G. R. Steele, The spontaneous social order

In a social context, evolution is ‘a process in which practices which had first been adopted for other reasons, or even purely accidentally, were preserved because they enabled the group in which they had arisen to prevail over others’ (Hayek 1973: 9). Institutional practices become established as venerated (though not immutable) traditions in consequence of the advantages that accrue to groups that adhere to those traditions. Practices that survived brought man from ‘the small horde to the organised tribe, the still larger clans and the other successive steps towards the “Great Society” . . . [where] . . . millions of men interact and where civilisation as we know it has developed’ (Hayek 1973: 14). This evolved social order is illustrated by institutions – religion, language, money, law, markets, etc. – that prevail because they enhance the reproductive fitness of those whose reason is directed by them. Such institutions are the result of a multitude of individual adaptations.

The social harmony that exists within small ‘tribal’ groups is based upon common objectives. Inevitably, that consensus is undermined as the number of participants grows. Hayek’s thesis is that spontaneous developments brought man from those primitive arrangements to a modern world network of extensive interrelationships; that a morality that binds individuals by personal relationships could never have supported that vast socio-economic order. Moreover, any attempt to impose an alternative order, created through rational design (that is, ‘constructivist rationalism’), would be undermined by a complexity of detail that could not be understood by any single individual or group of individuals. The rules that support the extended social order are qualitatively different from those that serve the consensual objectives of primitive groupings. The latter have their counterpart in the narrow but clearly defined goals of modern organisations: the general rules of law that a spontaneous order rests on aim at an abstract order, the particular or concrete content of which is not known or foreseen by anyone; while the commands as well as the rules which govern an organisation serve particular results aimed at by those who are in command of the organisation. (Hayek 1973: 50).

However, organisations and the spontaneous order are not mutually exclusive structures: the same group of people (employees of a firm) may act together as an organisation (on an assembly line) while a spontaneous order is also maintained by adherence to conventional norms of behaviour. Within every organisation, individuals are expected to operate according to a wider social framework of general rules. There are limits to the growth of the organisation, beyond which its advantages (from the avoidance of transactions costs) are outweighed by those that are derived from market exchange. Although Keynes has the reputation for practical economics and Hayek the reputation as a pure theorist, it is Hayek who points to the practical ineffectiveness of large-scale organisational planning. Hayek’s supposition, that the efficiency of the organisation is inferior to that of the market process, at a relatively small scale of operation, is consistent with his belief in the efficacy of an evolved spontaneous order and in the impracticality of centralised socio-economic planning.

The minutiae of interactive changes are beyond the compass of a single mind; and the advantage of decentralised individual decision-making is in selecting from this awesome complexity. This is the rationale for Hayek’s opposition to socialism and for his rejection of constructivist rationalism. From this perspective, a present concern must be with the visionaries who are working towards a more powerful European Union with designs for centralised parliamentary and political institutions, a monopoly currency,1 a monolithic central bank, tax harmonisation, a comprehensive social charter, regional resource transfers and standardised products.

Such aggrandisement is an anathema to Hayek. His view is that, with the exception of external relations, devolved (local) government is more effective in dealing with most issues – and potentially less threatening to individual liberty – than a centralised regime. With a general devolution of powers, local administrations would be in competition ‘with each other for citizens who could vote with their feet for that corporation which offered the highest benefits compared with the price charged’ (Hayek 1978b: 162). Although the volume of resources administered at the local level would vary between districts, the extent of local taxation would be regulated by universal and impartial laws.

The type and the extent of the distribution of economic and political powers mark the sharpest contrast between Keynes and Hayek. With their shared focus upon the inherent instability of a money economy, the primary economic issue is whether that instability is more likely to be ameliorated (Keynes), or exacerbated (Hayek), by the exercise of discretionary monetary and fiscal policy. However, the more general point in regard to that difference lies with the interaction of ideology and analytical endeavour.

Keynes’s social philosophy idealises ‘the possibility of nations learn[ing] to provide themselves with full employment by their domestic policy’ (Keynes [1936] 1973: 382); and it is supported by an analytical assessment of how wise statesmanship might substitute for the beneficent business patriarch. Hayek’s social philosophy idealises ‘[t]he possibility of men living together in peace and to their mutual advantage without having to agree on common aims, and bound only by abstract rules of conduct’ (Hayek 1976a: 136); and it is supported by an analytical assessment of the practical requirements that allow individuals to pursue diverse ends in harmony and free from coercion.

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