Friedrich Hayek is best known for his scathing polemic against central planning and socialism, The Road to Serfdom, which has in recent years become the gospel for libertarians, many of whom are seen thumping it around as the Bible of their creed whilst pulling wool over their eyes at Hayek’s mentions of national insurance and the like. Hayek’s advocacy for free markets, however, takes on a new incarnation in his advocacy for self-regulating markets as a result of spontaneous order, and not of human creation and intention in and in itself. “Spontaneous orders,” the economist Steven Horwitz writes, “are the products of human action but not human design …. [the] unintended consequences of various human actors’ pursuit of their own purposes and aims.”1 Such a line of thought is present, though not explicitly stated, in The Road to Serfdom, that markets out to be left alone, but later progressions in Hayek’s age resulted in what one may only call desultory philosophising about the nature of economic activity, most befitting an economist, not a philosopher of politics.
Hayek’s line of reasoning is as follows: man is fallible, markets are too complex for human design, and are the unintended consequences of actions that communicate information in complex ways. Because markets are not the result of human design, per se, it would be a folly to mess with them and manipulate them.2 There is a tacit appeal to tradition here that both Murphy and Horwitz recognise, but the implications are far from Burkean: the market, in Hayek’s world, is superior to the polis. One may even say that it is the whole from which the part is drawn. But such a view is fatalistic and deterministic, removing the possibility for political thought and political economy in general. It endorses the market as a persona ficta that ought to not be meddled with because of specious reasoning in demonstration of its self-regulation. Apart from the implausibility of a series of infallible agents as the cause of markets, and self-regulating markets their effect, there is much to contend with in Hayek’s view that “[market prices bring] about the solution which … might have been arrived at by one single mind possessing all the information which … might have been arrived at by one single mind possessing all the information which is in fact dispersed among all the people involved in the process.”3 Horwitz explains: “in other words, the price system enable us to generate order spontaneously by providing us with an institutional process for overcoming the unavoidable dispersion, context specificity, and tacitness of knowledge.”4
Michael Oakeshott, in his Lectures in the History of Political Thought, emphasises the centrality of “three important conditions for the appearance of a political experience.”5 First, that there ought to be more than one person, existing in ‘an association of human beings’ with some “variety of beliefs and activities.”6 Second, that there be “a government of some sort; a ruling authority” to harmonise the diverse ‘beliefs and activities’ in the state.7 Third, and perhaps most importantly, politics is ultimately human in condition and scope, and “it means there is no place for politics in a world believed to be wholly determined by natural necessity.”8 Politics, Oakeshott argues, is impossible when there is no choice, where modes of governance apart from the status quo already present are nigh impossible. Politics requires choice, and it is precisely this that Hayek seems to remove from our understanding of political economy through his characterisation of self-regulating markets as part of the spontaneous order, a vicious myth that has resulted in ruin and devastation, economically and intellectually.
Hayek’s fatalism and determinism takes root in markets because he engages in a sort of teleological thought that one may consider erroneous. His teleological thinking is very different from Aristotle’s: in the latter, man is the zōon politikon and the polis the highest sovereign association, whilst in the former, self-regulating markets exist by nature, and they are the whole upon which the part, the polis and man, are grafted. By reducing the possibility of intervention into markets, by defining them as greater than individual man and incapable of having its invisible hand act toward the summum bonum, Hayek takes away economics from the sphere of political activity and thought, and turns it into a value-free sphere of its own. Although Hayek’s fame was more the result of his ardent hatred for socialism — a sentiment I quite much agree with — he often had the tendency to write nasty and brutish (but not short) pieces in dramatic terms, with intended consequences all the more clear to him. Even in the Road to Serfdom,9 the distinction between interventions that are good and those that are bad are not immediately clear; the nuances and subtlety of thought has been ravaged by the coming serfdom, and Hayek makes haste as a polemicist whilst abrogating his role as a philosopher.
Harsh words aside, the issue with Hayek’s conception of spontaneous order is that it leaves no place for the development of politics. If the development of self-regulating markets was “wholly determined by natural necessity”,10 there would be no place for the polis. The polis’ only role would be minimised and castrated; it would not provide for human flourishing or act as the highest sovereign association, but as a registrar of transactions and landholding. The justice of the polis would lie in the imposition of laws that would only guarantee property and contracts, and nothing else. However, it must be important to consider Hayek’s provision of national insurance in the Road to Serfdom:
“There is no reason why, in a society which has reached the general level of wealth ours has, the first kind of security should not be guaranteed to all without endangering general freedom; that is: some minimum of food, shelter and clothing, sufficient to preserve health. Nor is there any reason why the state should not help to organize a comprehensive system of social insurance in providing for those common hazards of life against which few can make adequate provision.”11
The condition upon which national insurance can be provided is the existence of a prosperous society “which has reached the general level of wealth” of the United Kingdom.12 It is not a necessity that markets be subject to some sort of political control or oversight, or generally not pose problems to the sovereignty of the polis, for Hayek. Only prosperous societies have a peculiar demand placed upon them: the justice implicit in relief from privation. But what about the rest of the world? Is one sort of polis ontologically different from another insofar as the general level of wealth dictates justice? Hayek does not believe in an objective standard of justice, whether it is economic or social, and even here, it is the grudging grace of the state that can permit protection against privation. However, the conclusions quoted above do not logically spring from the perfection of markets and the disgust against planning.
