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.     

Bringing Social Structure Back into Economics: On Critical Realism and Hayek's Scientism Essay

This paper offers a critique of the critical realist (CR) interpretation of Friedrich Hayek's famous essay Scientism and the Study of Society presented in Tony Lawson's recent Economics and Reality. It is argued, contrary to Lawson's reading, that Hayek's social structures (1) do have an existence over and above the conceptions of the individual actors and (2) serve as a precondition for human action on the lines proposed by CR. Some links are made between Hayek's essay and the theory of social reality recently proposed by John Searle, and some comparisons drawn with CR.     

Some Reflections on F.A. Hayek's The Sensory Order

Though F.A. Hayek is principally known for his work in economics, he also made contributions, both positive and critical, to the field of psychology. His most important piece in the latter field is his 1952 book, The Sensory Order. This paper attempts to locate The Sensory Order in relation to some of Hayek's other works. The origins of Hayek's interests in psychology, as revealed by an early student paper that provided a starting point for his later book, is noted. We then examine what may have motivated Hayek some 25 years later to return to psychology. Finally, the larger role that the book came to play in Hayek's overall system is explored. This revised version was published online in July 2006 with corrections to the Cover Date.     

Listen Libertarians!: A Review of John Tomasi’s “Free Market Fairness”

John Tomasi’s 2012 book, Free Market Fairness, has been well received. On the dust jacket, Tyler Cowen proclaims it “one of the very best philosophical treatments of libertarian thought, ever” and Deirdre McCloskey calls it a “long and friendly conversation between Friedrich Hayek and John Rawls — a conversation which, astonishingly, reaches agreement.” The book does present an authoritative state of the debate across the spectrum from right libertarianism, on one end, to high liberalism (that shares some ideas with democratic socialism), on the other end. My point is not to question Tomasi’s own version of “market democracy” as a remix of Hayek and Rawls, but to use his sympathetic restatements of views across the liberal spectrum in order to show the basic misframings and common misunderstandings that cut across the liberal-libertarian viewpoints surveyed in the book. The heart of the debate is not in the answers to carefully framed questions, but in the framing itself.     

F.A. von Hayeks theorie der geldwirtschaft in neuerer sicht

This essay tries to reconstruct the analytical framework of F.A. von Hayek's theory of a monetary economy. In Hayek's analysis the concept of neutral money only serves to determine a point of reference which is derived from a model of ideal barter. According to Hayek's programme monetary theory should develope by giving up the implicite analogy to a barter economy and by analysing instead a monetary economy as a phenomenon of its own.The approach of the new classical macroeconomics is critically examined from this point of view. It is shown that the coordination of plans and expectations implied by this approach is incompatible with decentralized monetary transactions. This type of model therefore does not stand up to the demands formulated in Hayek's programme.     

Hayek contra Pangloss on Evolutionary Systems

Some analysts have criticized Friedrich Hayek's theory of cultural evolution for implying that the rules, customs, norms, and institutions that emerge from the evolutionary process are necessarily efficient or desirable in all cases. This charge is unfounded. The present article defends Hayek versus his critics in two ways: First, it restates Hayek's own objections to the idea that cultural evolution produces optimal outcomes. Second, it shows, through an analogy with biological evolution, that Hayek's theory need not imply any such conclusion. Contrary to a widely held misconception, biological evolution does not produce organisms that are perfectly adapted to their habitats; insofar as cultural evolution shares common features with biological evolution, cultural evolution may be expected to display similar types of suboptimality or mal-adaptation. Insights from the theory of biological evolution also help to illuminate some areas of controversy with regard to Hayek's theory of cultural evolution, including: Hayek's advocacy of gradual change; the question of what selective forces drive the process of cultural evolution; and the alleged conflict between group selectionism and methodological individualism.     

The Road to Serfdom and the world economy: 60 years later

We consider Friedrich Hayek's Road to Serfdom in light of global ideological and economic developments during the 60 years since its publication. Specific problems considered include socialism and planning, whether national socialism was really socialism, whether Hayek's views could be labeled as social democratic and whether his critique of social democracy was too strong, and his discussion of the prospects for international economic order. While often right and enormously influential, Hayek himself agreed that some of his predictions did not become true.     

On reading Hayek: Choice, consequences and The Road to Serfdom

The basic thesis in The Road to Serfdom is that the lure of socialist ideology has the unintended and undesirable consequence of economic depravation and political tyranny when countries follow its policy agenda. Socialist planning requires economic planners to assume a level of responsibility for economic life in a country which is both cumbersome to the point of impossible, and powerful beyond any reasonable limit that could be safely trusted to any one individual or group of individuals. The papers in this symposium provide a critical reading of the Hayek's thesis on socialism. While many strong points are made in the discussion, the critical reading of Hayek offered must ultimately be judged unsatisfactory. The issues of choice and consequences are not addressed, and as a result the basic argument presented in The Road to Serfdom is never adequately engaged.     

