Russ Roberts

Boudreaux on Reading Hayek

EconTalk Episode with Don Boudreaux
Hosted by Russ Roberts
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Don Boudreaux of George Mason University talks with EconTalk host Russ Roberts about the work of F. A. Hayek, particularly his writings on philosophy and political economy. Boudreaux provides an audio annotated bibliography of Hayek's most important books and essays and gives suggestions on where to start and how to proceed through Hayek's works if you are a beginner.

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0:33Intro. [Recording date: December 7, 2012.] Russ: Our topic for today is Hayek, the man, F. A. Hayek. And I have to say, although we blog together at Cafe Hayek and I write about Hayek a lot, I've learned much of what I've learned about Hayek from Don. And I thought what we would do today is a couple of things: Give an overview of Hayek's work, his written work; and then suggest a path for readers who are beginners, who don't know much Hayek, where you should start. Because I think a lot of people think they should start with the [?] of him, and that wouldn't be where I would start. Maybe that's where you would start, Don. And essentially, this will be an annotated bibliography. What are the major works of Hayek and what are their significance? What are the key ideas in those works? And how a reader might begin to approach it. So, Don, why don't you start? Give us an overview of his writing. Guest: Well, Hayek, he was born in 1899 in Austria. He became famous early on in the German-speaking world; he was writing on money and banking issues and some articles in German. I don't read German; these articles have been translated into English since. And he gave, in the early 1930s, maybe the late 1920s, a series of lectures at the London School of Economics (LSE) that were a big hit, among some people. Those lectures became his 1931 boo, Prices and Production. A book he had written before, in German-- Russ: Have you read that book? Guest: Yeah. Russ: All of it? Guest: Prices and Production? Yeah. Russ: Wow. Guest: It's not very long. Russ: Yeah, but it doesn't matter. It's hard to read. Guest: Well, when I read it, I'd already read other things by Hayek, so I knew where he was coming. But an even better book, I think, is his earlier book that he wrote in his late 20s. It was written in German, translated into English, and it's called Monetary Theory and the Trade Cycle. Which I think is a very profound and lovely work. And so Hayek's early work was on money, banking, and what's been called 'trade cycle theory'--costs of recessions, slumps, booms, and things of that sort. And in thinking about the way that money works in an economy, the way that the role that prices play in an economy. Hayek was then led to contribute in a major way to the Socialist calculation debate that was raging, that was begun by an older Austrian mentor, Ludwig von Mises. And so this combination of Hayek thinking about the role of prices in business cycle theory, and the role of prices in guiding an economy, as opposed to an economy being guided by conscious central direction, led Hayek to write what is no doubt his most famous academic article, his 1945 "Use of Knowledge in Society." It appeared in the December or September issue of the American Economic Review. It's a really profound work. It's the first thing I read by Hayek. Russ: We've talked about it many times on this program. Vernon Smith, I have vivid memories of him talking about it. He's read it so many times. Guest: I remember my professor, as an undergraduate, Bill Field. He gave me his copy of his collection, Individualism and Economic Order, which is where that essay, one of the many places where that essay is reprinted. And he said: Here, read this article by Hayek. I was only a sophomore in college. And he said: You won't get it all, but just read it. And I remember taking it home that night and laying in bed and reading it. And I could tell that it was really profound. But I could also tell that there was a lot that I wasn't getting. I've probably over the past, subsequent 35 years, read it probably 35 times--at least once a year. I'm sure I continue to get things out of that article. It's a really deep article on the role of prices and the reality of disperse knowledge, and how prices enable people, many individuals none of whom have complete knowledge of the economy, to nevertheless act as if they know well enough what other people are doing, so that those actions are coordinated and you get productive economic activity as a result, rather than chaos. It's a really profound article. Russ: And we have that article up on the Library of Economics and Liberty website. Guest: So, that was 1945 that he published that. Again, most of his writing before that, up until that time, was pretty technical on money and banking, and socialist calculation. Capital theory. Russ: And as you mentioned, his 1941 book, which we are not going to recommend either-- Guest: The Pure Theory of Capital. Russ: Yeah. Guest: That, I think--this is one of the few books by Hayek that I have not read cover-to-cover. I should say, my colleague Larry White has a wonderful introduction to the Chicago version that appears in Hayek's collected works. Hayek intended that book as the first of at least two volumes, I think--the Pure Theory of Capital and the Applied Theory of Capital. That's just a mare's nest for me at least. So, I haven't read it cover to cover. In 1944, though, Hayek reached prominence outside of the economics profession. He was, by the way--it should be known, I think you've mentioned it before; I'll mention it again--Hayek was, as a young man, in his 30s, he was one of the most influential economists working, certainly, in the world, along with Keynes. Sort of John Hicks, who later went on to win one of the earliest Nobel Prizes in economics, has this essay that he wrote some time in the late 1960s, early 1970s, where he said: You know, some time in the mid-1930s we economists didn't know if it was going to be Hayek's ideas or Keynes's ideas that won out. Russ: Yeah. We still don't know. Guest: Well, certainly in the popularity contest Keynes won out. Russ: And in the profession. Guest: And it caused Hayek to--not only did Hayek lose out to Keynes, but he fell into professional--disrepute is probably too strong a word, but he became less well respected. Because his views were so different from those of Keynes. In part because Hayek worried about the rhetoric that was in play during WWII and just before WWII broke out, both in the United States and particularly in Britain, where he lived. He became a British citizen. He wrote his most famous work, to this day, The Road to Serfdom. That was published in 1944. It was condensed into a Reader's Digest version here in the United States, and to everyone's surprise it became a best seller. And it is a work, a much more popular work, than anything else Hayek has ever written. Certainly any other book Hayek has written. But it's not a coffee table book. Russ: Not a page turner. Well, it might be a coffee table book. If you call it a book that sits on the coffee table and you don't read it, let your guests admire it from a distance. Guest: Yeah. Russ: It's not a page turner. Guest: Well, it is for me because I like Hayek, but what I mean is: It's not a book for partisan politicians or--you know, some people in the Tea Party might like the book. Some people in the Republican Party might like the book. Some people in the Tory Party in Britain might like the book. But it's not a book about partisan politics. It is a deep work of political philosophy. Yet it became quite famous. So, that.
9:34Guest: So, Hayek wrote four books broadly on political philosophy, not so much on economics. The Road to Serfdom was the first, in 1944. And then in 1960 he published what I think he probably thought would be his last major work on that topic. It's the largest in terms of page length, word length. It's The Constitution of Liberty. And then in the 1970s he published his 3-volume work, Law, Legislation, and Liberty. And then the last book he published, just a year before he died in 1992, The Fatal Conceit. Which has the phrase that you like so much, "the curious task"-- Russ: "The curious task of economics is to demonstrate to men how little they know about what they imagine they can design." Which listeners have heard many times. That book was published in-- Guest: 1988. Hayek died in 1992. And so those are the Big Four political philosophy works of Hayek. There's a lot of overlap--not redundancy, but overlap in themes of course. Russ: Well, we'll talk about that in a second. But let's just finish up the span. He also wrote number of books on money, in that later period, coming back to his youth. He wrote A Tiger By the Tail, the Denationalization of Money. Guest: Tiger By the Tail is a--it's a series of excerpts from passages from various of his works. Some of which are from The Pure Theory of Capital and the late Sudha Shenoy was helpful in helping to compile the readings in Tiger By the Tail. I don't believe that there are any original writings by Hayek in Tiger By the Tail. I could be wrong on that. Russ: I doubt you are wrong. Guest: Much of it is excerpts from his earlier works. He continued to write several articles on macro, money issues. As late as 1969 he had a piece in the Journal of Political Economy (JPE), one of the highest ranking professional journals in economics, on David Ricardo and money. In the mid-1970s Hayek published two pamphlets that were very closely related to each other, one on the denationalization of money. I forget what the title of the first one is, but the second version of it was called "Denationaliation of MOney". I think he referred to it as "Competition and Money," which came out in 1976, and then a year later he published a revised, expanded version of that called "Denationalization of Money." I believe that both were published originally by the Institute of Economic Affairs (IEA) in London. And in, "Denationalization of Money," Hayek rejected his earlier view, which was commonly held by most economists, that money was one of the few things that the government must supply because the private market can't supply it. And Hayek reflected more and learned a little bit more of economic history, and discovered that, in fact the market is probably a more reliable supplier of money than is the state. He was probably influenced in this event, probably a delayed influence by his former student, Vera Lutz (Vera Smith Lutz), who wrote a wonderful book called The Rationale of Central Banking. It was her dissertation under Hayek back in the 1930s. That book is published by Liberty Fund, now. And it's a very accessible introduction to debates throughout history on the role of money, the role of banks. And it has a kernel--it has strong suggestions that central banking is not all it's cracked up to be. To put it mildly. Anyway, so Hayek, in the 1960s, The Constitution of Liberty, he did not believe that the market could handle the supply of money. Sixteen or seventeen years later, he believed it could. And wrote very eloquently on that matter. And he has some other collections of essays.
