Is social justice for or against liberty? The philosophical foundations of Mill and Hayek’s theory of liberty

By comparing the philosophical foundations of Mill and Hayek’s theory of liberty, this paper shows that some similarities in the economic theories of Mill and Hayek are actually based on different rationales. It follows that any attempt to find a common thread in Mill and Hayek to provide reasonable guidance for social policy can be promising only if we can find the common ground from their social philosophy. While analyzing the rationales behind their opinions regarding the role of government and taxation policies, this paper will focus on exploring the role of two philosophical ideas, liberty, and justice. This will clarify the relationship between social justice and liberty as well as their status in relation to the ultimate principle of rules in the philosophy of Mill and Hayek. This paper will offer an explanation why, in Mill’s utilitarian philosophy, the pursuit of social justice aligns with the real freedom of everyone, but in Hayek’s philosophy, it is a hindrance.     

The limits of liberalism: Good boundaries must be discovered

Determining good boundaries for governance jurisdictions is among the most difficult problems in political theory and political philosophy. But to whom the rules of a given jurisdiction applies is a problem that afflicts private as well as public governance. Clubs have boundaries no less than cities, states, or nations. This essay applies Hayek’s conception of competition as a discovery procedure to boundary problems, arguing that good jurisdictional boundaries are subject to a great deal of contingent variation according to particular the conditions of time and place. Philosophical speculation, therefore, cannot fully replace a trial and error process that facilitates social learning about where good boundaries fall. I outline the features of good boundaries that make them subject to such variation, then evaluate two criteria for evaluating whether existing jurisdictional boundaries are good: one that emphasizes ex ante consent to boundaries, and one that focuses on the ability of individuals to exit from jurisdictions ex post, arguing that the exit-focused approach is underappreciated.     

Walter Eucken’s place in the history of ideas

German neoliberalism, as represented by the so called Freiburg School, was mainly influenced by the economist Walter Eucken. Eucken’s economic methodology can only be understood if placed in the context of the German philosophical and sociological debate of that time. The revelation of these connections is at the center of this paper. To this purpose, first, the influence of Max Weber and of his ideal typical approach will be discussed. Second, the role played by Walter Eucken’s father, the philosopher Rudolf Eucken and the significance of the Freiburg phenomenologist Edmund Husserl for the concept of ordoliberalism will be analyzed. Third, it will be shown that Eucken’s method is set against all relativist currents and sustained by the hope of discovering the “realm of truth” (Edmund Husserl) in economics as well. On this basis, Eucken’s oeuvre can be characterized by the aspects of order, freedom and truthfulness.     

Understanding Social Market Economy,Francesco Forte and His Interpretation

The social thought which emerges from Francesco Forte’s economic writings proves to be mainly inspired by methodological individualism, though interpreted through a peculiar “personalistic” key. We will analyze the peculiar traits of his thought and the specific contribution that Forte gave to the understanding of a specific economic theory based on the doctrine of “Ordoliberalism” or the “Freiburg School.” In our work, we will show how Forte proposes an interpretation of that doctrine, according to two of his main points of reference in economic and philosophical thought: Luigi Einaudi and Antonio Rosmini Serbati. Finally, we will present an important aspect of Forte’s work: his institutional analysis in the light of the particular civil philosophy expressed by Christian social teaching.     

Hayek’s 1945 Finlay Memorial Lecture: Tracing the origins and evolution of his ‘true’ individualism

Hayek’s original 1945 University College Dublin lecture outlined the origins and evolution of two different interpretations of ‘individualism’, comparing and contrasting what Hayek terms ‘true’ and ‘false’ individualism notwithstanding the misleading contemporary interpretations and distorted perceptions of the assumptions underlining ‘true’ individualism. Hayek developed and extended the Scottish Enlightenment theory of spontaneous order originally formulated by Adam Ferguson’s maxim that social order was the result of unintended human action rather than the result of deliberate human design in order to explain the origin of complex social structures, which originated in a Cromwellian maxim. The origination and inspiration for the title of Hayek’s lecture is also considered, as is the influence of other thinkers; Mandeville, Tocqueville, Mill, Acton and Schatz that Hayek cites in his Dublin lecture.     