It is a gloss placed over a horrific world, one that even Hayek recognises in part: “In a competitive society most things can be had at a price. It is often a cruelly high price.”13 But Hayek does not stop there: “The alternative, however, is not freedom of choice, but orders and prohibitions which must be obeyed.”14 This is no caricature of Hayek’s views, but his own expression of the substantial part of his libertarian philosophy. The polis is a castrated stump, with no abilities and certainly no will to do anything but express a willingness for internal conflict in the name of competition. Hayek takes Hume’s conceptions of justice, property, promise, and the development of order, and turns them into his own brand of reductio ad absurdums. But this is what Hayek himself perpetrates on markets: he takes competitive, self-regulating, efficiently allocating markets to be products of spontaneous order, such that it removes the polis from any consideration of economic activity save for its guarantor, and then onwards to removing the basic unit of economic activity altogether.
The tension that ought to be seen in the world of economics stems from its very name: it is the art of household management that provides the Greek roots for the English term, and it would be presumptuous, if not wholly impious, to relegate such a meaning to the back-burner. The house is emphatically still the base unit of organisation, whether for the polis or for the economy, which, unlike what most economists would like you to believe, is not made of atomised individuals who are driven exclusively by self-interest and the desire to gain more, the Homo Economicus, as distinct from Homo Aestheticus or even Homo Sapiens. If man ought to spend his entire life in the acquisition of material goods, the world of non-material goods would hold no consequences whatsoever. Hayek’s rabid materialism is a third-rate explanation for the power that ideas have held over man for millennia, and provide an unsatisfactory defence of the vita contemplativa or anything that would resemble holding a morality that extends beyond the demands of commercial society. Hayek’s so-called ‘great society’ is also the rule of the mob, for it would have no support for the fine arts — not those, at any rate, that are worth keeping and preserving as cultural heritage. Imagine a world without the opera or the philharmonic or the ballet or the National Gallery. Hayek’s world of unfettered capitalism would have no place for human flourishing, but only for man as labourer, enslaved to his passions, and unable to rise above, or even see the possibility that his reason could rule sovereign over his passions. The world is not a market, and neither is the entirety of political life. But Hayek’s brand of orthodoxy, whatever it may be, has taken a pernicious form: it has resulted in market-based aid, the prioritisation of the citizens of the economy — artificial persons, not real humans — benefitting and turning into leviathans, one after the other.
The solution, clearly, is not to produce a system of economic reforms that would reduce men from property owners to serfs. Neither is it to deny the importance of markets as important mechanisms for distribution of scarce resources. But there has been no market that has ever functioned properly. The economist Robert Sugden, in a widely cited article exploring spontaneous order, waxes poetic about “how markets in foreign currency, gambling, prostitution, alcohol and narcotics can continue despite the attempts of governments to suppress them. Such markets can continue only because the participants recognise de facto property rights that the state does not.”15 But Sugden nowhere voices objections, moral or otherwise, to the problems that such ‘markets’ pose: they are value-free, amoral expressions of the power of markets to spring up everywhere, and not of anything else. Sugden’s characterisation then relegates the role of moral and ethical conduct to governments whilst the markets continue unabated, ‘self-regulating’ and spreading ‘resources’ — guns and even humans — as their objects of trade. This is but a corollary to Hayek; it is the removal of human agency from the process of politics, and confining economics and markets to its own independent sphere where man is but matter in motion and a stock of labour.
The path forward is simple, yet uphill. The first task would be to rid economics, competitive markets, and the litany of myths attendant to them from the crazed idea that they are either outside the scope of moral and ethical action, or that they define their own limits of ethical and moral action independent of other realms of human action. The second would be to posit that markets are natural evolutionary growths, but not self-regulating or in some other way a priori goods that cannot be meddled with at the risk of being inhuman. Capitalism is not inherently bad; neither is this a clarion call for socialism or non-market based economics. Oakeshott’s criteria for political activity comprehensively show why Hayek was wrong about markets and their position within the polis, and we ought to take the issues raised with serious concern at risk of failing to see what may lie ahead as its consequence.
Ishaan Jajodia is a PhD student in Political Science at Yale University, where he studies political philosophy. Ishaan previously was a member of the editorial board of the Dartmouth Review.
- Steven Horwitz, ‘From Smith to Menger to Hayek: Liberalism in the Spontaneous-Order Tradition’, The Independent Review 6, no. 1 (2001): 81–97, 82.
- See James Bernard Murphy, ‘Friedrich Hayek: The Libertarian’, in James Bernard Murphy and Graeme Garrard, How to Think Politically (London: Bloomsbury, 2019), 239–46.
- Hayek quoted in Horwitz, ‘From Smith to Menger to Hayek’, 88.
- (Exeter, UK: Imprint Academic, 2006), 5.
- Oakeshott, Lectures, 5–6.
- Ibid, 6.
- Ibid, 7.
- See Keynes’ criticism of Hayek: Murphy, ‘Hayek’, 241–42.
- Oakeshott, Lectures, 7.
- Friedrich Hayek, The Reader’s Digest Condensed Version of The Road to Serfdom (London: The Institute of Economic Affairs, 2001), 59.
- Hayek, Road to Serfdom, 59.
- Hayek, Road to Serfdom, 56.
- Robert Sugden, ‘Spontaneous Order’, The Journal of Economic Perspectives 3, no. 4 (1989): 85–97, 86.