14:23Russ: The three main ones being? Guest: Oh, the main ones still being his 1948 collection, Individualism and Economic Order, where, I think it's the first place where "The Use of Knowledge in Society" was first reprinted. Published by Chicago in 1967. And he has a collection that was published called Studies in Philosophy, Politics, and Economics, in 1968 or rather 1977. A second sort of collection came out. New Studies in Philosophy, Economics, and the History of Ideas. Just reading--and I don't think there is any overlap. In fact I am sure there isn't any overlap between the essays in any of those three collections, the '48, '67, and '78--late 1970s, mid-1970s, mid-1960s. The range of Hayek's scholarships is astonishing. Scientific method, psychology, the role of money, the role of prices, history of ideas--he has essays on Richard Cantillon, David Hume, Adam Smith. Political philosophy--he has a wonderful essay on liberalism. Which reminds me to mention one of my favorite Hayek essays--which I'm surprised is not mentioned more by friends of Hayek or friends of classical liberals. It's mentioned but I think it deserves more attention. It's the opening essay in Individualism and Economic Order. It's called, "Individualism: True and False". And it's an incredibly profound piece. It was a 1944 or 1945 lecture that he delivered in Dublin. And in that lecture he distinguished between what he called 'false individualism' of French rationalism, the individualism of Rousseau and the French rationalists and the Encyclopediasts, as he called them, where the individual is this great wonderful all-powerful being who can create his own reality. And stand athwart of forces that he doesn't like. And Hayek rejected that view in favor of true individualism. And he associates with de Tocqueville, Adam Smith, David Hume, and the Scottish philosophers. John Locke. That's an individualism that respects the rights of the individual but understands that individualism is embedded in society; and society cannot be the result of any one's conscious plans. And that if false individualism takes hold, then people get the mistaken idea that somehow the--powerful, wonderful, smart, super-intelligent individuals can form society to their liking. And Hayek warns, in this essay that I mentioned, "Individualism: True and False", that if the false individualism takes hold, it will lead to collectivism. Because you need a powerful agency to bring your notions into being, and that powerful agency is the state. True individualism has a much more modest view of individual rationality and the scope of individual action all embedded in a spontaneous order over which no individual has an conscious control, and the idea of guiding society consciously and rationally in the true individualist view is recognized to be nonsense. And Hayek ends that essay in a really stirring way. I'll read it. This is the final paragraph from that essay. Quoting now Hayek:
What individualism teaches us is that society is greater than the individual only in so far as it is free. In so far as it is controlled or directed, it is limited to the powers of the individual minds which control or direct it. If the presumption of the modern mind, which will not respect anything that is not consciously controlled by individual reason, does not learn in time where to stop we may, as Edmund Burke warns us [and he's now quoting Burke] "be well assured that everything about us will dwindle by degrees until the length of our concerns are shrunk to the dimensions of our minds."
End quote and end of essay. And I think it's really profound. Hayek in that essay warns that in order to have what he later called a Great Society--not to be confused with Lyndon Johnson's Great Society by any means--they have an extended order that maximizes the prospects for each individual to achieve as many of his or her goals as he or she wants. Consistent with the same abilities of millions of others. In order for that society to exist, we have to give up the fantasy that society can be consciously directed and planned. And if you try to consciously direct it and plan then it reduces this extended order to the dimensions of the individual human mind. Russ: The one who is doing the planning. Guest: Yeah. And those are very small dimensions indeed compared to the amount of knowledge and scope and range of knowledge that is constantly at work in taking advantage of the decentralized spontaneous market process.
20:31Russ: That was lovely. Let's turn to the four works of political philosophy. My plan for the rest of this conversation is we'll go through each of them; you'll go through the main ideas and then in the last part of our conversation you'll give your advice on where to start in accessing this range of stuff. And I'll give maybe a little of my own input. But, why don't we start with The Road to Serfdom? Which we've talked about before on this program in an extended way. Give us a thumbnail sketch of what it's about. It is the best known of the four. Guest: Yeah. By far. And it's probably the most accessible of the four. But again, it's a serious work. It's not a partisan work by any means. It's Hayek's book-length attempt to make people aware really of the message of the essay "Individualism: True and False". Russ: By the way, when was that essay written? Guest: It was collected in 1948. It was a lecture that Hayek delivered in Dublin in December of 1945. Russ: Okay. Guest: So, it was after [?]. But the message is the same, warning against hubris. Hayek is saying: If you want a great society, you want a society in which people have maximum scope to prosper, maximum freedom from the arbitrary will of others, then you have to rely on abstract principles. You have to rely on general rules to guide your actions and you can't get impatient to create worlds that you can imagine--you can't get so impatient that you try to create those worlds consciously, because to create those worlds consciously you have to violate a lot of general principles, violate rules of private property, of the way that the market order works. And by doing that not only do you reduce people's political freedoms, but you don't even achieve the goals that you set out to achieve. Because the human mind, not even the best human minds, the best and the brightest, collected in a room with the world's most powerful computers, can hope to, begin to plan or even to intervene in any reasonably successful way in the larger market order. It's just too big. The Great Society is too big. And we don't realize how big and magnificent it is, because we take it for granted. This is the theme. I don't recall this theme exactly in Hayek but I probably get it from him somewhere, since I get so much from Hayek. The standard economist's view is that we need government intervention because of market failure. And I almost think it's the opposite. We get government intervention because of market success. The market is so amazingly good at working--you know, not perfectly, but it just keeps plugging on and plugging on--and we become unaware of the great complexity that the market is taking care of at every moment, is dealing with at every moment. So it makes us a little blasé about being able to introduce regulation. We kind of think of the wealth we have and the smoothness and success with which our daily lives go on and we kind of think this is normal, something that just kind of happens. You don't see the market working. Hayek warns against the hubris of thinking that we can plan and do better than the market. One of the major--the major--and continuing misperception of Hayek is that Hayek--here's misperception: Oh, we can't take Hayek seriously because Hayek said the moment you have any untoward government intervention you are on a road to serfdom and you can never turn back. Russ: A slippery slope that just slides into--and since that didn't happen or hasn't happened yet in America, obviously the book is wrong. Or in England. Guest: All I can say is people who say that about Hayek have not read the book or have not read the book carefully. And they certainly have not read Hayek's many, many subsequent protestations: he said, I did not say that. What Hayek said about the road to serfdom is that if government attempts to protect everyone from every form of economic disappointment, protect all workers from suffering losses of income, protect all businesses from suffering declines in profits because of changes in trade patterns and changes in technology--if we attempt to protect against any downsides of economic activity, the only way to do that seriously would be to create a society of serfs. You can do it, but it'll be a really poor society and no one will have any freedom. That's the road to serfdom. He's saying: if you insist on having a society in which no one suffers economic disappointment because of changes in trade patterns--changes in consumer taste, technology, things of that sort--if you insist, you cannot achieve that goal until serfdom is reached. Russ: You'll get tyranny. Guest: Then you will get tyranny. So, it's not an argument against the slightest form of government intervention. Indeed if you read The Road to Serfdom, and a lot of people on the right, when they read it for the first time they are disappointed now, because Hayek is not a Murray Rothbardian or to take a slightly different approach, David Friedman, or even Milton Friedman. Or even a Hayek of the 1980s libertarian. He, in that book, accords a great deal of responsibility to the state. Or at least says: look, if the state does this, it's not necessarily a bad thing. Welfare--minimum income guarantees-- Russ: Socialized medicine. Guest: Yeah. He's got-- Russ: In a paragraph. People will say: You like Hayek; what about this paragraph? And I think he's not a saint. I don't like that paragraph, I don't agree with that paragraph; I think it's a bad idea. Maybe he changed his mind later. I don't care, really. I don't have to accept everything he wrote as divine wisdom. It's thought-provoking, and that one, I disagree with it. Guest: That's a good response; much as I greatly admire Hayek's work, it doesn't commit one to agreeing with every word; you don't have to accept him whole or not at all. So [?] clear to me how much Hayek was endorsing those things as he was saying these things are consistent with a free and open and great society. He's got some passages in The Road to Serfdom where he says--can't remember his exact terms--political expectations have come along so far by the 1940s that it's just foolish to think that we can return to, like British laissez faire era of the 1860s. And so, given that people expect those actions by the state, we can do x, y, and z. And he says that quite explicitly. So to say that Hayek argued that we shouldn't do x, y, and z or if we do x, y, and z we'll end up in a state of serfdom, indicates that whoever is reading it did not read it carefully.
