I recently read Don Lavoie’s ‘Rivalry and central planning’ – an account of the ‘socialist calculation debate’ which I can’t recommend highly enough.  Lavoie is a partisan – his goal is to present a ‘revisionist’ account of the debate which makes the case for the Austrian side.  But it’s also simply an excellent piece of ‘internalist’ intellectual history.  Moreover, to my mind Lavoie’s reconstruction of the Austrian arguments is much more clearly articulated than any of the debate’s ‘primary texts’, and the book is well worth engaging with on that basis.

The core of the calculation debate is, of course, over the feasibility of socialist or communist central planning.  The debate is multi-faceted and it’s not the goal of this post to even begin to attempt to summarise it, but the postage-stamp-sized version of the Austrian argument is that central planning isn’t going to work well because of a set of ‘knowledge problems’: local knowledge, tacit knowledge, and – especially – ineradicable uncertainty mean that central planners simply don’t have the categories of information required to engage in efficient economic planning.  Therefore, the argument goes, the Marxist goal of rational central planning is a pipe dream.  By contrast, the Austrians argue, market-based ‘spontaneous order’ – or ‘catallaxy’ – can be responsive to local knowledge, tacit knowledge, and the forms of unexpected discovery associated with ineradicable uncertainty, in a way that central planning never can be.  Therefore markets are better than planning.

Along the way in making this argument, Lavoie summarises two elements of Marx’s work.  First, Lavoie argues that Marx is committed to a naive concept of planning, which hasn’t reckoned with the very serious obstacles to ‘rational’ central planning.  I think this is a very fair critique – though again I don’t want to get into this side of things in this post.  Second, Lavoie gives an excellent summary of one dimension of Marx’s account of capitalism: the centrality of uncertainty and disequilibrium to market dynamics.  

It is this second element of Lavoie’s summary of Marx’s argument that I want to focus on in this post.  Interestingly – and in my view correctly – Lavoie argues that this dimension of Marx’s argument is a point of commonality between Marx and the Austrians.  Lavoie makes this argument by contrasting this position (shared by Marx and the Austrians) with two rival understandings of market dynamics.  On the one hand, there is the position that sees capitalist markets as simply chaos (a view that Lavoie argues Hayek wrongly attributes to Marx).  This is wrong – markets are not chaos – rather they are a form of ‘spontaneous order’.  On the other hand, there is the position that capitalist markets can in principle attain perfect efficiency (a view expressed by, for example, the first fundamental theorem of welfare economics).  This is also wrong, because of the ‘knowledge problem’ associated with ineradicable uncertainty.  It is impossible for markets to attain perfect efficiency, even in principle, because one of the functions of markets is to discover information that is not and cannot be known to any of the market participants when those market participants take the actions that will, ultimately, lead to the discovery of the information.  In Hayek’s phrase, market competition is a ‘discovery procedure’ – and precisely because it is a discovery procedure market actors can in principle never possess the kind of perfect knowledge required for fully efficient coordination.  For the Austrians, in other words, a large part of the value of markets lies in their failures of coordination, in their constantly renewed moments of disequilibrium, because such moments of disequilibrium are a necessary precondition of the production of the knowledge that can then be disseminated through the price system.  (Indeed, the workings of the price mechanism are themselves one of the mechanisms via which such knowledge is discovered.) I’m being very telegraphic here – Lavoie spells all of this out in much greater detail and one day I would like to too – but that’s the general idea.

One strand of Lavoie’s argument in the second chapter of ‘Rivalry and central planning’, then, is that Marx: a) understands this dimension of capitalism very well; b) regards this dimension of capitalism as a flaw rather than as a virtue of the system; c) believes that this feature of capitalist markets can feasibly be replaced with a form of central planning that would not exhibit disequilibrium dynamics; and d) is wrong about this.

Now, I think Lavoie is right to say that Marx understands this element of capitalism very well.  Ironically, this element of Marx’s argument is frequently missed by both Marx’s critics and his defenders.  Marx’s critics frequently don’t understand how sophisticated and developed Marx’s understanding of market dynamics is.  Of course, Marx doesn’t use the Austrian term of art ‘catallactics’, but Marx in ‘Capital’ is definitely giving an account of a complex spontaneous order that operates via constantly renewed disequilibrium.  Indeed, this element of Marx’s account of capitalism deeply informs Schumpeter’s concept of ‘creative destruction’.  At the same time, many Marxists are also indifferent to this element of Marx’s argument.  Perhaps a bit provocatively, I think you could give a reasonable first-pass typology of a range of strands of recent Marxist theory in terms of what they miss about this element of ‘Capital’.  On the one hand, there are forms of ‘political Marxism’ which see Marx’s contribution as an emphasis on class conflict – either at the micro level of the site of production, or at the national level of ruling capitalist class versus the proletariat, or at the international level of core versus periphery.  Of course all of these forms of class conflict are indeed essential to Marx’s account of capitalism – but it is easy for accounts of Marx’s argument that emphasise these issues to miss the elements of Marx’s analysis that do not focus on any of these forms of conflict, but rather on the ‘spontaneous order’ that emerges from dispersed social action.  On the other hand, there are forms of Marxism that make central use of categories which are presented in Marx’s analysis as ‘emergent’ phenomena – and yet ‘reify’ such categories in a way that severs them from the explanatory apparatus developed in ‘Capital’.  In my view quite a lot of recent Hegelian and ‘value form’ Marxism can be understood in this way – that is, as treating what are for Marx emergent categories in ways that render them analytically opaque by losing track of the mechanisms of their emergence.  In this sense, I think it’s important to see that ‘Capital’ is a ‘microfounded’ account of large-scale emergent phenomena, and looking exclusively at either ‘side’ of that dichotomy (either just the microfoundations or just the large-scale categories) will give an unrepresentative account of what Marx is doing.  (As always, I need to flag here how much of my own understanding of Marx’s argument is informed by N. Pepperell’s work.)

