Hayek and Natural Law (Routledge Frontiers of Political Economy)

Hayek and Natural Law

Although one of the most prominent economists and political philosophers of the twentieth century, Friedrich A. Hayek (1899–1992) remains one of the most puzzling. In this book, Erik Angner dispels many of the mysteries surrounding the nature and origin of Hayek’s project by offering a radically new reading of Hayek’s life and work. Angner argues that Hayek’s work should be seen as continuous with the Natural Law tradition. Situating Hayek in this tradition allows Angner to develop novel accounts of Hayek’s thought on spontaneous order, information and coordination, and cultural evolution. Angner also analyzes the response to Hayek’s work, explaining why some people have found his ideas so attractive and why others have found them so unpersuasive. This book can be read by advanced undergraduates as an introduction to Hayek and by scholars at all levels seeking a fresh interpretation or a deeper understanding of the origin of his work. It will be of interest to anyone engaged in philosophical economics and the history of economic ideas. Erik Angner is Assistant Professor of Philosophy and Economics at the University of Alabama at Birmingham.

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Hayek and Natural Law Erik Angner

Hayek and Natural Law

Erik Angner

First published 2007 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group, an informa business This edition published in the Taylor & Francis e-Library, 2007. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” © 2007 Erik Angner All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN 0–203–96221–4 Master e-book ISBN ISBN10: 0–415–39715–4 (hbk) ISBN10: 0–203–96221–4 (ebk) ISBN13: 978–0–415–39715–5 (hbk) ISBN13: 978–0–203–96221–3 (ebk)

To my father, mother, brother, and sister

Contents

Preface

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Introduction

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Hayek and the distinguishing idea of Natural Law

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Natural Law doctrine 7 Hayek and the superiority of spontaneous order 12 Hayek and varieties of Natural Law doctrine 18 Did Hayek deny being part of the Natural Law tradition? 20 Are all economists part of the Natural Law tradition? 22 Discussion 24 3

Hayek’s Natural Law heritage

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Hayek’s childhood and youth 27 Hayek’s legal studies in Vienna 28 Hayek’s economic studies in Vienna and beyond 30 The Natural Law heritage of classical liberal economics 34 The Natural Law origins of Hayek’s thought on order 47 Discussion 49 4

Hayek on information and coordination Hayek’s work on information and coordination 50 Smith and Menger on information and socialism 55 The Natural Law origins of Hayek’s thought on information and coordination 61 Discussion 66

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xiv Contents 5

Hayek on cultural evolution

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Hayek’s theory of cultural evolution 67 Hayek’s evolutionary argument for the spontaneous order of the market 72 Hayek’s debt to Smith, Menger, and the other classical liberal economists 77 Carr-Saunders and Oxford zoology 80 The Natural Law origins of Hayek’s theory of cultural evolution 90 Discussion 94 6

Hayek’s transformation

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Hayek’s notion of equilibrium 96 The socialist calculation debate 98 The London School of Economics and The Road to Serfdom 99 Hayek’s World War I experiences 102 Physics and Hayek’s evolving philosophy of science 103 The University of Chicago 108 The Natural Law origins of Hayek’s transformation 109 Discussion 112 7

Concluding remarks

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Summary 114 Hayek and Natural Law 117 Potential objections 118 The reception of Hayek’s work 121 Notes Bibliography Index

125 129 137

Preface

This book is the result of a series of conversations with Mark Perlman in Fox Chapel, PA, starting in 2003. By the time I got to know Perlman, who was then Professor Emeritus at the University of Pittsburgh, I had already done some writing on Hayek, but was nowhere near satisfied that I had developed a coherent picture of his enterprise. During our conversations, Perlman encouraged me to explore Hayek’s links to the Natural Law tradition, which is what set me on the current course. Perlman also gave me a copy of Schumpeter’s History of Economic Analysis (1954), which contains an extensive and informative discussion of the Natural Law roots of economic thought, and which was critical in helping me articulate the main argument of this book. For Perlman’s wisdom, generosity, encouragement, support, and advice (solicited and not, on all conceivable matters) I remain deeply grateful. It is with great sadness that I note that he will not be able to see the book in print. The best way to honor his work as a scholar and teacher, though, is to carry on – however imperfectly – the tradition of scholarship of which he was a part. This book is my attempt to do so. Many other people had an important impact on the conceptualization and execution of the project. I am particularly grateful to Erich Streissler at the University of Vienna. My understanding of Austrian economics and the historical context in which it emerged benefited enormously from an interview (at what turned out to be a critical juncture) with Streissler, who probably knows this context better than any other living scholar, and who was extraordinarily generous with his time and ideas. The manuscript was improved in response to perceptive criticism from many others, including Scott Arnold, Zvi Biener, Elizabeth Blum, Andy Denis, Jon Fahlander, Uljana Feest, Abel Franco, Greg Frost-Arnold, Brian Hepburn, Steven Husted, Bruna Ingrao, Harold Kincaid, Maureen Kelley, Henry Krips, Morgan Marietta, David Miller, Nathan Nobis, Elizabeth Paris, Gualtiero Piccinini, Nicholas Rescher, Don Ross, Andrea Scarantino, Rebecca Skloot, and an anonymous referee. My thanks go to the above, and to all others (too numerous to mention by name) who in some way or other helped me shape the argument. Parts of Chapter 5 were adapted from my papers “The History of Hayek’s Theory of Cultural Evolution,” published in Studies in History and Philosophy of Science Part C: Studies in history and philosophy of biological and biomedical sciences,