29:17Russ: I want to move on to the next book. But I just finished reading Antifragile by Nassim Taleb, and he says in there, a very interesting thing--he says in the Middle East, a prophet is not somebody who sees the future. It's somebody who issues a warning. And we confuse those. We think a prophet is somebody who can see the future, and if you look in the Bible and Jonah is told to go warn the people of Nineveh that they are going to sin, that they are going to be destroyed, Jonah runs away. He doesn't want to deliver that prophecy. Because he knows that they'll repent and then God won't punish him; he'll look silly. So, most of the Old Testament prophets were warning about what would happen if people didn't pay heed. They were not saying: Here is the future; get ready for it. And I think that's a nice distinction to think about Hayek's role in The Road to Serfdom. Guest: Yeah, and keep in mind, in the 1940s--Hayek, like all of us, is a creature of his time. He changed his mind on a number of issues. There's no question in my mind that Hayek became more libertarian, more radical as he aged. I mentioned the money issue earlier. That's one Hayek became more skeptical of government efforts to--what we call antitrust efforts--became more skeptical of that over time. He was not an anarchist; he never became an anarchist. Although he says somewhere--and I think Milton Friedman said a similar thing, too--toward the end of his life, I think it was an interview, maybe with Tom Hazelton, I don't recall exactly--where he said: If I were a younger man, I think I might find that position--anarchy as laid out by David Friedman for example--more appealing. That indicates that he recognized that he was becoming more radical. But he recognized that he was becoming an anarchist, that he had even toward the end of his life he accorded more scope to state action than many libertarians do today does not mean--and he was not--a great, great champion of individual liberty. But he certainly never said that the slightest movement away from laissez faire will inevitably create Soviet totalitarianism or something like that. Hayek constantly gets painted like that, and I think the reason people paint him like that is because if you do so and it sticks, it's very easy to dismiss everything else he says.
31:51Russ: So, let's move on to The Constitution of Liberty. What is that book about? Why is it important? Guest: Hayek said, when he wrote Law, Legislation, and Liberty: I wish I wouldn't have used the title "Constitution of Liberty" for The Constitution of Liberty, because he would have liked to use it for his 1970's work. He tries to set out, in The Constitution of Liberty, in somewhat more detail what his ideal society would look like. I think of The Constitution of Liberty as being in two parts, and in my mind I don't know if it really tracks in terms of the number of pages, but I think of it as two halves. The first half is just a restatement, in a lot of ways even more eloquent, than The Road to Serfdom. Restatement as political philosophy. The importance of recognizing that the version of knowledge, a lot of what we call today public choice insights--you just can't give power to someone and that person is going to use it in ways-- Russ: In the way that you'd like them to. Guest: And then as the book progresses he lays out in more detail specific policies. Many of which I disagree with. It's, for my taste, far more of an interventionist creed than I have. In some ways even more interventionist than he comes across in The Road to Serfdom. Hayek's got a few paragraphs in The Road to Serfdom where he says the state can do x, y, and z that shock modern libertarians. And he's got several chapters in The Constitution of Liberty where he's laying out and explaining why the state should do various things. Russ: So, it's a bad book. Guest: No, it's not a bad book. Russ: Just kidding. Guest: It's a great book. Scholars of the quality of Hayek, even when you disagree with them you learn something by reading them. And certainly for people like me, when I disagree with Hayek I worry. There's something I'm missing. But on the particular work of The Constitution of Liberty--by the way, it's my least favorite of the four books, although there are some incredibly soaring, wonderful passages in it. Russ: Which is unusual for Hayek. You don't get a lot of soaring with Hayek. Guest: Well--you know, really quickly--I've read Hayek so much, I actually find it easy to read. Most people don't. Very weird, not weird but typical Germanic sentence structure and he goes on and on and on. But I'm so accustomed to it I read it and I get it. The final chapter in The Constitution of Liberty is very famous: "Why I Am Not a Conservative." And Hayek explains why he is not a conservative; and a lot of people take that to be a joke: Well, he's really conservative. Hayek was not a false individualist of the French Rationalism sort. Hayek was not an individualist in the sense that he believed that people could willy nilly choose which conventions and social rules to live by and which to reject. But he was not a conservative in the sense that unlike genuine conservatives, he welcomes social change. But just that change comes spontaneously. True conservatives want to use the state to protect certain social institutions from change. Hayek for example, I think--I'm speculating now--but consistent with what is in the final chapter of The Constitution of Liberty, I'm pretty sure Hayek would say: You know, same sex marriage, there's no reason for the state not to recognize same sex marriage. It would have been inappropriate for the state, say, in 1970 to sort of demand that everybody applaud same sex marriage. Society wasn't there. Now society is there. So there is no reason we should resist that. And there's no reason we should fear same-sex marriage at all, because society evolved to accept same sex relationships. Russ: I'm not sure when you say society accepts it. There's still quite a bit of differing opinion. It's certainly more acceptable-- Guest: Okay, we're evolving toward it. Russ: It's more acceptable than it was. The government's role in implementing it probably wouldn't be as problematic as if it were to impose it from the top down that much as in the 1970s. Guest: Let me use an example a little bit differently. Hayek, like a lot of conservatives, would not say: We must work to ensure that same-sex marriage never comes about. Because it somehow is going to threaten deep institutions. Hayek was not a conservative in that way. I'm sure he wouldn't believe that social acceptance of same-sex marriage is inconsistent with a prosperous, happy, free society. But those kinds of issues reflect deeply held, evolved, socially evolved norms, and Hayek was very aware that using government to forcibly change norms through legislation is a dangerous business. Even if we agree that the norms to which the forcible legislation wants to move us are admirable in some way, Hayek says: You know, you may get some unintended consequences from that. Russ: He had tremendous respect in that way for what you are calling norms-- Guest: He was Burkean-- Russ: because he believed they evolved and emerged in a bottom-up way and had the wisdom of individuals embedded in them. Which makes him something of a conservative, I have to say. Right? Various types of conservatives. He's very respectful of norms that he probably didn't agree with, because he felt that they had stood the test of time. Guest: Yes. Russ: One of the problems with that is that a lot of the norms that have stood the test of time are repulsive. And so you have to decide--you don't have to decide anything, but you are making a judgment about what's the right thing to do or what government should do, that's a little bit trickier than just saying we'll respect what society, what views people hold, and we'll let things emerge only from the bottom up. Obviously there are, not every emergent norm is a good norm. Guest: Maybe a good way to say it is: Hayek was not a conservative in the sense that he would be willing to use the power of the state to prevent the evolution away from-- Russ: Traditional norms. Guest: Traditional norms. But he was a conservative in the sense that he is not willing to use the power of the state to force an evolution away from existing norms. The latter has to be qualified a little bit. Hayek does explicitly--we alluded to this before--give a role to legislation. He does believe that Common Law and also the social mores and norms on which Common Law is based, springs from, can go awry. And so he says sometimes it's appropriate to use legislation. There's a little bit of a tension in Hayek, and how do we know? The easy example is slavery. No one, this side of sociopathy, believes that slavery was anything other than completely, unspeakably horrendously immoral institution, and that if it existed just 150, 160 years ago-- Russ: In the United States. Guest: In the United States-- Russ: And some parts of the world, I understand. Guest: And so that's one area where we can use the force of the state to break those norms. Use legislation to break the law that might have kept slavery going. There's something of a tension. I think it's fine. There's ambiguity in reality. We can recognize that there are many hard cases. But the hard cases shouldn't blind us to the larger reality that Hayek points to. And that is, most of the rules that govern our behavior evolved from time immemorial. They change as circumstances change. And we may not be able to understand fully what function these rules serve, but our presumption should be that evolved rules serve a good purpose. It's a rebuttable presumption. Which may be another way to say Hayek was not a conservative. It's a rebuttable presumption. But that should be the presumption. Which is a way of saying Hayek is a conservative. Russ: Right, in some sense.
41:47Russ: Let's move on to Law, Legislation, and Liberty. Three volumes. And I think you've read all three, is my guess. I've read one of them. Guest: The first volume is subtitled Rules and Order. It came out in 1973. The second volume is entitled The Mirage of Social Justice. It came out in 1976. The third volume is called The Political Order for a Free People. It came out in 1979. Russ: So, give us a thumbnail sketch. Guest: Let me say the third volume is the one by Hayek that I wish he would never have published. I think it's by far his least impressive work. I mean, there are parts of it that are fine, but all in all we can avoid it. But the first volume, Rules and Order, I consider to be certainly one of the two finest books I've ever read. And it makes a distinction-- Russ: Which you and I have talked about before in this program. Let's bring it back. Guest: Yeah. Between law and legislation. Of course, to the modern mind, the modern ear, those two words are synonymous. Right? What does Congress do? Well, they make laws. They are called 'lawmakers.' And by the way, that use of terms goes back a long way. Adam Smith used 'law' and 'legislation' also as synonyms. Hayek makes the point that these are very, very different. Law is that which evolves out of practice. Legislation is that which is designed consciously by people invested with power to make rules to govern an organization. So, Congress makes legislation. Law is not made by anybody. No more than prices are made by people. Hayek was very much influenced-- Russ: By any one person. Guest: By any one person. Hayek was very influenced by the Italian autodidact, Bruno Leoni, who wrote a book called Freedom and the Law that Liberty Fund published. The original version I think came out in 1963 or so. Leoni died tragically in 1967. Bruni Leoni's idea, I think the first to really drive home this idea that law is very much like market prices. They are the result of human action, but not of human design. Of course this is a phrase from Adam Ferguson that Hayek liked very much-- Russ: A contemporary of Adam Smith, or roughly contemporary. Slightly before. Guest: I think he wrote the book in 1767, maybe. The Ferguson book. And Hayek very, very compellingly in the first volume of Law, Legislation, and Liberty explains the importance of distinguishing between legislation and law. Russ: And some of our listeners are--as was I when I first heard this: What do you mean, we make the laws or the laws emerge? Laws are things like the speed limit and what happens to