On this side of things, then, I think Lavoie is exactly right in his re-presentation of Marx’s analysis of capitalism.  Moreover, I think Lavoie is right to say that Marx thinks the disequilibrium dynamics he analyses are bad qua disequilibrium dynamics.  For example, one of the many dimensions of capitalism that Marx is interested in is large-scale economic crisis – financial system meltdown, the forms of underemployment of resources associated with recession and depression, boom and bust cycles, etc. – and of course these elements of capitalist dynamics are intimately connected to the constantly renewed disequilibrium and speculative uncertainty that both Marx and the Austrians agree are core to capitalism as a system.  For Lavoie, Marx thinks that this kind of disequilibrium process can be contrasted with rational central planning which would not exhibit these attributes, and rational central planning is to be preferred on this basis.

So, I think Lavoie is right about all of this.  I also think Lavoie is right that Marx is severely underestimating the difficulties associated with ‘rational’ planning.  So what’s the problem?  Isn’t Lavoie – and, by extension, the broader Austrian critique of Marx – just right, full stop, by my lights?

Well, in a sense, yes.  But here’s the issue.  In Lavoie’s discussion of Marx, he foregrounds Marx’s dissatisfaction with the disequilibrium dimensions of capitalism, and their consequences.  As I say, I think this is indeed a central element of Marx’s critique.  But I think it’s important to remember that there are other dimensions of Marx’s critique of capitalism.  In particular, one of the most central dimensions of Marx’s critique of capitalism is that it is oppressive.  And I think it is important to distinguish two different senses in which capitalism is oppressive, for Marx.

Here I am shifting from discussing Lavoie’s book – which is quite narrowly focused on the specifics of the calculation debate – to discussing the broader debate between the Austrians and Marx.  That is, I’m giving myself permission to paint with broader brush strokes.  Broadly speaking, then, I think there are two key elements of the Austrian enthusiasm for market catallactics which Marx’s analysis challenges, quite distinct from the critique of disequilibrium dynamics in general.

First, there is the problem of power and direct oppression.  I think it’s fair to say that one of the reasons that Austrian economists (and many other economists more broadly) often value markets as freedom-enhancing is the idea that market exchanges are voluntary, and in this respect differ from commands laid down by a violence-monopolising state.  One of the things that Marx relentlessly emphasises in ‘Capital’ is the power relations that run fractally through the apparently ‘voluntary’ exchanges of the market – in particular, but by no means limited to, the exchanges associated with labour.  For Marx, the pro-capitalist emphasis on voluntary exchange is frequently simply engaged in denialism about the many forms of coercion that can be and are encountered in ‘market society’.  This is the element of Marx that contemporary ‘political Marxism’ emphasises.

So that’s one problem with the Austrian position: are we sure that things are so free out there, really?  This problem is, as it were, at the micro level – it concerns the kinds of interactions that are going on all the time in capitalist society.

The second problem is at the macro level – that is, at the level of emergent spontaneous order, or ‘catallaxy’.  Here’s the problem: granted that market society is a catallaxy in which a spontaneous order emerges as the product of human action but not human design, what actually is the spontaneous order?  Is it good?  Or is it oppressive?

This, in my view, is where the large-scale elements of Marx’s argument in ‘Capital’ start to bite – because Marx in that work has an extremely involved account of the spontaneous order of capitalist society, built up from a micro-level analysis of a very large number of different social practices and institutions that comprise capitalist society.  Again, my goal here isn’t to summarise ‘Capital’, but Marx’s overarching claim is that, yes, capitalism represents a ‘catallaxy’, but it is a bad catallaxy: the emergent patterns of capitalist society have an oppressive, not a liberatory, impact on a large proportion of capitalism’s inhabitants.  The invisible hand of the market is not beneficent, even metaphorically; it is drenched with blood.

Now, this obviously isn’t to say that we need to accept this element of Marx’s argument (which, again, I am not even attempting to summarise here – I am simply gesturing at Marx’s conclusions).  But it is important to recognise that this element of Marx’s argument is not a rejection of ‘catallactics’ qua catallactics.  The claim is not simply that spontaneous order is bad because it is spontaneous, and because it exhibits the forms of inefficiency that are intrinsically associated with any ongoingly-evolving spontaneous order.  Rather, Marx’s critique is directed at a specific spontaneous order – the spontaneous order of the capitalist society he is examining.  Marx’s claim in ‘Capital’ is that this spontaneous order is bad – and this argument cannot be rebutted simply by making a case for catallactics against planning.  We need to engage with the specifics.  