xvi Preface 33 (2002): 695–718, and “Did Hayek Commit the Naturalistic Fallacy?,” published in The Journal of the History of Economic Thought, 26 (2004): 349–61. I am grateful to Elsevier (http://www.elsevier.com) and to Taylor & Francis (http://www. tandf. co.uk) for their permission to include the material here. Finally, I wish to acknowledge the extraordinarily munificent financial support provided by Jan Wallander and Tom Hedelius’ Foundation, which was of the utmost importance both during the conception and execution of this project. None of the above should be held responsible for any of the errors, mistakes, and oversights that remain.

1

Introduction

Fifteen years after his death, Friedrich A. Hayek (1899–1992) is often identified as an economist and political philosopher of the first rank. According to Roger Koppl: “Hayek has as good a claim as anyone to be the most important economist of the 20th century” (Koppl 2006: 287). Similarly, the International Encyclopedia of the Social and Behavioral Sciences refers to him as “one of the preeminent social philosophers of [the twentieth] century” (Vanberg 2002: 6482). Meanwhile, Hayek is receiving increasing amounts of attention outside of academia. A 2000 profile in The New Yorker maintained that “it is hardly an exaggeration to refer to the twentieth century as the Hayek century” (Cassidy 2000: 45). Virginia Postrel, writing in The Boston Globe, subsequently pronounced him “one of the most important thinkers you’ve barely heard of ” (Postrel 2004). In spite of Postrel’s summation, there is evidence that interest in Hayek’s work is increasing. Until the year 2000, there was not a single book-length Hayek biography. Since then, no less than four such biographies have appeared in print. To my knowledge, the first was Hans J. Hennecke’s Friedrich August von Hayek: Die Tradition der Freiheit (2000), written in German and so far not translated into English. Subsequently, three English language texts were published in quick succession: Alan Ebenstein’s Friedrich Hayek: A biography (2001) and Hayek’s Journey: The mind of Friedrich Hayek (2003), and Bruce J. Caldwell’s Hayek’s Challenge: An Intellectual Biography (2004a). Moreover, Hayek is one of the three “formative figures” in Kenneth R. Hoover’s Economics as Ideology: Keynes, Laski, Hayek, and the Creation of Contemporary Politics (2003). According to Hoover, these three “did more than any of their contemporaries to define the center, left, and right of the political spectrum in Western industrial democracies” (Hoover 2003: xi–xii).1 The increase in interest can be explained, in part, by a realization that Hayek may have had a real impact on late twentieth-century politics. In her autobiography The Downing Street Years (1993), former British Prime Minister Margaret Thatcher wrote: [Books] like . . . Hayek’s powerful Road to Serfdom . . . not only provided crisp, clear analytical arguments against socialism, . . . but . . . also gave us the feeling that the other side simply could not win in the end . . . It left

2

Introduction a permanent mark on my own political character, making me a long-term optimist for free enterprise and liberty and sustaining me through the bleak years of socialist supremacy in the 1960s and ’70s. (Thatcher 1993: 12–13)