you if you steal and regulations for how much pollution you can emit. Those are laws. They don't come out from the bottom up. They are not the result of practice. They are just laws. So, when you say 'law,' or when Hayek says 'law,' what do you mean it's distinctive from 'legislation'? Guest: Socially imposed constraints on behavior that are not designed by anyone. Suppose I live in Virginia. Suppose the State of Virginia, for some odd reason, abolishes from its books all prohibitions on killing other people. Well, we say that therefore, what was murder yesterday in Virginia is now perfectly legal. It's still illegal. If you killed an innocent person in cold blood, you will be punished by someone. It may not be the state police or the local police. You will be punished by someone. It is wrong to do that. We all recognize it as wrong to do that. People will be constrained by society somehow from doing that. Now it may be that the state is the best agency to invest with the power to protect against murder and to punish those who commit murder. But that does not mean that it is the state that makes murder illegal. Murder is unlawful because of our social norms, not because some legislators decided: Hey, let's make the killing of innocent people unlawful. The proscriptions against murder are codified in all civilized societies and statute books. But that's not where they come from. Lawyers themselves have this long-standing distinction between rules that are considered malum in se and rules that are considered malum prohibitum--I don't know the Latin so I can't translate exactly. Russ: Mal sounds bad. Guest: Malum in se is things that are bad in and of themselves. And what that means is we just recognize them as bad. It's bad to steal. It's bad to kill other people. It's bad to burn down someone else's house. We kind of know what they are. They are in and of themselves bad. Malum prohibita are things that are bad simply because the authority, the reigning authority, has declared them to be bad. Not paying 38.5% of your last dollar earned in income to the Internal Revenue Servies (IRS) is malum prohibitum. It's not bad in and of itself. Russ: Going 66 miles an hour. Guest: Well, this is an example I like to use. There is no more black letter law than posted speed limits. It's literally black letters posted on a white sign. And yet everybody drives, in most weather conditions, they drive a few miles over the speed limit, and they don't think of themselves as being lawbreakers. If you take seriously, if you say the law is what the legislature says, then if you drive 10 miles or 5 miles per hour over the speed limit, you are a law breaker no less than if you drive 80 miles over the speed limit. Maybe the severity is different. So, there is a distinction. I'm convinced it's real. There's a distinction between what the government says is and isn't allowed to do and what the law--independent of what the government issues--says is allowed to do. There are a lot of laws that we obey in our daily lives that aren't written down anywhere. Are not legislated anywhere. Yet we obey them. And the Common Law, which Hayek greatly admired--the sort of formal Common Law that came out of British courts starting in the Middle Ages and was then transplanted in many ways to the United States by the British colonials--that Common Law is kind of the formalization of a lot of these social norms.
49:08Russ: Explain what Common Law is. Guest: Well, it has a variety of meanings. One meaning, it was the most mundane of law common to all of England, as opposed to local rules and regulations and laws that existed throughout the realm. It's most relevant meaning, the way it's normally meant, is that it is the law that--well, sometimes it's described as 'judge-made law', as opposed to 'king-made' or 'parliament-' or 'legislature-made' law. That's wrong. The Common Law is not judge-made law. It's judge-found law. The judge finds the law. Two people have a dispute. They go into court. And the judge, perhaps judge and jury, they find, what are the prevailing social expectations that we can use to decide which of these two disputing parties is right. Which party was acting most fully in conformity to the prevailing social expectations? If we find that the plaintiff was, we find that the plaintiff wins the case. If we find that the defendant was, we find that the defendant wins the case. It's not that the judges makes the law. That would just be legislation coming from someone wearing a robe. And so the Common Law is law that evolves from individual behavior. Russ: Let me give a narrower definition. And then I want to come back to your point about judge-found and judge-made law. Literally, I think when people talk about Common Law, they mean the corpus, the body, of cases that have been established as potential precedence in various rulings made by judges in disputes. Or interpretations of legislation in various disputes. Because no matter how well specified regulations or legislation is, there are cases that fall in gray areas and have to be interpreted. Now, the part I find strange about Law, Legislation, and Liberty, the first volume, Rules and Order, is that I take Hayek to be saying there--this is how I remember it--that this is what judges ought to do. That judges should--I view it as a normative claim, as opposed to a positive claim. That is, a claim about how the world ought to be versus how the world actually is. I'm sure many judges think they make the law. Guest: Well, a lot of times they do today. Because of the structure of the system. Russ: Yeah. But how I interpreted Hayek as saying was there's this exploratory process. That when a dispute comes along, Hayek is interested that the legal system allow people to set expectations, make plans, and execute those plans in coordination with others who may not have the same plans. And this is the great--one way to say it is this is the greatest social problem we have. The economic system solves it through prices, that seemingly impossible coordination of the fact that I want something you might want. The prices adjudicate that dispute. If I want to buy it at that price I do, and if you don't then you step aside and let me have it. But he saw--and correct me if I'm wrong, or give your own interpretation--he saw that as the correct role for a judge. That judges should look at what's expected. And I use the example all the time on this program--you know, you sell a house, and you leave your house in the condition that the buyer should be happy to have it. You don't specify in the contract every single detail of what is done. And as a result, some people leave some things in the garage, to be thrown out. Some people might leave various drapes or other things. They don't specify: You must remove all the drapes. Sometimes you have to keep the drapes. All those things, there are in different parts of the country different things that are expectations of cleanliness, of clutter, things that would be left behind or not left behind. And of course, people might dispute that. Because it's not written word-for-word in the sales contract of the house. And a judge--the way I understand Hayek--the judge is saying, trying to figure out, where that sale took place, what do people usually do that seems to be fine with everybody. Guest: Yes, yes. Russ: He's not saying that's what people do. Because they might not do that. That's an outrage; that basement was filthy; you should have-- Guest: Most certainly. It is normative. I take the positive part of the book to be, and teach people to take seriously, the distinction between law and legislation. There is a real and meaningful and important distinction between those two. And judges should take that distinction seriously as well. But so, too, should legislators. And so, too, should citizens. One of the important things I see about the distinction is law really is important. No one wants to live in a lawless society. And so law very naturally and properly has a kind of sanctity about it. We like the 'rule of law.' If legislation flies under the same flag of law, it's able to steal the sanctity that law has. And I think that's a really unfortunate thing. The dictates of a legislature, no matter how much you and I may agree or disagree with them, the arbitrary dictates of a legislature are not law, as Hayek and I conceive of law. They are legislation. And therefore they should not have the sanctity that law has. If you violate legislation, it may be morally wrong; it may be appropriate to punish someone who violates legislation. I'm leery of calling that person a law-breaker in the same way that I'm leery of calling legislators law-makers. When I hear legislators described as lawmakers, for me it's like fingernails on a chalkboard.
55:33Russ: Well, let me give you two examples. We're running short on time here; we have a lot more to talk about. We'll try to go quickly. I want to agree with you on that one area and disagree with you on another. So, I think it's an incredibly important distinction. When I think about the steroid scandals in baseball, I think of the distinction between law and legislation. People say: Well, they were cheaters. They used steroids. They broke the rules--and actually, that's not always true that there were rules in baseball against steroids. It was illegal to use steroids in certain situations, but it wasn't always--some of the things people were taking were not rules that baseball prohibited. But even if they had, there are many "unwritten laws" in baseball. Guest: Yep. Russ: And we've talked about on the program before. But if everybody is using steroids, pitchers and batters--which apparently a large number were--you are not a cheater in the same way as if no one is using them. Guest: Yep. Russ: If there is not a social convention that it is not okay. There are certain social conventions in baseball where it is okay to "cheat." You are sort of allowed to look in from second base and try to steal a sign, and the catcher knows that. And the person on second base will often try to signal that to the batter. Everybody knows that. That's what they do. It's sort of okay. And the pitcher and catcher will exchange signs when there's a runner on second base. But a batter who moves his head slightly to try to steal the sign out the corner of his eye, will usually be thrown at by the pitcher, his head, because that's quote "against the law." Guest: It's not written. Russ: It's not written down anywhere, and no one judges the pitcher for that because he broke the rules. Even though there's no rule. And so I think that distinction in "Laws and Legislation," written and unwritten rules, is very powerful. However, let me give you the flip side. The flip side, in certain times in history is was respectable to be disrespectful to people of different color, different religion, different sex. And that was the norm. And those were bad norms. I'm not talking about statistical discrimination of various kinds against folks or treating people differently. I'm talking about disdain and public commenting about people. Guest: Yep. Russ: That's gross. I'm glad we don't do that any more. But when that norm was enforced and you could say, say, disrespectful things about your wife or about blacks or about Jews--that was a bad norm. I wouldn't want a judge to enforce that norm. How do you deal with that? Look, the first thing says, the law in a sense can't be expected to work better than markets can be expected to work perfectly. The question is, it's a cost-benefit one, how