This, I think, is where the critique I made a few posts ago about Austrian economics’ inconsistent application of the principle of epistemic limits comes into play.  My view is that Austrian economics wants to make two qualitatively different categories of argument.  One is that the actually-existing spontaneous order of capitalism is good not bad, that the invisible hand is more to our benefit than to our detriment, etc.  This is a normative social-scientific claim, which relies on us being able to analyse and understand in quite some detail the structure and dynamics of both capitalism and alternative political-economic systems.  The other category of claim Austrian economics wants to make is that our knowledge, understanding, and ability to act in ways that have the consequences we desire, are all so limited that we had better leave well alone in the face of spontaneous order – essentially ‘Chesterton’s fence’ at the level of large-scale political economy.  But it seems to me that these two positions are in significant tension.  If our understanding is so limited, how are we in a position to adequately assess the virtues of capitalist spontaneous order?  On the other hand, if we claim to understand capitalist catallactics well enough to make a dispositive case for capitalism’s virtues, what has become of our epistemic humility?  It seems to me that Austrian economics moves back and forth between these two epistemological poles of its argument, and that there is a tension – even, perhaps, at times, a convenient double-standard – in this movement.

So, let’s say we grant (as I think we should) that Marx is being naive in his imagining of a form of rational economic planning that could replace the spontaneous order of capitalism.  The claim I’m making is that this doesn’t in itself dispose of Marx’s broader arguments, because there are two further scenarios that need to be considered.  First: the possibility that the specific spontaneous order of capitalist society is sufficiently awful that forms of planning – even with all their inefficiencies and oppressions – are nevertheless an improvement.  Second: the possibility that other spontaneous orders are available – that we can transform our practices in ways that replace bad catallactics with good catallactics, or at least worse with better.  Moreover, there is arguably significant overlap between these scenarios, because one of the surprising claims underlying the Austrian critique of planning is that the institutions of a planned economy must themselves in practice be a complex system which does not lie under any individual’s control, if they are to function in the ways they often do in practice.  Thus there is a startling moment late in Lavoie’s book in which he argues that the USSR under Stalin is a good example of catallaxy:

although the Stalinist economy ‘professes to be planned,’ to use Hayek’s phrase, it in fact relies on the outcome of the clash among rivalrous, decentralised decision-makers – that is, it is anarchically rather than consciously organized. (155)

I think this view has a lot to recommend it – but in my view it also risks wreaking havoc with a lot of other Austrian arguments.  For if Stalin’s USSR and US market society are both examples of catallaxy, then it’s unclear the extent to which the categories ‘catallaxy versus planning’ can get a purchase on the relevant comparative institutional question.

Perhaps this seems like a facile debating point – and perhaps it is.  At the very least, this issue merits a lot more time and care than I’m giving it here. But I think this problem nevertheless captures something, which is that there are countless possible spontaneous orders.  Almost all of those spontaneous orders contain some degree of planning.  It’s unclear to me, then, how a general emphasis on catallaxy can guide us in choosing which actions we wish to take, in order to influence, in whatever ways, the specific nature of the spontaneous order we inhabit.  One response to this problem is, of course, full stoicism, or quietism.  But if we reject that route – as all participants in the calculation debate have, to some extent – then I see no real alternative to wrestling with concrete social-scientific questions of political economy.  The level of abstraction at which the socialist calculation debate is carried out cannot in itself be an adequate guide to political-economic action.  Which, in fairness, I think all the participants, on both sides, already knew – but that’s all I’ve got to say for now.


Fully in the ‘thinking out loud to externalise things’ space here still – I just started reading Frank Knight’s ‘Risk, Uncertainty and Profit’, and I wanted to externalise a few thoughts prompted by the book’s framing.

Knight kicks things off with a carefully caveated comparison of economics to physics.  He argues that the marginalist analysis of perfect competition is analogous to the ‘core’ laws of nature in physics, in the sense that it represents a ‘tendency’ that is always present within the behaviour of the free enterprise system.  However, this tendency does not determine the behaviour of the system on its own – there are other, countervailing tendencies which also need to be analysed.  If you naively consider only the tendency described by the laws of perfect competition in your analysis, then you will draw badly faulty conclusions about the real dynamics of the economic system.  So Knight advocates a two-step analytic approach.  First, you understand the tendency of the system associated with the assumption of perfect competition, then you analyse all the ways in which the system in fact departs from this tendency – and the latter, in practice, is where much of the work of economic analysis lies.

This seems to me to be an extremely common approach to economics – start with the idealised perfect competition model, then modify it with departures from perfect competition until you get something that seems like a reasonable approximation of the actual behaviour of whatever slice of economic life you’re studying.  I’m not saying this is necessarily the right way to approach things – in general I think that methodological pluralism is a virtue.  But let’s say that we accept this two-step approach.

The question then is: what are the important departures from perfect competition?  I think it may be useful as a first pass to distinguish two broad categories of departure (not, of course, that these are exhaustive): first, those associated with knowledge, and second those associated with power.  