Schumpeter: Theorist of the avant-garde

This paper argues that Schumpeter’s 1911 edition of ‘Theory of Economic Development’ can be fruitfully read as a theory of the avant-garde, in line with such theories developed by artistic avant-garde around the same time, in particular by the Italian Futurists. In particular it will show that both Schumpeter and other avant-garde theorists sought to break with past (1), identify an avant-garde who could force that break (2), find new ways to represent the dynamic world (3), embrace the new and dynamic (4) and promote a perpetual dynamic process, instead of a specific end-state or utopia (5). This new reading helps us to understand the cultural meaning of this seminal text in economics. Secondly it greatly facilitates our understanding of the differences with the later interwar German edition and English edition, which were more cautious in their embrace of the new, less focused on the individual qualities of the entrepreneur and placed more emphasis on historical continuity. Thirdly this reading suggests a different reason for the bifurcation between Schumpeter and the rest of the Austrian school of economics. Traditionally this split is explained by Schumpeter’s affinities with the Lausanne School, this paper instead suggests that the crucial break between Schumpeter on the one hand and Böhm-Bawerk, Wieser and later members of the Austrian School on the other hand is their theory of and attitude toward social change.     

The Cambridge challenge to the Ricardian analysis of poverty

The Ricardian economists’ famous model of economic growth employed the Malthusian population doctrine, the law of diminishing returns, and the classical or iron law of wages. This analysis was based on utilitarian moral philosophy. The gloomy Stationary State conclusions of the Ricardian growth model — maldistribution of income and widespread poverty — were challenged by both economists and moral philosophers. A particularly important challenge was that offered by William Whewell (1794–1866), Professor of Moral Philosophy and the dominant figure at the University of Cambridge. Whewell is remembered today for his early contributions to mathematical economics. This article begins with a review of the Ricardian growth model. Next, Whewell’s system of moral philosophy is examined and the scientific and religious basis of Whewell’s antagonism to Ricardian economics is considered. After considering Whewell’s treatment of agricultural progress, economic classes, and rent doctrine, his own model of economic growth is analyzed. Finally, Whewell’s appraisal of the duty of government to those harmed by development is explored.     

Methodological individualism: True and false

I apply Hayek’s distinction between ‘true’ and ‘false’ individualism to methodological individualism. Hayek traced ‘false’ individualism to Cartesian rationalism; Hayek’s rejection of Mises’ praxeology was due to its rationalist underpinnings. The first half of this paper identifies praxeology’s foundational philosophical concepts, emphasising their Cartesian nature, and illustrates how together they constitute a case for methodological individualism: intuition and deduction; reductionism; judgement; dualism. In the second half of this paper, I draw upon philosophy and cognitive science to articulate ‘Hayekian’ (N.B. not Hayek’s) alternatives to these Cartesian concepts. The Hayekian alternative allows a ‘gestalt switch’ from the individual- to the system-level perspective. I therefore suggest that methodological individualism is both true and false: true, in that economic phenomena are grounded in the actions of individuals; false, in that certain problems might be reconceived/discovered at the system-level. I finish by suggesting three avenues of research at system-level: optimisation; stigmergy; computational complexity.     

James M. Buchanan’s contractarianism and modern liberalism

This paper contrasts Buchanan’s contractarian–constitutional liberalism with Hayek’s evolutionary liberalism and Rothbards free-market liberalism as representative branches of the classical liberal tradition. While Hayek and Rothbard focus on individual liberty as private autonomy, Buchanan posits that individual sovereignty should be recognized as the fundamental normative premise of liberalism. He insists that a consistent application of this premise requires liberals to respect individuals as sovereigns not only in their capacity as private law subjects but also at the constitutional level of choice where, as sovereign citizens, they choose, jointly with their fellow citizens, the rules under which they wish to live. It is argued that by supplementing the notion of individual liberty as private autonomy with the concept of individual sovereignty in constitutional matters Buchanan lays the theoretical foundation for complementing the well-developed liberal theory of the market with a consistent liberal theory of democracy.     