The impossibility of a weakly path independent Paretian liberal

This paper shows that the conflict between two well cherished values related to moral and political philosophy, namely the Pareto optimality and the libertarian principle, cannot be resolved as long as a social choice function is required to satisfy a rationality-consistency condition which ensures some kind of path independence, however, weak.     

Liberal constitutionalism,constitutional liberalism and democracy

The tension that is often seen to exist between the ideals of liberalism and of democracy is examined in this paper in light of the distinction between two liberal outlooks at constitutional regimes, namely, on the one side, a liberal constitutionalism that focuses on the need to provide institutional safeguards of individual liberty as private autonomy and, on the other hand, a constitutional liberalism that focuses on the need to respect the freedom of individuals to choose the constitutional environment in which they wish to live. It is argued that a liberalism that consistently extends its fundamental ideal of individual sovereignty to the level of constitutional choice can be reconciled with the basic democratic ideal of citizen sovereignty.     

The Road to Serfdom symposium.: Comment on papers by Rosser and by Levy, Peart, and Farrant

The paper reviews the history of the socialist calculation debate leading up to the publication of Hayek's The Road to Serfdom, and then uses that information to address various claims made by Rosser and Levy, Peart, and Farrant in their symposium papers.     

On Political Competition: Democracy, Opinion and Responsibility

In this paper, I consider the influence of political competition on opinion. After reflecting on the notion opinion as a concept in the economic analysis of politics, I turn to Hayek's Constitution of Liberty and consider his argument for democracy on the grounds that it is the form of government which best promotes progress in opinion. Yet Hayek's claim that democratically formed opinion improves is unsubstantiated. I turn to accounts of expressive voting thereafter to show why opinions which are realised in the form of votes may be anything other than propitious to democratic culture. I then return to Hayek and consider what becomes of opinion in Law, Legislation and Liberty. His claim that opinion improves under democratic institutions is no longer of great significance to him. Indeed, his account of the rise of bargaining politics provides evidence against the claim that opinion improves. I conclude by asking how democracy can be shielded from opinion, that is, how opinion might be improved in ways which go beyond Hayek's model of political competition outlined in Constitution of Liberty. To this end, I look to accounts of deliberative democracy and expressive politics for support.     

Intersubjectivity and Embodiment

This paper explores how the self-constitution of the social order is affected by a property of human desire that is seldom taken seriously in the social sciences, namely the fact that desire is essentially triangular. It brings into play a subject, an object, and a mediator or third party whom the subject imitates. It is suggested that the difficult issue of the embodiment of social cognition finds its solution in the role played by the third party. It is shown that Friedrich Hayek and John Maynard Keynes were familiar with this pattern. The paper focuses on the role played by imitation in Hayek's conception of the social order as spontaneous or self-organized. Many apparent contradictions in Hayek's social philosophy are explained (away) when one realizes that Hayek remains oblivious to the ambivalence of imitation. Imitation is efficient if the correct information is present somewhere and recognized as such, but otherwise it becomes a source of illusions and waste. The problem is that it is impossible from inside the system to know in which of the two cases one finds oneself. To overcome this undecidability, it is necessary to resort to an exteriority. Generalized imitation has the power to create worlds that are perfectly disconnected from reality: at once orderly, stable, and totally illusory. The notion of collective or social self-deception is illustrated with the case of gift giving. The conclusion of the paper is devoted to a critique of the notion of truth in American pragmatism in that it ignores that possibility altogether. This revised version was published online in July 2006 with corrections to the Cover Date.     

Regular Distributive Efficiency and the Distributive Liberal Social Contract

We consider abstract social systems of private property, made of n individuals endowed with nonpaternalistic interdependent preferences, who interact through exchanges on competitive markets and Pareto‐improving lump‐sum transfers. The transfers follow from a distributive liberal social contract defined as a redistribution of initial endowments such that the resulting market equilibrium allocation is both: (i) a distributive optimum (i.e., is Pareto‐efficient relative to individual interdependent preferences) and (ii) unanimously weakly preferred to the initial market equilibrium. We elicit minimal conditions for meaningful social contract redistribution in this setup, namely, the weighted sums of individual interdependent utility functions, built from arbitrary positive weights, have suitable properties of nonsatiation and inequality aversion; individuals have diverging views on redistribution, in some suitable sense, at (inclusive) distributive optima; and the initial market equilibrium is not a distributive optimum. We show that the relative interior of the set of social contract allocations is then a simply connected smooth manifold of dimension n ? 1. We also show that the distributive liberal social contract rules out transfer paradoxes in Arrow–Debreu social systems. We show, finally, that the liberal social contract yields a norm of collective action for the optimal provision of any pure public good.     