Several observers, including 1976 Nobel Memorial Prize laureate Milton Friedman, have suggested that Hayek’s writings contributed to the fall of the Iron Curtain (Friedman 1994: xix). Anders Åslund, who served as an economic advisor to Boris Yeltsin during the Russian post-Soviet reforms during the early 1990s, claimed that his efforts were inspired by Hayek’s work (Åslund 2002: 100). The fact that Hayek could have such an impact without getting involved in day-to-day politics only serves to underscore the power of his ideas, and the increasing interest in his work suggests that those ideas continue to inspire. Hayek is not only one of the most prominent economists and political philosophers of the twentieth century, however, he is also one of the most puzzling. What may be most perplexing about Hayek is the trajectory of his career. He started out as “a very pure and narrow economic theorist” working in “technical economics,” including monetary economics, the economics of business cycles, and so on (Hayek 1967: 91). In the 1930s and 1940s, however, in an episode typically referred to as “Hayek’s transformation” (Caldwell 1988), Hayek gradually abandoned this work and turned toward broader questions in social and political philosophy (Hayek 1967: 91). Much of the later work served to defend a classical liberal vision of limited government and extensive reliance on competitive markets in the production and distribution of goods and services. Contrasting the “spontaneous order of the market” with the “artificial orders” promoted by socialists, Hayek explored multiple ways in which the former (while often imperfect) is superior to the latter. It is to his later work that Hayek owes most of his prominence, and possibly his 1974 Nobel Memorial Prize as well (Streissler 1992: 261). According to the press release announcing the award: “The [Royal Swedish] Academy [of Sciences] is of the opinion that von Hayek’s analysis of the functional efficiency of different economic systems is one of his most significant contributions to economic research in the broader sense” (Kungliga Vetenskapsakademien 1974). Equally puzzling is the nature of Hayek’s mature work, whose focus on information, coordination, and cultural evolution makes it sharply different from that of his contemporaries. He often emphasized the fact that knowledge “never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess” (Hayek 1945: 519–20). In Hayek’s view, the problem of the “division of knowledge” is the “really central problem of economics as a social science” (Hayek 1937: 49). The division of knowledge forms the basis for his analysis of the price system, which serves “to coördinate the separate actions of different people,” a goal that it achieves by “communicating information” (Hayek 1945: 526). This analysis leads to a defense of freedom or liberty in the sense of

Introduction 3 absence of coercion (Hayek 1960: 11). In Hayek’s view, “a free society can make use of so much more knowledge than the mind of the wisest ruler could comprehend” (Hayek 1960: 30–1). Over time, the theme of cultural evolution took center stage, as Hayek adopted a theory of cultural evolution through group selection – that is, a theory of natural selection in which selection operates on properties of the group rather than of individuals – as the core of his system (Hayek 1967: 66–81). This theory serves to explain both how there can be a spontaneous order at all, and how it is possible for such an order to be superior to artificial order. Hayek himself appears to have seen that theory as a signal achievement, as he wrote that the theory had finally allowed him to achieve what no earlier economist had, namely, to paint “what now seems to me a tolerably clear picture of the nature of the spontaneous order of which liberal economists have so long been talking” (Hayek 1967: 92). Because the trajectory of Hayek’s career and the nature of his mature work are seen as highly unusual, Hayek is often described as something of a unicum. Thus, Caldwell wrote: “Where Hayek began was with the Austrian presuppositions, but, after decades of study, where he ended up was in a place that was unique” (Caldwell 2004: 12). Closely linked with this image of Hayek as a unicum, or sui generis, is the image of his ideas as wholly original, created as it were from scratch. Thus, for instance, Ebenstein described the concept of spontaneous order as one of “Hayek’s greatest contributions,” suggesting that it was of Hayek’s own invention (Ebenstein 2001: 237).2 Of course, few would deny that Hayek was inspired by thinkers who came before him. The classical liberal economists, including Adam Smith (1723–90) and Carl Menger (1840–1921), are often identified as Hayek’s prime sources of inspiration. Nevertheless, as the two quotes above indicate, Hayek scholarship tends to emphasize the various ways in which Hayek’s mature work differs from his earlier work, and from that of other thinkers. In this sense, then, Hayek scholars often emphasize the discontinuities, both between the stages of Hayek’s life and between Hayek and other economists. The purpose of this book is to argue that Hayek – far from being sui generis – was part of a particular, well-known intellectual tradition, typically referred to as the Natural Law tradition. In what follows, I explore multiple ways in which Hayek’s work was continuous with this tradition. The distinguishing idea of the Natural Law tradition – that is, the idea that spontaneous order is frequently superior to artificial order – and connected notions are clearly present in Hayek’s work. He was the product of an environment in which Natural Law doctrine permeated social, legal, political, religious, and economic thought. His work on information and coordination was an effort to articulate how, exactly, the spontaneous order of the market is superior to man-made orders. His work on cultural evolution was an attempt to explain how it is possible for there to be spontaneous orders in the first place, and how it is possible for such orders to be superior to artificial orders. Finally, like other economists in the Natural Law tradition, Hayek turned to Natural Law doctrine as a result of his opposition to socialism. Seeing Hayek as part of the Natural Law tradition – or, as I will say for short, as a Natural Law philosopher – allows us to see his enterprise in a new light.