Knight is primarily interested in the first category, knowledge.  Specifically, Knight is interested in the distinction between risk and uncertainty, where ‘risk’ denotes quantifiable uncertainty, and ‘uncertainty’ denotes unquantifiable uncertainty: known unknowns and unknown unknowns, as it were.  Knight discusses John Bate Clark’s account of the importance of change in generating profit.  Because the tendency of perfect competition is towards zero profits, we need an account of the source of profits that lies outside the perfect competition model.  Knight quotes Clark arguing that change provides that source, because change upsets the equilibrium of the economic system.  Knight in turn argues that Clark’s categories aren’t adequate to this insight, because if future changes – or even the probabilistically analysed possibility of future changes – are properly understood by economic actors, then they do not really count as a relevant departure from complete knowledge, and therefore do not in fact upset the equilibrium.  What generates the dynamic artefacts that Clark attributes to ‘change’ is really uncertainty – things that we do not know in the fundamental sense that we cannot even quantify the risk associated with them.

So that’s one kind of departure from perfect competition.  The other kind (that I’m talking about in this post) is power.  The idea in a perfect competition model is that every social actor is a price taker because ‘exit’ is trivially easy.  But of course there is a vast literature on the ways in which market power involves departures from this model, giving some economic actors more bargaining power than others.  I’m pretty daunted by this literature and haven’t even really begun to work through this space – but this is obviously a lot of what economics ‘is’.

It seems to me that ‘mainstream’ neoclassical economics can and has – at least in part – incorporated both of these categories of departure from perfect competition into its analytic resources.  There is a lot of mainstream economics on information and uncertainty, and there is a lot of mainstream economics on market power and bargaining power.  And yet, at the same time, there are figures on both of these two ‘wings’ of economics arguing that the neoclassical apparatus is not adequate to the core of each of these insights.  On the ‘uncertainty’ side there are the Austrians and Austrian-adjacent theorists, arguing that the neoclassical apparatus blinds its advocates to the centrality of our epistemic limits to economic dynamics.  And on the ‘power’ side there are the Marxists and Marxist-adjacent theorists, arguing that there are many forms of power operating in the economy that the neoclassical mainstream has failed to reckon with.

I don’t really have a view on all of this, at least not a view worth having – but I guess what I want to do in this post is lay down a marker to keep an eye on these two issues as I try to make my way through ‘mainstream’ economics.  My intuition, baseless or otherwise, is that these two ‘wings’ of heterodox economics (where, very crudely, the right wing corresponds to an emphasis on epistemics, and the left wing corresponds to an emphasis on power) have a point when they criticise neoclassical economics from the perspectives of these preoccupations.  And yet I also suspect that neoclassical economics has a lot more resources for tackling these issues than its heterodox critics often give it credit for.  Anyway, this is one (very partial) way (among many) of slicing up the intellectual terrain, and I wanted to jot it down.

Usual caveats in spades here.  First: I’m writing this quick post to get thoughts organised in my head rather than because I’m claiming any very significant knowledge.  I’ve read some Hayek and some Mises and some other odds and ends within the tradition of Austrian economics, but my knowledge of this tradition is still fairly slight, all up.  Second: of course almost every tradition is very diverse and no quick summary – even one much better informed than mine – is going to be adequate to that diversity.  With appropriate caveats, though, what are some key elements of the tradition of ‘Austrian economics’?  I think I want in the first instance to distinguish four elements of this tradition.

  1. Subjective value theory.  I discussed this a few posts back – ‘subjective value theory’ can potentially mean quite different things, but I think a lot of this strand of ‘Austrian economics’ has been absorbed into the mainstream of economics via the triumph of marginalism.
  2. An emphasis on catallactics and catallaxy, or spontaneous order.  Again, although mainstream economics may not use this terminology, economics as a discipline has been fascinated by the ‘spontaneous order’ of the market since Adam Smith.  Austrian economics I think gives this theme particular emphasis, but of course it’s hardly unique in discussing it.
  3. A strong commitment to laissez faire economics and classical liberal governance.  Again, the Austrians are hardly unique in this, but it’s a particular preoccupation of the tradition.


  1. A strong emphasis on the limits of our knowledge.  I think it’s reasonable to say that this is what’s most characteristic of the Austrian tradition.  There are a bunch of different ways in which economists working in the Austrian tradition talk about the limits of our knowledge: the straight-up overwhelming complexity of the spontaneous order we inhabit (who can credibly claim to begin to understand the detailed dynamics of a system this complex?); the unknowability of local or (especially) tacit knowledge for an outside observer; the sheer diversity of values among the countless people that inhabit our societies (how can we begin to get a handle on ‘preferences’ when individuals are so diverse?); the intrinsic unknowability of the future, and the fact that most of our economic categories and institutions are essentially time-bound and time-dependent, and therefore contain an unknowable element; and finally the fact that creative innovation – of technologies, of practices, of ideas, etc. – is a key and unpredictable element of economic dynamics, and likewise introduces an intrinsic uncertainty or unknowability into our efforts to analyse those dynamics.  Many of these arguments about the limits of our knowledge are somewhat ‘philosophical’.  That is to say: Austrian economics isn’t just worried about what we don’t know as a contingent result of limited data (for example) – it is interested in the idea that there are many aspects of our social reality that we cannot know, in a relatively strong sense, and it is interested in what the implications of these intrinsic limits to our knowledge are for political economy.