The Microfoundations of Austrian Economics through a New Classical Theoretical Lens

This paper is an attempt to contribute to the microfoundations debate by discussing the distinctive methodological characteristics of the Austrian school, and how they relate to different conceptions of equilibrium and general equilibrium models. Further, we shall focus on one specific branch of the Austrian school (those who see markets as exhibiting equilibrating tendencies) and one specific branch of neoclassical economics (the New Classical School) to highlight some hitherto overlooked points of tangency. Indeed, we shall use the monetary theories of Hayek and Lucas to argue that the limitations of New Classical models may lead to Austrian solutions.     

Spontaneous economic order

This paper provides attempts to formalize Hayek’s notion of spontaneous order within the framework of an Arrow-Debreu economy. Our study shows that, if a competitive economy is sufficiently fair and free, a spontaneous economic order will emerge in long-run competitive equilibria so that social members spontaneously occupy an unplanned distribution of income. Despite this, the spontaneous order may degenerate in the form of economic crises whenever an equilibrium economy approaches the extreme competition. Remarkably, such a theoretical framework of spontaneous order provides a bridge linking Austrian economics and neoclassical economics, where a truth begins to emerge: “Freedom promotes technological progress”.     

现代主流经济学的制度转向及其制度不及——兼论新制度主义的分析思维及其范式缺陷

新古典经济学是研究既定制度下个体理性行为的学说,而社会制度的确立原则不同于属于个体的行为原则,因为社会制度涉及到众多社会性因素。不幸的是,流行的新制度主义恰恰舍弃了包括伦理、历史和权力等社会性因素,而试图把制度分析纳入新古典经济学框架,它或者基于博弈均衡来分析和解释那些正式规则,或者基于理性建模的互动行为分析来构设社会制度。正是基于这种抽象思维,新制度主义必然不能真正剖析制度的产生和演化,舍弃权力结构的博弈均衡所构设的社会制度。     

Changing knowledge in the early economic thought of Michael Polanyi

How did Polanyi, a middleman between Keynes and Hayek, see economics education as a way to save the challenged liberal economic system of the 1930s? The first part of the article explores how experts and non-experts were engaged in making and disseminating economic knowledge, what role perception had in these engagements, and how such practices contributed to a kind of mental division of labor in the early economic thought of Michael Polanyi. The second part reconstructs Polanyi’s endeavors to show how the visual presentation of social matters could foster these engagement practices and the construction of economic knowledge. The third part points out that top-down and bottom-up approaches were both present in Polanyi’s economic thought and explains why the latter is evolutionary in a sense that it is based on changing knowledge in cognitive, behavioral, social and technical domains. The fourth part discusses how public understanding of economic ideas connected interactional expertise and boundary work in Polanyi’s account, and how he was engaged in developing both as part of his social agenda. The article concludes by showing how Polanyi positioned his growth theory and social agenda to save liberal economic thought and our civilization.     

Hayek’s monetary theory and policy: A note on alleged inconsistency

Challenging the dominant view, we claim that Hayek’s monetary views did not significantly change over his lifetime. The prevalent perception of early Hayek as a money stream stabilizer and late Hayek as a price level stabilizer is attributable to an unjustified normative interpretation of Hayek’s positive analysis. We argue that in his contributions to monetary theory, Hayek took the goals of monetary policy as exogenously given and analysed the efficiency of different means of achieving them. Hayek’s allegedly inconsistent transformation from a critic to an advocate of price level stabilization is explained by a change of issues under his focus, rather than by a change in his positive views. We also claim that Hayek was always aware that every practical monetary policy involves difficult trade-offs and that he was therefore reluctant to impose his own value judgments on what people should strive for.     

Gordon Tullock and the Virginia School of Law and Economics

In 1999 Gordon Tullock became Professor at the George Mason University Law School. Tullock’s arrival at George Mason brought the economics department and the law school close together. The work that resulted during those years consolidated the methodological foundations for a different way of thinking about the economic analysis of law—the “functional” approach to law and economics. The functional law and economics approach espoused by the Virginia School was not attacking any of the results of the Chicago School or the Yale School, but rather proposing a methodological shift. This paper presents some of the results developed by this school and illustrates Tullock’s controversial positions on trials and on the common law system, through anecdotes, Tullock’s own work and related scholarly contributions.     