4

Introduction

On my account, as suggested in the previous paragraph, the distinguishing idea of Natural Law doctrine turns out to play a central role in Hayek’s system of thought. Though the idea may be particularly clear in his mature work (from the 1960s and 1970s), it is also present in earlier writings (from the 1930s and 1940s). More importantly, the distinguishing idea of Natural Law doctrine emerges as an organizing theme of his work, tying the various strands of Hayek’s argument – on information, coordination, cultural evolution, and so on – together, and showing how they are part of one and the same fabric. Thus, attention to the Natural Law tradition and the role played by its distinguishing idea will help us see Hayek’s work more as a coherent whole, and less as a series of disconnected projects. Seeing Hayek’s work as continuous with the Natural Law tradition also suggests a novel account of his life and work, and in particular, a novel account of his transformation. According to this account, Hayek’s mature work was an effort – motivated by a desire to counteract the socialist tendencies he observed in the world around him – to substantiate the distinguishing idea of Natural Law doctrine. Like other Natural Law philosophers before him, I argue, opposition to socialism motivated Hayek to develop novel arguments – acceptable to modern audiences in the Anglo-Saxon world, where he operated – for the superiority of spontaneous over artificial order. The account I develop is intended to add to rather than replace more traditional accounts. The present account, I will argue, has distinct advantages over more traditional accounts, in that it is simultaneously extraordinarily explanatorily powerful and spectacularly parsimonious. (Incidentally, the explanatory power and parsimony of this account constitutes additional support for my main thesis that Hayek should be seen a Natural Law philosopher.) The account describes Hayek less as a unicum and more as part of a long-standing intellectual tradition. It shows that Hayek’s central ideas – far from created ex nihilo – have a long and interesting history. While underscoring the coherence of Hayek’s project, I do not mean to deny that there were tensions in his work. Complete coherence, while in principle a fine ambition, is presumably impossible to achieve in the real world. Moreover, by emphasizing the continuities between the various stages of Hayek’s life, and between Hayek and the thinkers who preceded him, I do not mean to deny that Hayek was in many ways an original thinker, or that there were important discontinuities in his life. His mature work was in fact in many ways original, especially by comparison to contemporary economists in the English-speaking world. Nevertheless, historians of science have good reason to be suspicious of accounts according to which discontinuities are so sharp as to portray individuals as sui generis, and according to which individuals create radically novel ideas ex nihilo. It is wise to assume – at least as a working hypothesis – that (whether they are aware of it or not) individuals are historically situated, that they represent traditions, movements, and trends, and that most ideas do not appear ex nihilo. In the case of Hayek, I will maintain, this working hypothesis is amply vindicated. In developing my argument, I will rely on the writings of a number of historians of economics, several of whom were active during the first half of the twentieth century. During that era, able economists were well aware of the

Introduction 5 Natural Law tradition and of its role in shaping the development of economics in particular and social science in general. Economists and historians of economics like Pierre Struve (1921), O. H. Taylor (1929; 1930), Gunnar Myrdal (1930), Eric Roll ([1938] 1956), Joseph A. Schumpeter (1954) – and, indeed, Hayek himself – clearly expressed their appreciation for the Natural Law tradition and its impact on economic thought.3 Nowadays, historians of economics do not emphasize the Natural Law tradition to quite the same extent. My guess is that the awareness of the Natural Law heritage of economics is a casualty of the decline of German language skills – and the deeper knowledge of the culture that tends to come with the study of a language – among economists in the English-speaking world.4 Be that as it may, here I wish to resuscitate the tradition that emphasizes the Natural Law roots of economics, and to show that the tradition remains highly relevant to understanding modern economic, social, and political thought. Finally, in order to anticipate various misunderstandings, it may help to say a few things about what this project is not. First, I do not see this book as an exercise in intellectual biography. I do not aspire to present anything like a complete account of Hayek’s intellectual development, nor do I claim to present significant amounts of novel biographical material. I explore those aspects of Hayek’s work, and use those primary and secondary sources, that are most relevant to my case. Much of the material with which I work is already well known, though I believe its implications have not yet been made clear enough. Also, the book is not an exercise in rational reconstruction. The narrative does describe how Hayek struggled to develop a cogent argument, and to convince people around him, in response to a range of intellectual and political events, some of which he was the author but many of which he was not. Yet, my story is not a tale of continuous linear progress from darkness to light (nor, for that matter, is it a tale of continuous degeneration). Similarly, the book does not start out with the assumption that Hayek must in the end come across as the hero (nor the villain). I do not assess Hayek’s contribution by reference to “what we now know,” or anything else. As a result, there is nothing “Whiggish” about the analysis. The goal of this book is, in the first place, to develop a better understanding of Hayek’s life and work. I approach the problem by a close study of the texts that Hayek produced during the relevant period, but above all by taking seriously the personal, intellectual, cultural, and political background against which he was operating. The underlying idea is that by situating Hayek in a broader cultural, intellectual, economic, social, and legal context, we can develop a better understanding not just of the historical origins of Hayek’s thought, but also of its nature, significance, and political implications. Whether Hayek turns out to be right or wrong is an interesting question, and one that can only be addressed in light of an accurate conception of the nature of his project, but it is not the focus of this study.