much do you want to empower people to consciously override these things? Recognizing that by consciously overriding things, they might wind up doing worse. Russ: They might-- Guest: My favorite example is, you mentioned disdain for blacks. In the late 19th-century U.S. South, the market was not tolerating segregation. It was too costly. And so you saw a lot of racial integration. So, how did racists get the segregation that they wanted? They needed legislation. That's why we had Jim Crow legislation. And it was the Civil Rights Acts of the middle-part of the 20th century, particularly the 1964 Civil Rights Act, that undid that legislation. And I agree that that that legislation should be, should have been undone. But it shouldn't have come in to begin with. If we had not relied on legislation to begin with, we would not have had the problem later. There is this interesting interplay--I'm sure there is a feedback loop between legislation and law. I have no doubt that Jim Crow legislation by in fact forcing blacks to the back of the bus and street car, as it were, itself helped enforce negative stereotypes. Russ: Fair enough. But let's move on. Guest: But Hayek did recognize a legislative role for changes to those things. Russ: Give me 60 seconds on volume 2. Because we've got to leave room. Guest: Here it is: The concept of social justice is meaningless. People use it. Justice has meaning only as it relates to a conscious action between individuals. I can treat you justly or not. The outcome, the unintended, unplanned outcome of millions of different actions cannot be appropriately be discussed as being just or unjust. They just are. It may be that the rules that gave rise to those outcomes are just or unjust. Maybe the actions are followed justly, or not. But the outcome itself if it is unplanned can't be described as just or unjust. So, there's no such thing as social justice. Matt Zwolinski has a great new video on this. Russ: Is it a good book? Worth reading? Guest: Oh yeah, very good.
1:00:46Russ: Well, let's move on to my favorite book of Hayek's, The Fatal Conceit. It's quite short. Guest: Yes. Russ: There's debate about whether he actually wrote it. He was old and it was written-- Guest: The late Bill Bartley. Which--I forget his title there. He's not editor. He's sort of editorish; and I've had the privilege of seeing the 3x5 cards that Hayek took notes on for that book in the Hoover Institution archives. They are a jumble. So a lot of people--there was also a seminar, where I think Vernon Smith--was Vernon Smith there? and others-- Guest: Buchanan. Russ: Was it Buchanan? Some said it was awful. And a hodgepodge. But the book itself is pretty good. So, some people say: This couldn't have been written by Hayek. It was written by Bartley really when Hayek was old. Let's not even go into that. Forget that. I don't care whether Hayek wrote it or not. So tell me, what's the main idea of the book and why it is important. Guest: Again, it's the main theme that appears in the The Road to Serfdom--we are conceited if we think that we can consciously plan the overall order of our society in a way that would improve it from what it would emerge through evolution based upon rules of private property. And freedom of contract. And that conceit--it's not only that we fail. It's a fatal conceit. It will lead to serfdom. Hayek's conservatism comes out a lot more in The Fatal Conceit than it does in the earlier works. Although I don't think he became more conservative. I just think he is emphasizing themes--maybe in the emphasis it is from Bartley. I don't know. When I read it, though, it strikes me as Hayek. Russ: Yeah. Guest: It sounds like Hayek to me. Russ: And besides the quote we mentioned earlier, it has this wonderful quote, which I've recited a few times, about the microcosm and the macrocosm: that we are socialists when we come, deal with our family and friends. We have an egalitarian streak that came out of our--he attributes it to our emergence from hunting and gathering bands of small groups--that now that we have this extended group of society, we have an impulse to extend that, those attitudes toward our larger group. He says that will lead to tyranny. And similarly he says that if we try to take that role the prices play in the macrocosm and bring it into our family, we will destroy our family. So, I think those two things are my favorite moments of the book. Guest: But every page is interesting. It's a learned history, learned intellectual history. But we can close just by reminding readers again that these four books all share the one theme that I think is appropriately summarized by the title of the last one: The Fatal Conceit. We fancy that we have the power to design and guide overall social forces in ways that we just don't have. And we try to. We send lots of well-paid people to Washington, D.C. and to Brussels. But they are not going to achieve their ends. And if we insist that they try to achieve those ends, and until they actually do, those ends will never be achieved. And then we will reach serfdom.
1:04:21Russ: Now, let's talk about where a beginner should start. I'll give mine first, and then you can go. I always tell people to start--actually, I used to say: Read The Fatal Conceit, it's his best book. The problem with that is it's a little dense. And it's short. A lot of people, given that book, don't read it. I'm sorry to report. And they read books. Right? It's not just that they don't read. So, I tend to now encourage people to read the essays first. The two I start with are "The Use of Knowledge in Society," which is very accessible. As you say, you can read it 35 times and still get something out of it. But the first time is pretty good. And I also encourage people to read "The Pretence of Knowledge", his Nobel Prize address, which we haven't talked about. Which is a wonderful indictment of macroeconomics and a statement about the limits of reason. Which is a theme that runs through Hayek that we haven't talked about. But certainly the limits of experts and certainly top down hierarchy. So, my encouragement is start with those essays and Individualism and Economic Order is a book of essays that has more than one good one. One you've mentioned; two you've mentioned so far: "Individualism, True and False," and "Use of Knowledge in Society." Try The Fatal Conceit. I then encourage the first volume of Law, Legislation, and Liberty; and after that whatever you can get through. Guest: I think it depends on what--if the person who is asking you wants to learn more about Hayek's economics, "The Use of Knowledge in Society" and "The Pretence of Knowledge" are great places to start. If the person is more interested in political philosophy, I actually think "Individualism, True and False", is a great place to start. He has another essay in the Individualism and Economic Order, the 1948 collection called "Free Enterprise: Competitive Order", which is very short and very good. In these Studies' collections, New Studies in the Philosophy of Politics and Economics, his most accessible essays: He has some essays on Adam Smith, on David Hume, on Bernard Mandeville, on liberalism. Which in a way are his most accessible to a non-specialist economist. But there is another essay that I'd like to mention that I think is--I think it's in the New Studies collection--it's called "The New Confusion About Planning." It's very accessible. And in that, Hayek makes very clear: I'm not opposed to planning. We should all plan. Who does the planning? He makes it really clear in this essay. And the fact of getting better computers in the 1970s when he is writing this, and democracy is more widespread--that doesn't mean that somehow we are better able to plan at the social society level. Trying to plan at that level will inevitably make us unable to plan successfully at the individual level. Russ: And lastly: A listener wrote me in the last week or so about emergent order. He said, we talk about on the program: What is it? Where can I find out more about it? I think if you listen for a long time to the program it kind of seeps in. You'll get a feel for it just from listening. My book, The Price of Everything, I tried to in a way take from what I learned from Hayek about emergent order and apply it to everything I could think of. Guest: You did a great job. Russ: Thanks. But where in Hayek, if you want to understand? If you want to get it from the horse's mouth, the horse's mouth is Adam Smith or Adam Ferguson. But if you want to get it from Hayek, he doesn't have an article called 'What Emergent Order Means to Me.' Or 'Why I Am Not a Top-Down Guy.' Guest: It's sort of a theme that suffuses all of it. But he has an essay entitled, I think it's entitled, "The Results of Human Action, Not of Human Design." It's one of his more accessible essays. And that is either in the 1967 collection or the 1978 collection of essays by Hayek. Russ: Why don't you close by talking about Hayek's influence on you? Of the things we are still talking about? And what you still read of his? What do you go back to and read? You mention "Use of Knowledge in Society". What else do you go back to? Talk about what you go back to. Guest: I go back to Hayek's macro more and more. I still find it to be really profound, and unfortunately neglected or misunderstood. Not only by Keynesians but by our friends at Chicago--Chicago as a school, not as a place. I started studying economics in 1977, and one of the first people I was introduced to, the works of Milton Friedman. He turned me on right away. I was reading his Newsweek articles. And I remember going in to my still-beloved Bill Fields's office after having read something by Milton Friedman--and saying: Friedman, I'm sure he's the greatest living economist! And Bill Fields said: No, he's the second greatest. And I remember getting all tingly, saying: Whoa, there's someone better than Friedman? This is too good to believe. Who is it? And he said: Hayek. And I'd never heard of Hayek. And that's when he pulled his copy of Individualism and Economic Order off the shelf, and asked me to read "The Use of Knowledge in Society." And I go back to Hayek. I don't think there is a day in my life that goes by that I don't read something by Hayek. Maybe not a whole article every day. But some thing by Hayek. His world view, his economics, his general philosophy so pervades me, it's difficult to know what I got from him and what I didn't get from him. I never met him. I had a little bit of correspondence with him back in the late 1980s. But from what I know and just from reading his stuff, he seems like a very gentle man. Certainly humility. That's another way--if you want one word to summarize Hayek's world view from the 1920s until he died in 1992: humility. Don't be so arrogant to think you can do more than you can do. You can't. The social processes know a lot more than you can possibly do. Don't be so arrogant to think that you can affect aggregate demand or make the economy better. Don't be so arrogant to think that you can design a series of regulations that will result in higher wages for workers who until now were not getting higher wages, without having some unintended consequences on innocent people. So, be humble. Hayek care deeply about keeping space for individuals as large as possible, so individuals can make as their own plans. And he understood that the arrogance of trying to plan society would inevitably constrict that space, and not as progressives and many other people believed, enlarge it.