A constitutional paradigm is not enough—would sovereign citizens really agree to manipulative nudges?—A reply to Christian Schubert

In this short note I reply to a comment made by Christian Schubert, who argues that my criticism of libertarian paternalism cannot be upheld under a constitutional economics paradigm. I disagree: it is implausible to assume that sovereign individuals behind a veil of ignorance would actually agree on manipulative nudges from the public sector. Resorting to a constitutional economics paradigm does not diminish the force of the manipulation objection—libertarian paternalism remains morally objectionable. Moreover, where sovereign citizens would agree on permissible (morally legitimate) nudges behind a veil of ignorance, these would no longer constitute “paternalism” under its commonly agreed definition. More constructively, the only morally defensible paternalistic nudges would be those that improve welfare while respecting or, better yet, improving individual autonomy. These are not the typical nudges defended by libertarian paternalists.     

Does Libertarian Paternalism Reconcile Merit Goods Theory with Mainstream Economics?

In the wake of Musgrave's move to question the absolute hegemony of individual preferences for normative economics in the 1950's by propounding the existence of merit goods, a recent book by Thaler and Sunstein is now making a similar claim under the label of ‘libertarian paternalism’. This paper tackles the question of why the framework of libertarian paternalism has received a so much more friendly reception among economists than the theory of merit goods. The main reason is a better foundation, not only for the conditions under which paternalism may be justified but also for the tools that should be applied, utilizing transaction cost theory.     

Should evolutionary economists embrace libertarian paternalism?

Libertarian paternalists hold that biases and distortions in human decision-making justify paternalistic interference affecting individuals’ decisions. The aim of this paper is to analzye to what extent an evolutionary outlook supports libertarian paternalism. I will put forward three arguments in favour of libertarian paternalism and six objections that strongly oppose it. While evolutionary economists should take seriously the contention that our positive knowledge of real-world decision-making will have to influence our normative assessment of these decisions, the objections against libertarian paternalism brought forward in this paper serve as a cautionary note. Contrary to the claims of its proponents, libertarian paternalism is neither inevitable, nor does it provide an adequate measuring rod of normative rationality. It is prone to abuse by anchoring its standard of rationality pragmatically to norms and can thus promote conservative bias and stifle innovative exploration. It also presents the policy-maker with a compounded Hayekian knowledge problem. Finally, from a dynamic point of view, libertarian paternalism’s manipulative shaping of preferences might lock-in individuals into heteronomous preference learning paths without them being even aware of it.     

On justifying a minimum welfare state

Since anarchy is not viable, limited government is the best that the realistic libertarian can hope for. But limited government will itself always be threatened by an inherent tendency to transgress its limits. In modern western societies the regulatory and redistributive welfare state is the major threat to a constitution of liberty. However, a “minimum welfare state” which redistributes personal income among its citizens may comply with the same principles of individual liberty and the rule of law that are embodied in the protective state. Since any state, including the minimal state, necessarily incorporates regulation and redistribution and thus is a welfare state of sorts the non-anarchist liberal should turn against welfare state privileges rather than against redistribution and regulation per se. He may even have good reason to go beyond the minimal state to found a “minimum welfare state” if this is instrumental in securing liberty under the rule of law. I am grateful to the Center for the Study of Public Choice, George Mason University for hospitality both during the period in which this paper was written and on other occasions. I am deeply indebted to the people at the Center for their criticisms and comments. As far as this paper is concerned Geoffrey Brennan's and Richard Wagner's comments were particularly helpful. I should also like to acknowledge helpful oral comments from Kevin Mulligan and Philip van Parijs, who of course is much more of an expert on demogrant schemes than I am. I also wish to thank two anonymous referees for their valuable suggestions. The general caveat applies.     

“Was Hayek Right About Group Selection After All?” Review Essay of Unto Others: The Evolution and Psychology of Unselfish Behavior,by Elliott Sober and David Sloan Wilson

One of the most controversial aspects of Hayek's social theory was his acceptance of the concept of cultural group selection. The publication of Unto Others: The Evolution and Psychology of Unselfish Behavior provides an opportunity to revisit this much-maligned component of Hayek's thought. Sober and Wilson are concerned with biological group selection, but much of their argument is equally applicable to cultural group selection. This essay revisits Hayek's views on cultural group selection in light of the model proposed by Sober and Wilson. Comparing their model to Hayek's model suggests that group selection theories are more plausible than traditionally thought and that their viability in any given situation is an empirical, not an a priori, question. So long as there are benefits to a group from greater levels of altruism and cooperation, and so long as free rider problems can be mitigated, group selection models are plausible.