2

Hayek and the distinguishing idea of Natural Law

In this chapter I explore one way in which Hayek can be said to be part of the Natural Law tradition: the distinguishing idea of Natural Law doctrine is clearly present in Hayek’s work. As we will see in this chapter, Natural Law doctrine comes in a variety of forms, in many ways different from each other. Nevertheless, it is possible to identify one feature that distinguishes the Natural Law tradition from other intellectual traditions. This feature is the idea of the superiority of natural order over artificial (or man-made) order. Because writers in the Natural Law tradition sometimes use the term spontaneous instead of natural (cf. Taylor 1929: 31), the distinguishing feature of Natural Law doctrine can also be expressed as the idea of the superiority of spontaneous over man-made order.1 This idea is closely connected to the idea of the superiority of natural law over man-made law, and the notion that social organization should to the greatest extent possible mirror the natural order. The distinguishing idea of Natural Law doctrine and connected notions, I will maintain, are both explicit and implicit in Hayek’s work. Using the language of natural (or spontaneous) vs. artificial order, Hayek repeatedly emphasized the superiority of spontaneous over artificial order, as well as the superiority of spontaneously evolved norms, rules, and practices over those that have been artificially constructed. He argued that it is difficult or impossible to improve on spontaneous order by replacing it with artificial order, and even claimed that it would be irrational to try to do so. Indeed, he went so far as to assert that spontaneously evolved moral rules must be followed without questioning their justification in particular instances. Hayek also pressed the superiority of natural over man-made law, and strongly believed that social organization should to the greatest extent possible rely on or mirror spontaneous order. In brief, the distinguishing idea of Natural Law doctrine and connected notions are clearly present in Hayek’s work, which shows that there is at least this one way in which Hayek was a Natural Law philosopher. In arguing that Hayek should be seen as a Natural Law philosopher, I do not mean to suggest that he himself ever described himself as such. Neither do I wish to imply that he explicitly committed himself to any given Natural Law doctrine. Later in this chapter I will discuss the reasons why he did not. For now, it is sufficient to notice two things. First, there is nothing anachronistic about describing Hayek and

Hayek and the idea of Natural Law 7 his enterprise in terms of the Natural Law tradition. The tradition itself can be traced back to ancient Greek philosophy, as we will see, and it has long been described in terms of Natural Law. Second, it is perfectly possible to be a member of a given tradition, and to defend its characteristic ideas, without explicitly acknowledging that fact. Thus, the fact that Hayek did not describe himself and his project in the same terms as I do is no argument against my thesis. It should be mentioned that I am not the first to argue that Hayek should be seen as a Natural Law philosopher. In an appendix called “Logical Positivist, Natural Law, and Instrumentalist Philosophies in Economics,” H. H. Leibhafsky (1971) took Hayek to represent a “current form of natural law philosophy in economics” (1971: 567). Scott Gordon read Law, Legislation and Liberty (Hayek 1973; 1976; 1979) as “an attempt to resurrect the doctrine of ‘natural law’ ” (Gordon 1981: 477). In her doctoral dissertation Nyliberal politisk filosofi: En kritisk analys av Milton Friedman, Robert Nozick and F. A. Hayek, AnnaMaria Blomgren (1997) argued that Hayek’s thought “is very close to the natural law tradition” (Blomgren 1997: 234).2 Morgan Marietta and Mark Perlman (2000) argued that several modern economists, including Hayek, can be seen as part of the Natural Law tradition (Marietta and Perlman 2000: 159). Gerald P. O’Driscoll argued that Hayek (1973: 84) himself “acknowledged, ever so briefly, the influence of natural-law thinking and the work of the late Spanish scholastics” (O’Driscoll 2004: 279; cf. Denis 2001: 163).3 That said, none of these authors develop the argument in any detail. Moreover, the interpretation of Hayek as a Natural Law philosopher is far from standard. For example, Caldwell’s biography mentions Natural Law doctrine only to say that the Historical School – which Hayek vigorously opposed (see, for example, Hayek 1933: 125) – rejected it (Caldwell 2004a: 43).

Natural Law doctrine Natural Law doctrine can easily be traced back to ancient Greek philosophy. As Gordon put it: “The notion that the world is a harmonious order, despite the manifest appearances of conflict, muddle, and formless happenstance, has a long history, going back to the great Greek thinkers of the classical era” (Gordon 1991: 211). The fundamental belief underlying Natural Law schools of thought is beautifully captured in Roll’s A History of Economic Thought ([1938] 1956): In spite of their sharp distinctions, these schools can be regarded as representative of a single trend of thought. Its essence is a reliance on what is natural as against what is contrived. It implies a belief in the existence of an inherent natural order (however that may be defined) which is superior to any order artificially created by mankind. It claims that all that wise social organization need do is to act as nearly as possible in harmony with the dictates of the natural order. At different times this involved different action; and the policies urged by the protagonists at different stages appear