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COMMENTS (24 to date)
Walter Clark writes:

Don, Russ,
You need a new word for the concept of law that is more than just legislated. It is pretentious to expect society to accept your re-defining of the word "law".
Please make up a word. Consider a hyphenated word with the letters "meme" in it. I suspect you are unfamiliar with meme or you would have mentioned it.

Walt

Walter Clark writes:

Russ and Don seemed to be unable to counter Hayek's yielding to the value of the state to correct some bad memes such as racial prejudice. The state is not necessary even there if you acknowledge Hayek's suggestion to be patient. The civil rights movement was far more influential than mere law. Codifying change while that social movement was at work actually went beyond what evolving attitudes would have brought about. This can be seen in the 1965 version of the Civil Rights Act. That was the part that violated property rights. The harm there is the same one involved with government sponsored altruism. It creates resentment between classes which as we have seen since then, is worse than any measurable improvement in equality.

Rob writes:

Guys I'm curious as to how you think Hayek would respond to the growing consensus of stricter gun laws in this country. On one hand you have the idea that Hayek would resist such notions because he believes "we are conceited if we think we can consciously plan the overall order of our society to improve it." But on the other hand, if there is a growing consensus among the people of our country towards stricter gun laws, than such societal norms should not be resisted and such gun restrictions should be adopted.

I am having a difficult time weighing these two arguments against one another.

Greg G writes:

I liked this podcast a lot, especially the superb treatment of the way Hayek's thought is and isn't "conservative" in the sense that word is usually intended today. Also thought you guys were very fair and accurate in discussing the extent of Hayek's support for a social safety net. That is often exaggerated and taken out of written, historical and biographical context. As you point out, he became more libertarian as he got older.

From here, the distinction between law and legislation looks entirely untenable. We already have a perfectly good term for what Hayek and Don want "law" to mean. That term is "social norms." Anytime you find yourself arguing that most other English speakers are using the language wrong, you are losing the argument.

Libertarians usually claim to see a bright line between issues involving fundamental rights and other issues - or between "law" and what should be legislation. That looks like a pretty seamless continuum to the rest of us. Even two libertarians never see that line in exactly the same place. When you add in non-libertarians there is a spectacular variety of opinion on exactly where to draw that line.

So who exactly decides when a social norm is pervasive enough it should be considered "law"? Exactly how much consensus is enough? There is a calculation problem for you!

Greg G writes:

Another question: Hayek tended to use the term "evolution" where you guys use the term "emergence" in describing self organizing systems but I'm pretty sure you are referring to the same thing.

When individuals come together to form governments that protect private property from theft, Hayek calls that self organizing evolution. When individuals come together to form governments that enforce contracts and punish fraud, he calls that self organizing evolution.

But as soon as that same process goes farther than he likes towards consumer or employee protection, he wants to call it something that is interfering with the self organizing evolution - no matter how reliably that pattern "emerges" and no matter how pervasive the bottom up support for it is.

Why should we think that "bottom up" or "self organizing" or "emergent" are anything more than compliments for processes whose results you approve of?

Bradley Reali writes:

It seems like Hayek’s arguments centered with the idea that the will of the people as established by their actions is more often than not better than attempting to look at every situation and attempting to engineer the outcome we think we want at the time.

It seems like that would be a much better base to start from when looking at an economy. The genius of Hayek is that he understood that he did not fully understand everything, and that others probably didn’t as well.

I think the question that needs to be looked at is that the economy has very likely evolved to the point where we need only monitor it and not engineer it. This is scary, because it on face value seems that we are giving up control, but in reality, it’s the opposite. By allowing the economy to have fewer restrictions, we are actually giving the power to the broader masses. That’s because the collective is what drives the markets that we use.

