buchanan’s critique is important, again, in disclosing that Hayek’s attitude to rationalism is ambivalent and unstable. If we adopt the latter view of spontaneous order as a value-free explanatory idea, its uses in political argument depend upon two kinds of considerations. First, they must invoke a political ethics, which arguably is given by Hayek’s synthesis of Hume with Kant. More problematically, however, the use of an explanatory idea of spontaneous order in political argument presupposes that we have a genuine theoretical or synoptic knowledge of social life of just the sort that Hayek occasionally suggests is impossible. This is to say that, if we are to make use of the idea of spontaneous social order in framing or reforming social institutions so as to make best use of society’s spontaneous forces, we need to invoke a theoretical model of social structure and social process which gives some assurance as to the outcome of our reforms. To this extent, contrary to some of Hayek’s recommendations but in line with a part of his recent practice, we cannot avoid adopting a critical rationalist stance toward our inherited institutions and the historical process. This is true, whether we accept Hayek’s own effort at a political ethics, or Buchanan’s neo-Hobbesian contractarian constitutionalism.

Michael Oakeshott on Hayek

These cited points are reinforced if we consider Michael Oakeshott’s attitude to Hayek’s work. Oakeshott is a more intrepid traditionalist than Hayek in that Oakeshott claims that we cannot in the end do anything but accept the traditions which we inherit in our society. Certainly, we cannot appraise our traditions by reference to any transcendental standard of reason or justice, since such standards (in Oakeshott’s view) necessarily turn out to be abridgements of our traditions themselves. Like Hayek, then, Oakeshott maintains that all moral or political criticism must be immanent criticism, but, unlike Hayek, he denies that there is any inherent or evolutionary tendency for the development of traditional practices to converge on liberal institutions. For this reason Oakeshott would insist that his conception of civil association or nomocracy—upon which, as we have already seen, Hayek draws in his conception of the juridical framework of the liberal order—is a description of a strand of practice in the modern European state and has no necessary application beyond the cultural milieu in which it came to birth. Oakeshott would accordingly repudiate the implicit universalism of Hayek’s argument for the liberal order.

To some extent, of course, Hayek concedes that there cannot be universal scope for liberal principles when he allows that the Great or Open Society is itself an evolutionary emergence from rude beginnings. Where he differs from Oakeshott is in affirming that the Great or Open Society in which liberal principles are uniquely appropriate represents the future of all mankind. In this respect, Hayek continues to subscribe to an Enlightenment doctrine of universal human progress which Oakeshott has abandoned. I do not mean that Hayek has ever endorsed the belief that historical change is governed by a law of progressive development, but rather that he seems to take for granted (what surely is most disputable) that the unhampered natural selection of rival practices and traditions will result in a general convergence on liberal society.

Hayek’s Variant of Classical Liberalism: A Fusing of Libertarian & Traditionalistic Ideals?

A contrast of Hayek’s thought with that of Oakeshott revives one of the commonest criticisms of Hayek’s work, namely, that it straddles incompatible conservative and libertarian standpoints. The upshot of my discussion thus far may support this standard criticism in that it suggests that Hayek’s system is poised uneasily between the constructivist (but not uncritical) rationalism of a Buchanan and the out-and-out traditionalism of an Oakeshott.

At the same time, however, elements of Hayek’s conception of social evolution via the competitive selection of rival traditions may provide a point of convergence, if not of fusion, for some libertarian and conservative concerns. One central argument in contemporary neo-conservatism, after all, is in the claim that the stability of the free society depends upon its containing strong supportive traditions. Modern neo-conservatives such as Irving Kristol and Daniel Bell take up the doubts expressed by writers of the Scottish Enlightenment such as Smith and Ferguson about the effect on society’s moral traditions of the workings of the commercial marketplace itself. A major difficulty in the neo-conservative analysis is the lack of any very convincing prognosis: if free markets have corrosive effects in respect of the moral traditions which support them, so that capitalism institutions contain cultural contradictions which make them over the long run self-destroying, what is to be done?

This is an especially hard question if we recognize (as some of the neo-conservatives themselves sometimes fail to do) that merely capturing positions of power in the apparatus of the contemporary democratic state affords no longrun security for the market order.

Hayek’s Voluntaristic Traditionalism: A Market in Traditions

There is in Hayek’s work an argument for voluntaristic traditionalism which goes some way toward answering this question. Hayek sees that the principal cause of the erosion of definitive moral traditions in advanced societies is not so much the market itself, but rather interventionist policies sponsored by governments. Often with the support of business, governments have contributed to the erosion of moral traditions by their educational, housing, and welfare policies. Hayek’s argument for a voluntaristic traditionalism distinguishes him from neo-conservatives, firstly in that he would argue that it is government interventionism which causes much of the contemporary moral malaise and because he would not seek to use government power to prop up faltering traditions. Rather, he seeks to establish something like a market in traditions, in the hope that the traditions which would emerge from an unhampered social life would be most congenial to the stability of the market order itself. In his argument for a competitive and voluntaristic traditionalism, Hayek plainly treats particular traditional communities as filter devices for social practices of the sort Robert Nozick discusses in his fascinating and profound account of the framework of utopia.

It cannot be said unequivocably that Hayek’s libertarian traditionalism answers the most profoundly disturbing doubts of the neo-conservatives. In particular, Hayek’s advocacy of procedural justice, with the role of chance in distributing incomes being recognized clearly, confronts the difficulty that the moral defense of capitalism has chiefly been conducted by reference to the notion of desert. By comparison with this traditional defense, Hayek’s apologia for the market order may be, as Kristol observes, “nihilistic.”

Against this criticism Hayek may justifiably maintain that there is a sheer conflict between traditional sentiments of desert and merit and any clear-sighted defense of the market order—a conflict which the neo-conservative endorsement of the market order does nothing to resolve.

Kristol’s criticism of Hayek has other, and perhaps profounder aspects, however. Hayek recognizes that contemporary moral sentiment is by no means uniformly, or even generally, favorable to the market order, and, both in his writings on Mandeville and elsewhere, Hayek has implicitly acknowledged that the spontaneous growth of moral norms may not, in fact, yield results congenial to a stable market order. At the same time, Hayek continues to advocate a strong form of moral conventionalism, resisting the claims of those who see modern morality as in need of radical reform. There is thus a tension, perhaps irresolvable in terms of Hayek’s system, between his Mandevillian moral iconoclasm and his moral conservatism.

Conclusion: Hayek’s Research Program & Classical Liberalism

In his argument for a voluntaristic traditionalism, Hayek (as we have seen) answers some of the concerns of contemporary conservatives. His argument for a market in traditions may be vulnerable to criticism, inasmuch as the growth of anti-market ethics over the past centuries seems to belie his expectation that natural selection of moral traditions will filter out those unfriendly to the market process. In recognition of this, Hayek would in consistency be compelled to adopt, in respect of moral convention, a more “rationalist” stance than he usually recommends. He would need to undertake a systematic criticism of modern morality in regard to its viability as part of an ongoing market order. In so doing, he would be resuming the task undertaken by those moderate rationalists, Bernard Mandeville and David Hume, whom Hayek rightly sees as the fountainheads of classical liberalism. Even if his own system of ideas should prove unstable, it recalls to us the insights of the great classical liberals, and intimates the most powerful research program in classical liberal political philosophy. And, in recalling that intellectual tradition from what had sometimes seemed an irrecoverable oblivion, Hayek’s work is a hopeful augury for an uncertain future.