8

Hayek and the idea of Natural Law contradictory in retrospect. Their common characteristic, however, is the principle from which they claim authority: the superiority of natural over man-made law. (Roll [1938] 1956: 144)4

As Roll suggests, the Natural Law tradition is characterized by its commitment to the superiority of natural over artificial order. Closely connected to this idea is the notion of the superiority of natural over artificial law, and the notion that social organization should to the greatest extent possible be modeled upon the natural order. Thus, Natural Law doctrine is not just the belief in a natural order of some kind, or the belief that the world is in some sense governed by law. What truly characterizes Natural Law doctrine, and distinguishes it from other strands of thought, is the commitment to the superiority of natural over man-made order. As Roll implies, there are many varieties of Natural Law doctrine, and in what follows I will discuss some of these varieties. The fact that various representatives of the tradition, from the pre-Socratics to the moderns, differ among themselves in important ways should not be surprising, given that the tradition spans more than two thousand years of intellectual activity, and that different representatives had radically different aims and purposes. The diversity makes it difficult to capture the full complexity of Natural Law doctrine in but a few pages. Here, the idea is simply to give a few examples of what we have in mind when we talk about the Natural Law tradition. I also want to make the case – insofar as this can be done on the basis of such a brief review – that Roll was right: there is a feature that distinguishes the Natural Law tradition from other traditions, and it is the emphasis on the superiority of the natural over the man-made. I will, at the end, have one quibble with Roll’s characterization, but it is a relatively minor one. While Natural Law doctrine is based on the idea of “an inherent natural order,” as Roll put it, authors in the tradition thought of this order rather differently. Perhaps the most important difference between varieties of Natural Law doctrine relates to whether the natural order is actual or potential (Buckle 1991: 162–3). According to the first main strand, which is often associated with Plato (427–347 BC),5 the natural order is actual rather than potential. The historical roots of this tradition can be traced to pre-Socratics like Pythagoras (570?–495?), Heraclitus (c.500 BC), and Parmenides (early fifth century BC). Their thought was typically motivated by an interest in finding unity behind flux. These philosophers aspired “to find the permanent element, the ground of being, the core of reality, the fixed essence of substance, which may be called the nature of being, a nature which operates as a standard in the midst of a changing, pluralistic, and contingent world” (Eterovich 1972: 22). Though the answer to the fundamental question differed across philosophers, they were united by the view of the universe as, at a fundamental level, an actually orderly one. Thus, for example, Pythagoras taught that a certain harmony based on numbers could be found in both man and cosmos (Sigmund 1971: 1). In this tradition “Nature manifests a law or design, and design calls for a designing reason” (Eterovich 1972: 22). Hence, the natural order is associated with reason.

Hayek and the idea of Natural Law 9 Subsequent philosophers were interested not only in whether there was something constant in a changing (physical) universe, but also in whether there was a law that governed human behavior and which was valid everywhere and always (Windelband 1958: 73). The Sophists of the fifth century BC found such a law grounded in human nature (Eterovich 1972: 23–6). Plato in particular offered a strong affirmative answer, though one very different from that of the Sophists. In Plato’s view, the Idea of Justice is eternal, unchanging, and perfect. Although such Ideas (or Forms) reside in a separate realm, they are accessible to the mind. A person or polis is just if, or insofar as, he, she, or it partakes in the Idea of Justice. Plato gives an account of the just individual or polis in terms of notions of harmony and order. An individual or a polis is just when its elements – the “parts” of the soul, or the social classes – perform their proper function (Solari 1931: 983; Sigmund 1971: 28–9). According to the second main strand, often associated with Aristotle (384–322 BC), the Universe is not actually, but potentially ordered. On such accounts, what is natural need not be unchanging. Unlike an account according to which the order is actual, so that “there is a normative order that is part of the natural world,” an account according to which the order is potential “requires only that changes occur as the result of the natural inner working of a being” (Buckle 1991: 162–3). Typically, this kind of account involves a belief in natural tendencies of some kind – as in the “natural inner working” referred to by Buckle – for the order to be actualized. In Aristotle, each natural thing – be it a man, horse, or acorn – is endowed with an inner principle or source of change (Eterovich 1972: 30). In the Politics, Aristotle defined the nature of each thing as its end (telos), and the end of a thing as what each thing is when fully developed (Politics i.2–1252b32; in Ackrill 1987: 509). For human beings, the telos is the good life or flourishing. Since it is impossible to reach this goal in isolation from others, people form families, villages, and ultimately the polis. Hence, “man is by nature a political animal” (Politics i.2–1253a2; in Ackrill 1987: 509). In Aristotle’s view, reaching one’s end, fulfilling one’s potential, is associated with attaining perfection or excellence (Politics i.2–1252b34; in Ackrill 1987: 509). Justice is a virtue that is required for an individual to be in harmony with himself and with other members of the polis (Eterovich 1972: 33). As Schumpeter remarked: “the Natural . . . he associated with the Just, thus setting an example for ages to come” (Schumpeter 1954: 108). We should note that Aristotle also associated the Natural (and Just) with expedience, and with the good life and flourishing of all. Another central difference between varieties of Natural Law doctrine concerns the source of authority. According to one kind of Natural Law doctrine, the natural order is in some sense divine. Like Aristotle and Plato, the Stoic philosophers of the third and second centuries BC envisioned the polis as a natural order, but they also saw the universe – the cosmos – as a polis. Both the cosmos and the polis were ruled by universal and divine Reason, which had designed the world for the good of man (Struve 1921: 297; Eterovich 1972: 36). Thus, “man and the universe about him blend into one single unit, and Reason rules men and things alike” (Eterovich 1972: 40). As a result, the cosmos is a fundamentally harmonious one.