This isn’t to say that all restrictions should be removed. The exploitation of children be it labor of sexual should always be inhibited to the most reasonable extent possible. I just happen to believe that we should focus on the laws that govern the people, and allow the economy to be changed indirectly.

I feel like many of the economic issues we currently have, stem from the actions and choices of the few at the expense of the majority

Bradley Reali writes:
Why should we think that "bottom up" or "self organizing" or "emergent" are anything more than compliments for processes whose results you approve of?

I believe I can answer this question.

The argument emergent organizing is better than allowing a few people to choose what is best, is 1 part information, and another part as fairness.

Allowing the base make choices allows for more information to be used, because of the broader base. It’s true that some of that information might be wrong, but society typically makes the right choice. It’s not perfect, as seen with civil rights, where a majority of those polled were not in favor, but as a whole, we have done a pretty good job of progressing.

As for fairness, that comes from the incentives of the broader voting as to the social norms. It is no wonder that the rich favor lower taxes, and the poor favor more social programs. As discussed in a previous podcast, allowing more input seems improve the chances of a better outcome. It will get things wrong, but more often than not, it gets them right.

The argument for emergence seems to be this. Do you bet on a few with expertise making the right choices, or go with the masses with a much larger base of data and all of its fallacies.
So far, the larger base has a better track record.

big al writes:

thanks for another great podcast. it occurs to me that i would love to have a series of podcasts where an essay like "The Use of Knowledge in Society" is read and discussed, a section a time. you already do yeoman's work on EconTalk...but i was just thinking of my wish list....

again, thanks for the hours and hours of great listening.

-a

Blake writes:

I have to agree with Walter Clark, you guys need a much better term to distinguish the difference between law and legislation. The way Munger came up with "euvoluntary", there needs to be a better term for your concept of societal norms, even if it is just "____ law" with some modifier in front. I am not creative enough, so someone else have at it.

Rob W writes:

Personally I'd like to see less on Hayek and The Use of Knowledge in Society in future, as these are really well-worn topics on EconTalk. There are a lot of fresh and interesting issues guests could be discussing!

Scott B. writes:

I very much enjoyed this weeks 'cast. I'm fairly new to listening to EconTalk, and appreciated the advice on where to start reading Hayek. I have to admit that the only thing I could find in the local library was The Road to Serfdom, and found it impossible to read.

As I've been working my way through the EconTalk archives, I've found myself wanting to actually read some of his work for myself.

On the other hand, Russ, I have to say that our library also has copies of two of your books, The Price of Everything and The Invisible Heart and I found both of them extremely easy to read as well as educational.

Thank you!

Evan writes:

I'm concerned that the Hayekian emphasis on the impossibility of applying rationality to the organization of social systems precludes the criticism of existing social systems. It seems to me that you need SOME rational criteria by which to evaluate social systems beyond the fact that they work well enough to exist.

I certainly agree with Hayek generally about the infeasibility of central planning, but I just don't see how his philosophy of knowledge can lead anywhere beyond the Whig theory of history (i.e. "everything that is, should be".)

Greg writes:

I enjoyed this podcast, as both Don and Russ are obviously extremely knowledgeable about Hayek's work and I, like them, am very sympathetic to the central ideas in it and wish our current society better reflected them, though maybe I'm a little less pessimistic than they are. (It could be a lot worse, and, throughout history, traditionally has been.)

That said, whenever Don was talking about Hayek's thought it seemed he frequently slipped into "Hayek would have thought," or "it's not explicitly there, but a theme from Hayek is...." followed by whatever Don thinks, put into Hayek's words. And then later, when discussing the things that Hayek said which Don explicitly disagrees with, Don mentions that at the end of Hayek's life his views changed and he was "sure" he wouldn't agree with those statements then -- i.e. that Hayek surely came to see the world as Don does now.

Now, it's not to say that it's not interesting to hear what Professor Boudreaux has to say, but it's a bit clammy to say that what Hayek was really saying, even if he didn't say it, was whatever Professor Boudreaux thinks and where Hayek disagreed with me well, don't worry, I'm sure he eventually came around to the side of light -- my side -- later in his life. I think it's very easy to convince yourself that your heroes would always agree with you. (It must be said that this is characteristic of all of Don's podcasts about Hume, etc -- "Some ancient thinker has been rediscovered and guess what? He agrees with me!"

I don't want to be too harsh as I did enjoy the podcast, as, despite my complaints, I really did enjoy and believe EconTalk is the best podcast on earth. And I'm sure Hayek and David Hume (and Don Boudreaux) would agree with me.

Don Boudreaux writes:

Thanks for all of these many good comments. I don't have much time today to respond (last-minute Christmas shopping, and some other commitments abound), but I hope to add more in the next few days.

But do let me say a word here about "law." I understand that it's difficult to change the popular use of a term - and I understand the extraordinary irony here of my pressing to do so. But because the word "law" carries with it an I think permanent sanctity, if you will, I believe that the confusion of law with legislation is especially dangerous: the respect properly due (in general) to law is unjustifiably shared by legislation. Because in fact legislation is NOT law that reflects emergent norms and expectations but is, instead, mostly commands issued by a central-planning rule-maker, the two types of rules (law and legislation) should be kept distinct. I believe that the importance of pressing for this distinction is so high that it is worth my tilting at this particular windmill.

For a related reason I disagree that "social norms" is acceptable to use for my meaning of "law." The term "social norms" conveys something far less important than law.

It might be appropriate to distinguish more than I do between social norms and law - that is, to reserve the term "law" for those emergent social norms that have become so important to maintaining social order and promoting social cooperation that some minimal degree of physical force is widely regarded as being appropriate in enforcing theses norms ("laws"). We want, for example, to use physical force to stop a man from beating his wife; we do not want to use physical force to stop a man from pulling his car into a just-vacated parking-space ahead of another driver who a few minutes earlier signaled with his turning-signal 'ownership' of that parking space.

As I ponder this issue more, I increasingly see merit in reserving the term "law" for the more-important categories of social norms. But it remains the case - and here's the importance of Hayek's insistence on the distinction between law and legislation - that all laws (even on this more limited definition) are emergent social norms. These norms are just so important that their enforcement justifies some minimal, and rather high, use of resources.

Evan writes:

Don,

Is there any way to escape from moral relativism in this understanding of law? Hayek contemplates that legislation is necessary to eradicate particular practices that emerge within society (master-servant practices, for example) but conflict with broader norms of justice also accepted by that society (sort of a social norm "market failure")-- but what if broader norms of justice be accepted that are unjust?

Could we ever find ourselves in a place where we can't get rid of a law --not a piece of legislation, but a law-- that's profoundly evil? Hayek doesn't seem to seriously consider that possibility-- there's the implicit assumption that the social evolutionary process will work things out in the end. Murder will always be something profoundly destructive. Societies that allow murder to go unpunished won't last.

I don't know. I'm more sympathetic to deriving moral principles from a fixed view of human nature, rather than long-term group evolutionary interests. That is, it's wrong to initiate physical force against people because they're rational creatures; it's important to respect property rights because those who attain property have mixed something of themselves in them. Etc.

Evan

Evan B writes:

Point of clarity: I'm going to go by Evan B, seeing as there as another Evan who posted earlier.

And Hayek's distinction between law and legislation is, I think, a transformative thought. It's just that I wish there was a more explicit moral component to "law," on his terms, than "whatever behavior emerges and enables our group to perpetuate itself." The difference between laws proscribing murder and speeding laws goes deeper than the fact that the latter doesn't emerge organically from social consensus.

Evan

Greg G writes:

Don,

Thanks for that thoughtful reply. We certainly agree that there are some values and practices and rights that are so valuable and important that we would both want to defend them, whether or not they were enshrined in legislation. But if we explored that a little further, we would find that, in many other cases, there is a lot of disagreement on where to draw that line.

I contend that history has shown that constitutional democracy, despite its many failings, is the method of drawing those lines that has been the most effective at minimizing coercion. You say that to maximize liberty we have to "give up the fantasy that society can be consciously directed and planned." As the utter collapse of communism has shown, there is a lot of truth in that.