I think, then, what’s most characteristic about the Austrian tradition is its use of arguments drawn from point (4) to expand on and defend the positions in points (1) through (3).  And I think this is visible in the arguments Austrian economics has with the two main alternative economic analytic ‘paradigms’ that it spends much of its time critiquing: Marxism and neoclassical economics.  For Austrians, the Marxist desire to engage in large-scale rational planning of the economy is always and definitely going to end up shipwrecked on the rocks of the intrinsic limits of our knowledge about the dynamics of the economic order.  This (obviously) is the core of the socialist calculation debate.  But Austrian economics is also extremely sceptical about the kinds of modelling (and statistical analyses) carried out by the neoclassical mainstream.  For Austrians, the apparatus of general equilibrium analysis, etc., is also hubristic in its belief that it can usefully capture the dynamics of a system that is, for the many reasons gestured at above, well beyond our capacity to adequately understand.  For Austrians, then, the entire neoclassical apparatus – with its belief that it can model the dynamics of capitalism, and then identify the ‘market failures’ associated with those dynamics, facilitating government intervention to address those failures – is sort of Marxism lite.  For sure (most) neoclassical economists don’t aspire to a fully rationally planned economy – but neoclassical economics is still much too confident in its ability to rationally comprehend the relevant complexities, and is therefore also much too confident in its ability to intervene in the economy on the basis of such models.  (This is the sense in which Milton Friedman – though clearly a political ally of the Austrians – is emphatically not an Austrian himself either by temperament or in terms of his analytic apparatus: he is a mainstream economist who happens to also be committed to (1) through (3) above.)

Now, I have a range of criticisms of various Austrian economists, some of which I’ve already discussed on the blog, some of which I’ll hopefully eventually get to.  So I wouldn’t want the above summary to be understood as signalling my own commitment to the ideas of this tradition!  But I do think that the ‘epistemic’ element of Austrian economics is one that is worth taking seriously.  As I gesture at above, I think the ‘epistemic’ arguments in Austrian economics are in fact very varied – there are a lot of quite different arguments that can in principle be captured under general headings like ‘the knowledge problem’.  I think this can be quite confusing!  So one of the things I want to do, as I continue engaging with this tradition, is try to tease apart the different Austrian arguments about the limits of our social-scientific knowledge, and the different implications those arguments can plausibly be taken to have for political economy.

Hayek on rules and order

August 11, 2022

I just read the first volume of Hayek’s ‘Law, legislation and liberty’ – ‘Rules and order’ – and as usual, I want to put up some quick notes while it’s still fresh in my mind.  I don’t have a specific argument I want to make here, so this is again largely ‘notes to self’.

I guess the first thing to say about ‘Rules and order’ is that in my view it’s easily the best work by Hayek that I’ve read.  ‘Law, legislation and liberty’ is the culmination of Hayek’s late turn to broader social theory, away from ‘traditional’ economics or political economy.  For my money, both ‘The road to serfdom’ and ‘The constitution of liberty’ – two earlier works that are arguably precursors – are deeply flawed.  ‘The road to serfdom’ is a popular polemic that I feel isn’t really going to be persuasive to anyone who isn’t already sympathetic to its arguments.  ‘The constitution of liberty’, while a much longer and more serious work than ‘Serfdom’, is also a huge mess.  I wrote up my thoughts on ‘The constitution of liberty’ last year on the blog, but in summary: it is packed with ad hoc arguments and claims that don’t seem to fit in to any very coherent broader thread, and moreover its more ‘philosophical’ or social-theoretic claims are in my view often very muddy or confused in their expression.

‘Rules and order’ fixes both of these problems – in a sense it’s ‘The constitution of liberty’ done properly.  It develops a coherent, clearly articulated, wide-ranging argument, and that argument moreover in my view has a lot to recommend it. (The stuff that I didn’t like in ‘The constitution of liberty’ is likely still to come in volumes two and three of this work, but I’m talking about volume one here.)

So, on the substance, I’m going to very briefly note a few themes in no particular order.

