August 18, 2008
Hayek differs from classical liberalism because of his attempt to re-ground the doctrine of liberalism without recourse to the fiction of the social contract, and by attempting to avoid the critiques usually made of rationalism, utilitarianism, the postulate of a general equilibrium or of pure and perfect competition founded on the transparency of information. The re-grounding is evolutionary, in that the market evolves. The market comes about at a particular time in history, as part of the emancipation from traditional society of the feudal order during the emergence of modernity.
Modern society constitutes a "spontaneous order" which no human will could ever reproduce or surpass, which came into being according to a Darwinian model. Modern civilization is neither a product of nature nor an artifice but the result of cultural evolution where selection operates automatically. From this viewpoint, social rules play the role attributed to mutations in neo-Darwinian theory: certain rules are retained because they are "more efficient" and provide an advantage to those who adopt them ("rules of correct behavior"), while others are abandoned.
The market is obviously the key to Hayek's understanding of modernity. In a society of individuals, exchange takes place within the context of the market, which is the only conceivable means of integration. For Smith and Mandeville, the market is an abstract mode of social regulation. It is governed by an "invisible hand" following objective laws which supposedly regulate relations among individuals, independently of any human authority. This theory takes into account habits, customs and even the traditions which have accompanied the emergence of the market. To some extent, as with Ferguson, market exchange becomes the specific modality of social relations based on custom.
For Hayek the market is not ordered according to goals: it leaves them undetermined and only deals with reconciling means.y combining the evolutionist theory and the doctrine of the "invisible hand," the "naturality" of the market it established without having to posit it as original. He does away with the idea of a natural order or self-evident truth. At the same time, he appropriates the liberal postulate according to which there are objective laws such as the free interaction of individual strategies leading not only to order but to the best possible one.
For Hayek, the market is no longer simply an economic mechanism for the optimal allocation of resources in a universe traditionally described as governed by scarcity -- a mechanism ordered by some positive finality (individual happiness, wealth, well-being); rather, it is a sociological as well as political order, an instrumental formal support for the possibility of individuals to freely pursue their particular objectives. In short, it is a structure, i.e., a process with no subject, spontaneously managing the coexistence of the plurality of private goals, which imposes itself on everyone to the extent that, by nature, it prevents individuals as well as groups from trying to reform it.
The law's objective is no longer to organize individual actions in terms of the common good or of some particular project, but to codify the rules whose only function is to protect individual freedom of action, i. e., to indicate to each person what he can count on, which material objects or services he can use for his projects, and the kind of action he can engage in. It is equivalent to the rule of the catallactic game in which there are winners and losers.
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Hi Gary
thanks for that. I'd not read any Hayek but it sounds like a differently framed take on free, rational agents acting in their self interest with a bit of Darwinism thrown in. Plus, what is'the market'? I mean, when one really thinks about it, it is quite nebulous, a real abstraction that can mean a lot of things.
I can see its seductive aspect, it is a big picture view, and the 'organic' hue the market takes on seems like a flip side to the Hegelian view - to my limited understanding at least. Except that it is self-defeating: "there will be winners and, hey, there will be losers but there's nto much we can do about it so let's just enjoy the ride".
I believe that some 'rules' are absolute. Perhaps only a hard core game-theorist would argue that a society where norms such as implicit respect for others (not only their property but the person) are usurped could be classed as 'good'. There is evidence to spport this (Sen, Navarro)... Modern societies where 'markets' operate and, yes, 'evolve' within carefully and intelligently constructed frameworks are more prosperous. Conversely, where the market is seen as an end as opposed to the means the picture is not so bright - case in point: sub-prime.
Another example - climate change. I wonder what Hayek would make of the 'market's' difficulty in grappling with this problem (unless he would view government intervention here as an extension or evolution of this big, all encompassing organic market you mention- in which case the concept loses all its explanatory power).
Based on your synopsis, Gary, I think Herr Hayek, although conceptually elegant and seductive, doesn't really end up explaining that much?