I would add that we also have to "give up the fantasy" that liberty would flourish without a central government strong enough to defend it and strong enough to survive making some mistakes. Obviously, not just any strong central government will do. You need certain institutions and traditions to support it.

There is not "a" single "central planing rule maker" as you suggest. There are many representatives of the people who compete and co-operate in order to make and enforce legislation. The result of this process is "emergent."

Certainly, you can see the irony in trying to carve out the use of the word "emergent" to describe a fantasy libertarian world while denying its use to the results of processes that really do emerge over and over again here in the real world.

There have been many cases in history of societies with minimal central government. The Americas were filled with them when the Europeans came. Most were constantly fighting with each other and stealing from each other. Why did no more successful libertarian states "emerge"?

It is also worth noting that, for much of human history, slavery would have easily been contained within the sense of the word "law" that you seek to defend here as one of the most universally accepted social norms. Does "common law" come closer to the meaning for the word "law" that you are seeking to defend here?

SaveyourSelf writes:

___Don Boudreaux said, “In the late 19th-century U.S. South, the market was not tolerating segregation. It was too costly. And so you saw a lot of racial integration. So, how did racists get the segregation that they wanted? They needed legislation. That's why we had Jim Crow legislation. And it was the Civil Rights Acts of the middle-part of the 20th century, particularly the 1964 Civil Rights Act, that undid that legislation. “

What a fascinating take on that period of history. My economics training has never been able to reconcile with the history taught in government-run-public-school that the Federal Government saved the south from white business owners discriminating against their paying black customers. Don's interpretation makes far more sense.

___Mr. Boudreaux said that the state does not make murder illegal.

I find this statement profound but confusing. If individuals contribute to society and the cumulative result of all individual contributions is a universal prohibition against murder--as he suggested--,then doesn't that mean the state prohibited murder? Isn’t a state the aggregate of all citizens? His sentence suggests that “the state” is just the government.

___Mr. Bourdreaux’s discussion of Malum-in-se (things that are bad in and of themselves) and Malum-prohibita (things that are bad because an authority has declared them bad) was deep and thought provoking.

This categorization of rules by their source seems to imply that the Malum-prohibita necessarily draws its legitimacy from the Malum-in-se. It seductively hints at the possibility for better governance by abandoning Malum-prohibita entirely in favor of Malum-in-se. But to do that we need to know what makes an activity Malum-in-se so as not to create something Malum-prohibita unintentionally. Unfortunately, no defining characteristics were discussed. Mr. Boudreaux said that “It’s bad to kill other people,” suggesting that is self evident, but the reason that he feels it is self-evident is not clear.

Here are some quickly brainstormed rules derived from Justice for classifying an action as Malum-in-se (bad by nature):
1) Actions that harm others–reduce their standard of living or reduce the value of their property
2) Actions which intentionally mislead others to harm
3) Actions which intentionally violate contracts and result in harm.

Certainly the murder of an innocent would be Malum-in-se under this simple rule set. Furthermore, breaking the speed limit would be Malum-prohibita under these rules, as Don suggested...until a car collision occurred! Since the harm caused by the collision was arguably greater at high speed than the same collision would have been at slow speed, the act of speeding qualifies as Malum-in-se after the collision!

Perhaps the difference between these concepts is simply time-orientation with Malum-in-se looking backwards on events where harm has already occurred and Malum-prohibia looking forward to events that could cause harm. Such a difference would give Malum-in-se a sense of "rightness"--called hindsight bias in the psych trade--and it would give Malum-Prohibita an disquieting character due to all the uncertainty associated with trying to predict and control future probabilities/possibilities. If this time-orientation description is accurate, then the Malum-prohibita is not an inferior concept to Malum-in-se and we would not want to abandon Malum-prohibita out of hand as suggested in the podcast. This time-orientation helps predict the feelings and outcomes we experience when considering common-law vs legislation, along with the limitations and biases of each.

___Finally, Mr. Bourdreaux reported that Hayek said “…if we try to take that role the prices play in the macrocosm and bring it into our family, we will destroy our family."

I disagree strongly with the generality of this statement. As soon as kids can understand patterns and consequences—ie almost immediately—they benefit from a home environment with the same assumptions as an ideal market—which are Justice-knowledge-Freedom-Competition. Stable applications of market principles--including prices--between family-members does not “destroy our family,” just the opposite. Granted, a parent may have to prohibit many activities the young child may wish to voluntarily undergo such as playing in the street or drinking drain cleaner. So complete acceptance of the principle of freedom is not appropriate for infants and toddlers,but as their capacity for understanding and surviving the consequences of their actions grows, it seems a corresponding increase in Freedom will improve the mental health, development, and understanding of the child in ways the parents could not predict—and therefore could not improve upon in a paternalistic model. Which is another way of saying the predicted limitations of top-down decision models in government are the same for top down decision models in a family. Similarly, the tools for maximizing social welfare in the economy are the same for maximizing the total welfare in a family—Justice, Knowledge, Freedom, and Competition. Furthermore, it is wise to trade with kids and spouses. The kids learn how to negotiate and realize their actual self-worth when their labor and ideas are given real-world value through prices.

rjh writes:

Is the distinction between "law" and "legislation" similar to the distinction between "common law" mechanisms and legislation in the English legal tradition?

Chris J writes:

I enjoyed this podcast a lot, and learned a lot from it. It inspired me to read "The Use Of Knowledge in Society" for the first time, and I also put "The Pretense of Knowledge" in my reading list.

The use of knowledge rang very true - it reminded me of my brother in law explaining to me the extents he goes to to manage costs on major house rehabs he does in san francisco. He explained that it is incredibly easy for many small costs to run over just a little bit, and yield an unprofitable project. He also explained how hard he works to find low prices, and to negotiate them lower, which means that he is constantly both responding to signals about the availability of resources, and sending them (he is telling suppliers that they need to keep prices tight, or he cannot give them his business). The essay does make me marvel at the role that prices play, but also makes me depressed that the most critical parts of our economy (education, health care) have such imperfect price signals.

As always, really informative podcast. This is the only podcast I make time for these days.

Peter Harley writes:

re Your distinction between laws and legislation, I ran across this quote today (1/4/2013) in David Brooks' NYT column. Seemed appropriate.

. . .Smart people who’ve thought about this usually understand that the habits we put in practice end up shaping the people we are within. “Manners are of more importance than laws,” Edmund Burke wrote. “Manners are what vex or soothe, corrupt or purify, exalt or debase, barbarize or refine us, by a constant, steady, uniform, insensible operation, like that of the air we breathe in.”

Woodah writes:

I think the example about "not killing someone" as Law vs. Legislation is myopic and parochial. There's nothing at all innately taboo about killing people. That's why it's been legislated intensely over the past four to three thousand years. I encourage you to study up on emergent orders in tribal societies around the world and how well they work.

ttp://www.nytimes.com/2013/01/13/books/review/the-world-until-yesterday-by-jared-diamond.html?smid=pl-share

[url changed to Permalink--Econlib Ed.]

JP Sweetnam writes:

Law vs legislation. Your comments reminded me of George Jonas criticizing then Prime Minister Trudeau (who flippantly commented that he should perhaps make it legal for the RCMP to burn down the barns of Quebec separatists) that it wasn't wrong because it was illegal; it was illegal because it was wrong. When people lose the ability to understand these simply differences, we are in big trouble.

daniel j aronoff writes:

Good Discussion, but I dont understand why you guys made no mention of 'The Counter Revolution of Science' (including Scientism and the Study of Society). Alongside 'The Use of Knowledge in Society', I rate this book as Hayek's deepest, widest and most historical. I think it provides Hayek's understanding of the origins of the modern world adn it is his most readable work (in my opinion).

A suggestion for a future podcast is to compare and contrast the meaning of limitations in knowledge in 'The Use of Knowledge in Society' -which is atemporal - and Keynes and Knight - whcih is intertemporal. I have been thinking about the dichotomy in points of view: to what extent are they in conflict (I suspect not much) versus complimentary? I suspect a good deal of the differences in economic policy and political philosophy between Keynes adn Hayek, however, can be traced to differences in the types of knowledge limitations they each emphasize.

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