  • The most central theme of the book is the distinction between planned and spontaneous social order.  A planned order is chosen and directed by some specific social actor or actors’ intention; a spontaneous order is the emergent effect of many decisions none of which are oriented to producing this order as their outcome.  This is Hayek’s central distinction, and it seems like an important and useful one.
  • Hayek then derives from this distinction an account of two different forms of rationalism – one which sees order as necessarily planned, and one that is willing to accept spontaneous order.  For the former kind of rationalism, only order that has been fully chosen, intended and constructed is legitimate order; for the latter kind of rationalism, order may emerge without the intention to produce that order, and we should not intrinsically see this lack of intention as a problem with the order.  Hayek calls the former a ‘constructivist’ rationalism, and the latter an ‘evolutionary’ rationalism.  (He also cites Popper’s articulation of the same distinction in terms of ‘naive’ versus ‘critical’ rationalism.)
  • Hayek then connects this distinction to two different ways of thinking about normativity or social rules.  From a ‘constructivist’ perspective, rules must be fully chosen if they are to be legitimate – this approach results in social contract theory as the understanding of the basis of political legitimacy.  From an ‘evolutionary’ perspective, rules or norms may have evolved over time without being specifically intended in this form by any social actor, and this should not intrinsically be seen as a problem with them.  Here the model is not social contract theory but common law.
  • This distinction also results in a difference in explanatory priority: for social contractarians the willing and choosing subject is fundamental, and rules, norms, a political order, etc. are chosen by this subject.  For the evolutionary approach, the subject is always formed by an existing tradition, and cannot get ‘outside’ of that tradition (though it may transform it).
  • Within the spontaneous order side of his dichotomy, Hayek distinguishes in turn two different ‘levels’ of spontaneous order.  One is the spontaneous order of the marketplace (or of capitalist political-economic dynamics more broadly).  This is the focus of the first (long) period of Hayek’s career, in which he is primarily working as an economist.  The second kind of spontaneous order is the emergence of rules or norms that can find expression in law.  This is the focus of the latter period of Hayek’s career, culminating in ‘Law, legislation and liberty’.  The latter (legal) order is an institutional precondition of the former (market) order, because a legal framework (and the normative practices associated with private property, exchange, etc.) is required for the spontaneous order of the market to get off the ground.
  • These distinctions then also allow Hayek to draw a distinction between ‘law’ and ‘legislation’, where ‘legislation’ is a constructed and intended legal order, and ‘law’ is an evolved set of norms that can be codified in common law but already exist prior to that codification as an emergent or evolved phenomenon.  In Hayek’s vocabulary, an emergent order is ‘cosmos’ and a constructed order is ‘taxis’; evolved law is ‘nomos’, and constructed law is ‘thesis’.
  • With some important but definitely secondary caveats, Hayek basically thinks that cosmos and nomos are good, taxis and thesis are bad.
  • This is fairly close to a kind of Burkean conservatism.  However, Hayek differs from at least the most ‘vulgar’ forms of Burkean conservatism in his account of, and at times enthusiasm for, ongoing evolution of the spontaneous legal order.  [Of course Burke also says that tradition can evolve, and this is central to his Whiggism, so we’re arguably dealing with somewhat fine distinctions here, but to me Hayek seems to be more centrally an ‘evolutionary’ thinker than Burke.]  There are two mechanisms for the transformation of the evolved legal tradition that Hayek discusses.  First, when we are confident that the tradition has got it wrong we can simply use legislation to transform it.  Second, the application of the tradition in practice may reveal internal inconsistencies within the evolved rules we are applying – in this scenario, we must make decisions about which dimensions of the tradition to apply and which to discard.  This latter, in particular, is a mechanism via which the tradition can genuinely evolve, without the intervention of direct ‘constructivism’.
  • Again to a first approximation, Hayek thinks that evolved law is legitimate, while legislation has a tendency towards despotism.  The goal of maintaining a legal order protective of the forms of economic and political liberty that facilitate the (‘lower-order’) spontaneous order of the market, therefore, in general requires constraining legislation – and certainly constraining the specifically targeted decisions of an administrative state – and deferring to common law traditions.  
  • This connects (a little clumsily, I think?) to the distinction between ‘impartial’ law and ‘the will of the powerful’ that animates the argument of ‘The constitution of liberty’.

Ok – those are some of the major themes of ‘Rules and order’.  Obviously there’s more to it than all this, but this is a reasonable first pass I think.

I don’t really want to spend much time on ‘editorial comment’, as it were, but a few quick remarks alongside this summary.  First, as I say, I think this is all a very well-developed metatheoretical apparatus.  Second, I think that meta-theoretically speaking it is largely correct.  I obviously differ from Hayek in a large number of ways at the level of theory, but the apparatus he develops here for the discussion of spontaneous order seems to me to be mostly good and right.  I’m not the person to develop this, but I think there are worthwhile connections to be made between Hayek’s discussion of common law and Brandom’s historicised normative pragmatics, for example.  I recently read Burczak’s ‘Socialism after Hayek’, one of the arguments of which is that Hayek can usefully be understood as a ‘postmodern’ theorist.  I think that argument is sometimes a bit of a stretch, but I see what Burczak is getting at.  For myself, though, I would articulate the point by saying that at a metatheoretical level, the apparatus developed in ‘Rules and order’ is really quite pragmatist (in the philosophical sense).  From my perspective this is a virtue (though Hayek would no doubt not have welcomed the comparison!)

All that said, I want to mark a few ways in which I would want to depart from, or at least significantly modify, Hayek’s apparatus.

First, as ever, there is the issue of conflict, coercion, and dissensus.  Hayek throughout his corpus is systematically under-attentive to many of the conflictual dimensions of social life.  Of course, Hayek is interested in competition, but there are many forms of conflict that are also central to social life that Hayek is basically indifferent to.  And yet conflict is part of these spontaneous orders too!  Conflict contributes to the production of these spontaneous orders!

Second, and relatedly: Hayek’s tacit model of common law here presupposes a high level of internal homogeneity of norms within the relevant society.  And yet why should we assume that such normative homogeneity exists?  What if dimensions of common law are better characterised by one subcomponent of society simply imposing ‘their’ norms on another?

Third: If we accept (as I think we should!) Hayek’s account of the evolution of norms through the need to choose between conflictual implications of our existing normative framework in new cases, and if we tether this element of Hayek’s apparatus to a more conflictual understanding of society as a whole, the implication, I believe, is that the ‘evolutionary’ process in question may necessarily at times become radically transformative: we may have no choice but to choose some dimension of ‘our’ normative tradition over another, in a way that has radically transformative implications for the entire tradition going forward. Again, I don’t think Hayek would exactly disagree with that, but I think it’s clear that his basic model of societal evolution is more ‘incrementalist’ than ‘revolutionary’ – and yet from my perspective his metatheoretical apparatus is neutral on this question.   