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While stones and animals must obey the laws – out of physical necessity or instinct, respectively – man’s capacity for choice makes it possible for him to violate the Law; but by doing so he violates Reason (Wollheim 1967: 451). Fortunately, since man has the ability to reason, and since he is part of the cosmos, the universal Design or Natural Law is directly accessible to him (Solari 1931: 983). The idea of a divine source of authority was shared by many of those who built on the Stoic ideas, including Cicero (106–43 BC), the Roman jurists, and the Christian thinkers of the Middle Ages (Struve 1921: 298; cf. Buckle 1991: 164–6). The Romans, whatever their differences, “simply accepted this Natural Law as a source of legal rules that was just as good as, and in fact superior to, any of the sources of positive law, statutory and other” (Schumpeter 1964: 108). The Church Fathers, among them St Augustine (354–430), identified Nature with God, and the Law of Nature with that part of the Law of God which can be known independently of revelation (Salmond 1895: 130). Augustine distinguished between the temporal law, which is made by men and governs human states, and the lex aeterna, which proceeds from the divine mind and rules the City of God (Salmond 1895: 130). According to Augustine, the state is justified as the only way to achieve eternal peace on earth, where peace is characterized by order, harmony, and coordination of the parts with the whole (Solari 1931: 984). St Thomas Aquinas (1225–74) continued the efforts to construct a philosophical system that combined and harmonized Christian doctrines with those of ancient thought (Salmond 1895: 131). He accepted Augustine’s account of eternal law and natural law. In addition, he incorporated elements of Aristotelian thinking. In particular, he adopted Aristotle’s ideas of an inner principle of change, and of a natural end state, and believed that the good of everything consists in actualizing its inherent potential. In Aquinas’ view “the precepts of natural law are inherent in man” (Eterovich 1972: 50–2). Thus, Aquinas shared the idea of an underlying law that governed both the operations of the physical world and human behavior, although he found the basis of that law in the Christian God (Salmond 1895: 134). By the beginning of the seventeenth century, however, another version of Natural Law doctrine emerged, increasingly dissociated from its theological roots. This turn is best represented by the work of Hugo Grotius (1583–1645) and Samuel Pufendorf (1632–94) (cf. Buckle 1991: 166–8). As Salmond put it: Though rarely rejecting as actually invalid the Scholastic conception of the divine will as legislative, philosophers begin to disregard it as at least irrelevant in a secular science, and to seek another and independent source for the precepts of natural law. This source is the rational nature of man. The ancients derived this law from the universal nature; medieval theologians from the divine nature; modern philosophers from human nature. (Salmond 1895: 135) In the words of Murray N. Rothbard (1995), Grotius “developed a natural law theory which he boldly declared was truly independent of whether God had