社会功能工资模型的构建

马克思经济学的劳动力价值工资理论、新古典经济学的边际生产力工资理论和利润分享工资理论等,在解释私有制经济中的劳动者报酬方面,都具有一定的优势,同时又都有一定的局限性。以劳动者报酬社会功能工资理论为标准,以马克思经济学的劳动力价值工资理论为起点,综合新古典经济学的边际生产力工资理论和利润分享工资理论,构建劳动者报酬社会功能工资模型,能为提高我国私有制经济中的劳动者报酬提供理论基础。     

Normative judgments and spontaneous order: The contractarian element in Hayek's thought

This paper explores the apparent tension between Hayek's moral skepticism and his role as a defender of liberal institutions. It looks at Hayek's concept of spontaneous order, and asks whether there are any grounds for claiming that spontaneous orders have moral value. The argument from group selection is considered but rejected. Hayek is interpreted as putting most weight on arguments which show, for specific orders (such as the market and common law) that their rules assist each individual in the pursuit of his or her ends, whatever those ends may be. It is suggested that this form of argument is contractarian in character. However, Hayek's contractarianism is distinctive in that it looks for agreement among individuals within an ongoing social order, rather than among rational agents who stand outside any particular society. This paper was written while I was a Visiting Scholar at the Social Philosophy and Policy Center, Bowling Green State University; I am very grateful for the Center's support. An early version was presented at the Friedrich August von Hayek Memorial Symposium in Freiburg, in June 1993. In revising the paper, I have benefited from the comments of the participants at that symposium.     

Intertemporal Choice,Saving and Investment,and Interest Rate: Contributions from a Neglected Hayekian Model

Hayek’s ‘Utility analysis and interest’ expounds a graphical model of intertemporal choice that has not received the attention it deserves. This model is important in that it can be used as a basic macroeconomic model and can therefore perform for the Austrian School the role that the Solow model plays for the standard neo-classical paradigm. This article provides an in-depth presentation of the Hayekian model, and then applies the model to key theoretical issues in macroeconomics; namely, the effects upon intertemporal equilibrium and upon the interest rate of a change in time preference, of the implementation of a technical development and of an increase in the supply of labor.     

Hayek and Keynes: From a common critique of economic method to different theories of expectations

The methodological positions of Hayek and Keynes contain striking similarities. Both authors opposed empiricist approaches to economics that assign priority to mere observation as the source of knowledge. Both emphasised intentionality, motivation and human agency. Notwithstanding this common ground, they had different conceptions of how beliefs are formed and had different explanations of thought and action in economics. Hayek grounded his explanation on an evolutionary theory of the mind, i.e. on psychological premises, whereas Keynes based his view of belief formation on probable reasoning, where probability is a logical concept. Starting from psychological premises Hayek maintained that individuals act rationally only by following rules. As a consequence, he considered conventional expectations to be the primary guide for agents in economic life. Keynes agreed that conventional expectations actually guide economic behaviour, but he maintained that they are justified only in situations of total ignorance. In conditions of limited knowledge, agents can base their action on reasonable expectations, independently of conventions. Moreover, agents?particularly those institutions responsible for economic policy?ought to shun conventional behaviour in order to counteract its negative social consequences. We argue that Keynes's theory of expectations is well grounded upon his theory of logical probability. Hence his advocacy of discretionary policy is rationally justified.     

Hayek on corporate social responsibility

Hayek published a piece in 1960 that criticized corporate social responsibility as a norm for economic organizations, although he regarded corporate actions to be subject to essentially the same moral rules as individual action. This article identifies and reorganizes Hayek’s criticisms of social justice, the rule of law and morality, his comparison of the open society and the closed society, and his treatment of charity and altruism. The aim is to clarify the Hayekian perspective on CSR. These considerations explain why the ‘social’ perspective on responsibility is considered dangerous in a free society, how to separate legal compliance and morality from concerns about social justice.