Fourth and finally: given that social actors are (of course) engaged in intentional action in order to produce the spontaneous orders Hayek is discussing, and given that some forms of intentional action may be quite far-reaching, where are we to draw the line between intentional action that contributes to the creation of a spontaneous order, and intentional action that aspires to override a spontaneous order?  It is not clear to me that this distinction is as clear-cut as Hayek implies.  Even if we think about large-scale purposive state action (Hayek’s paradigmatic case for hubristic constructivist interference in a spontaneous order): states are still social actors within a complex system, and their actions also both contribute to and are shaped by an emergent spontaneous order. The distinction between ‘evolution’ and ‘construction’ seems to me to be muddier than Hayek’s discussions of this issue often suggest.

All of these are points I want to return to as I continue to work through and work with Hayek.  But for now I just wanted to get these notes down.

I’m still circling here around Hayek and the calculation debate, but I want to take a quick detour into the work of Michael Polanyi on science.  Unlike Hayek, with whom I am still getting to grips, I know Polanyi’s key works well – I drew on Polanyi heavily in my Ph.D. thesis, and I think Polanyi’s 1962 article on ‘The republic of science’ is one of the best works in the social studies of science full stop.  Polanyi is also, in a fairly direct sense, engaged in a closely related intellectual project to Hayek – both Polanyi and Hayek were members of the Mont Pelerin Society and both are interested in the value and functioning of ‘spontaneous order’, in contrast to communist-style planning.  I think Polanyi’s work is of great intrinsic interest and value – but the reason I’m blogging on it now is because I want to start to draw out parallels (and perhaps points of difference) between Polanyi’s analysis of science as spontaneous order and Hayek’s arguments about spontaneous order in market society.

For Polanyi, then, it is critical to the functioning of science as an epistemic system that science be in a relatively strong sense unplanned, decentralised, polycentric, etc.  That is to say: scientific knowledge, for Polanyi, cannot and must not be understood on the model of the knowledge held by a single mind.  It is an intrinsic, not merely a contingent, feature of scientific knowledge that it be dispersed across a complex spontaneous order (‘the republic of science’).  For this reason, Polanyi argues, efforts to regiment and homogenise science are misguided at a fundamental level.

Polanyi does not, however, have one specific argument for this position – rather he has a cluster of arguments that need to be carefully distinguished.  In this post I want to highlight four different elements of Polanyi’s argument for the intrinsic polycentricity of science, and make some provisional and tentative connections to broader (Hayekian) arguments about spontaneous order.

First, and arguably most superficially, science must be ‘decentralised’ for Polanyi because there is simply too much of it for any one human mind to hold.  Perhaps there was a time when the greatest (and most well-resourced) intellectual figures could plausibly achieve mastery over all the major scientific (or pre-scientific, depending on how you periodise the intellectual history) domains, but in recent centuries it is simply impossible for anyone to gain mastery over anything more than a very small slice of our scientific knowledge.  Science is, in this very direct sense, a vast cognitive division of labour.  “We” possess vast scientific knowledge, but this “we” is a vast community – any individual within that community can of course possess only a small fragment of that knowledge.  Given that science hangs together in ways that span individuals’ knowledge, it can very plausibly be claimed that “we” know things that no individual knows.  (Even an individual scientific paper may be co-authored by a range of researchers with different skills and specialisations, such that the conclusions of the paper as a whole are not ‘known’ in the strongest sense of full comprehension by any individual author.  Think, then, how much more true this must be of broader coherent swathes of scientific knowledge.)  Scientific knowledge, then, is intrinsically dispersed simply because there’s so much of it.

Polanyi’s next argument is about tacit knowledge.  Scientific knowledge is often understood as explicit propositional content, paradigmatically published in scientific journals – but Polanyi emphasises that “knowing how” is as important to the scientific enterprise as “knowing that”.  We can, moreover, distinguish two different senses of “knowing how”.  First, there are the kinds of skills that cannot be communicated by means of explicit propositional knowledge: for example, how to operate such-and-such a piece of equipment is the kind of thing that one may have to learn in practice.  Second, there are the kinds of creativity and inspiration that for Polanyi are critical to the scientific enterprise, but that are missed by ‘positivist’ approaches that reductively overemphasise propositional knowledge.  (For what it’s worth, I’m less impressed than Polanyi is by ‘divine spark of creativity’ arguments – I think Polanyi is at times problematically mystical when discussing this sort of thing.  But of course Polanyi is right that tacit knowledge is important.)  For tacit knowledge, as for explicit knowledge, you could in principle I suppose imagine some sort of superhumanly skilled and creative individual who would render the division of labour associated with tacit knowledge redundant, but in any imaginable real-world scenario of course we are again dealing with a division of labour here, driven perhaps by slightly different factors from the division of labour associated with explicit propositional knowledge.

There’s a third argument in this broad space that isn’t really central to Polanyi, but that I think I might as well canvas since I’m itemising arguments: this is the problem of the incentives for knowledge sharing.  There’s a whole bunch of work, much of it coming out of Robert K. Merton’s sociology of science, about how the reputational economy of science incentivises publication of research findings.  But there are also many institutional incentives that push in the other direction: difficulties in publishing replications; reasons not to publish the ‘wrong’ findings; reasons to hoard data or other intermediate scientific inputs; incentives to commit fraud.  All of these problems can be (a bit crudely) grouped under the heading of “incentives not to share knowledge” – and if knowledge cannot be shared then the knowledge is intrinsically going to remain ‘decentralised’.

So these are three reasons why we would expect science to be intrinsically polycentric or decentralised.  Polanyi’s really interesting argument, though, from my perspective, is only weakly related to these.

Polanyi’s final argument is that science must remain decentralised because disagreement is central to the entire scientific project.  Science operates via (to use more Popperian/Lakatosian language) conjectures and refutations.  There is therefore a double-movement (apparently but only apparently paradoxical) to the scientific knowledge-production process.  On the one hand, would-be scientists must be taught the best existing knowledge, and their ability to demonstrate expertise in that knowledge is what grants scientists entry to the ‘club’ of recognised scientific research.  On the other hand, scientists must be willing and able to challenge existing knowledge in the service of making new discoveries and overthrowing old errors.  The first of these two elements pushes science towards a certain uniformity of belief – a shared canon is established and disseminated via scientific training, etc.  The second of these two elements, however, pushes science towards an intrinsic diversity of belief.  Scientific progress simply cannot happen if scientists don’t disagree.  More strongly – scientific knowledge itself cannot be scientific knowledge (but will rather become dogmatism) if the scientific community does not have the internal capacity to reject it.  There must therefore be not only cognitive division of labour – whereby knowledge and expertise are divided up across the scientific community by means of specialisation – but also genuine substantive pluralism (a stronger claim).  Although the preponderance of scientific opinion at any given time can reasonably be taken to represent ‘scientific knowledge’, it is intrinsic to the very concept of scientific knowledge (which must be fallibilist or it is no longer science) that any given scientific ‘consensus’ may be wrong, and that (therefore) scientists who are prepared to reject any given element of scientific ‘knowledge’ must also be part of the scientific community.

I think Polanyi is right about all of these points (caveats aside).  Moreover, I think the last point – about the necessary pluralism of the scientific endeavour – is a profound insight, which really does explain why science as a collective project must be in some sense polycentric and decentralised at its core, if it is to function as science at all.

But what about Hayek?  As I say, my goal here at the moment is not really to discuss Polanyi on science, but rather to extend my own field of competence, from the political economy of science to political economy more broadly.  So what are the analogies between Polanyi’s account of science and Hayek’s account of the market as catallaxy?

Well, I want to return to this in future posts.  Very quickly and crudely, though, I think we can see analogies with all four of these points.

  1. The division of epistemic expertise in the Polanyi account of science of course corresponds to the division of labour within market society.  This is a practical ‘decentralisation’ of a sort associated with the need for specialisation.  Of course, division of labour can exist within a planned economy – but here the second analogy is that, just as no one mind can in fact master all of scientific knowledge, so no one planner (or planning bureaucracy, or whatever) can master the information required to organise such a division of labour.  This is, as it were, the ‘weakly practical’ argument against ‘socialist calculation’.
  2. Like Polanyi, Hayek is interested in the problem of tacit knowledge.  One of the other Hayekian arguments against central planning is that tacit knowledge intrinsically cannot be communicated to the central planner, because the knowledge is not explicitated into propositional content.  This seems like it could potentially be a more ‘intrinsic’ obstacle to central planning than the difficulty of mastering the sheer quantity of ‘explicit’ information involved in economic decision-making.
  3. The problem of incentives not to share knowledge is a challenge for planners just as much as for the scientific community.  Again, one of the arguments against central planning is that there are many reasons why the information informing the plans would be faulty, due to the many incentives economic actors may have to pass on faulty information (or fail to pass on relevant information).
  4. Finally, and again I think arguably most importantly, there is the issue of intrinsic and necessary pluralism in science as a precondition of the creation of scientific knowledge (as opposed to scientistic dogmatism) at all.  Here I think the analogy is to Hayek’s arguments about the market as a discovery process.  Hayek’s argument here is not just that there are insuperable practical difficulties involved with aggregating the knowledge dispersed across the market.  His argument is, rather, that the relevant knowledge simply doesn’t exist without the pluralism of a decentralised process.  Specifically, all kinds of knowledge about what to produce and how to produce it does not exist without the experimental ‘entrepreneurial’ trial and error process of decentralised market dynamics.  Just as we need pluralism of belief for scientific knowledge to take on the positive epistemic attributes of scientific knowledge, so we need a decentralised discovery process to generate the kinds of information that could be aggregated in a planning process.  (This, I take it, is one of the key arguments of Don Lavoie’s book on the socialist calculation debate – which I recommend!)

Now, I’m not in this post trying to take a position on the strengths or weaknesses of any of these arguments – at this point I’m still trying to get clear on what the Hayekian (or, more broadly, the Austrian) arguments about planning and spontaneous order even are.  Moreover, I’m completely confident that these four points do not exhaust either Hayek’s arguments about spontaneous order, or the broader Austrian arguments in the socialist calculation debate.  (For example, I don’t think the core of Mises’ original argument about calculability is captured by any of these four points – hopefully I’ll come back to all this.)  But for myself, I find this way of breaking down some of Hayek’s arguments about ‘the knowledge problem’ of socialist planning clarifying.  Hopefully I will return to these issues, expand on these points, and supplement them with different arguments in future posts.