Hayek and the idea of Natural Law 11 created them” (Rothbard 1995: 369). Thus, these more modern Natural Law philosophers aspired to find a basis for law in the natural tendencies and demands of human nature (Solari 1931: 984). Yet another dimension along which doctrines of Natural Law differ relates to the inexorability of the natural laws. Many representatives of the Natural Law tradition thought of natural laws as absolutely binding, a view that is often associated with a picture of the Universe as mechanistic and deterministic (cf. Taylor 1929: 8). This view did not prevent them from believing in the superiority of the natural order; as Taylor put it: “this idea was still combined with the theological idea of an harmonious ‘Order of Nature’, in which every thing or being has a definite, ideal function to fulfill in the wisely planned economy of the cosmos” (Taylor 1929: 8). Nevertheless, Natural Law doctrine is not always associated with a view of the universe as mechanistic and deterministic, and of natural laws as inexorable. In particular, more recent Natural Law thinkers rejected the view of laws as deterministic or inexorable. In Taylor’s words: “The more modern view is that the laws describing these processes of adjustment are only rough tendencies, or are of the nature of ‘statistical laws’; and in no sense rigid ‘laws of nature’ in the nineteenth-century meaning of that phrase” (Taylor 1929: 30). Hence, modern representatives of the Natural Law tradition typically think of natural laws as describing what tends to happen, or what frequently happens, rather than what must happen. The brief overview offered in this section permits us to say a few things about how doctrines of Natural Law philosophers differ, and what features they have in common. The doctrines differ, first, in their view of the status of the natural order as actual or potential; second, regarding the source of authority as divine or otherwise; and third, concerning whether natural laws are inexorable or not. In spite of the evident diversity, however, doctrines of Natural Law have certain shared features. One is the commitment to the idea of a “natural order.” This idea is conceived of differently in different authors, but it always entails a certain independence of human intentions. Closely connected with this idea is the notion of the world as governed by law, be it inexorable or not. However, what truly characterizes the Natural Law tradition is the idea of the superiority, in some sense or other, of natural (or spontaneous) over artificial (or man-made) order. This idea is closely connected to the idea of the superiority of natural over artificial law, and the notion that social organization should to the greatest extent possible mirror the natural order. In what way is spontaneous order superior to artificial order, and natural law superior to artificial law? Different thinkers in the tradition have articulated this idea differently. One idea that returns in different Natural Law thinkers is that of harmony as something that characterizes natural order (and of disharmony or disorder as something that characterizes artificial order). Oftentimes, the spontaneous order is characterized by harmony both between the individual parts and between the parts and the whole. Moreover, the natural order is associated with justice, expedience, perfection, adjustment to the nature of things, and the common good. Schumpeter (1954) reminded us of the tendency of Natural Law

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philosophers to think of the end state of a process of natural development as just, adjusted to the nature of things, and conducive to the common good. He then added: Hence the equation between just and natural, natural and normal. Hence also the ease with which they passed from normative doctrine to the analytic theorem and vice versa . . . Hence, finally, the relation – not, of course, amounting to identification – that subsists with them between justification and explanation. (Schumpeter 1954: 112) Either way, Natural Law doctrine is committed not just to the view that the Universe is fundamentally ordered, whether that order is actual or potential, whether it has divine origins or not, and whether it is ruled by inexorable laws or not, but above all to the idea of the superiority of the natural over the artificial. Though I am in broad agreement with Roll about the distinguishing feature of the Natural Law tradition, I do have one quibble with him. When Roll says that Natural Law doctrine is characterized by a belief in the superiority of the natural over the artificial, this might be read as asserting that the natural is always or necessarily superior to the artificial. However, as we have seen, more modern thinkers in the Natural Law tradition reject the view that laws of nature are inexorable. As a result, Natural Law philosophers do not in general maintain that natural orders are always or necessarily superior to artificial order. Thus, Roll’s quote (as it stands) may be slightly misleading. Following Taylor’s description of laws as describing “rough tendencies” or as “statistical laws,” it might be better to articulate the distinguishing feature of Natural Law doctrine as the view that spontaneous order has a rough tendency to be superior to artificial orders, or as the view that spontaneous order is or is likely to be (or is frequently) superior to artificial order.6

Hayek and the superiority of spontaneous order In this section I argue that the distinguishing feature of Natural Law doctrine – the idea that spontaneous order is frequently superior to artificial order – and connected notions are both explicit and implicit in Hayek’s work. In Chapter 3, I will argue that this is unlikely to be a coincidence, since he was born, raised, and educated in an environment in which Natural Law doctrine infused economic, social, religious, and legal thought. For now, however, my point is just that the distinguishing idea – in these very terms – is clearly present in Hayek’s writings. The fact that Roll’s characterization of the essence of the Natural Law tradition is virtually identical to some of the things that Hayek wrote may make it seem suspect as an independent source about the Natural Law tradition. It is conceivable that Roll was aware of Hayek’s work and that this awareness, consciously or not, helped shape his views about Natural Law doctrine. Yet, this strikes me as unlikely.

Hayek and the idea of Natural Law 13 The first edition of Roll’s book appeared in 1938, and it too includes the passage quoted in the previous section. While the first edition appeared after the publication of several important English-language articles of Hayek (e.g. 1933; 1937), it appeared years and sometimes decades before the most influential statements of Hayek’s position, such as The Road to Serfdom (1944), The Constitution of Liberty (1960), and Law, Legislation and Liberty, the first volume of which appeared in 1973. Moreover, at least in his History of Economic Thought, there is no indication that Roll was particularly concerned with Hayek’s work. For one thing, the index does not contain a single reference to Hayek. The notion of order is critical to the distinguishing idea of Natural Law doctrine, and it figures prominently in Hayek’s work. Indeed, because it is presupposed in the distinction between natural and artificial order, which (as we will see shortly) plays a central role in Hayek’s work, it can be seen as the central concept in his system. Hayek himself introduced the concept by drawing a distinction between rules and order. He specified a rule of conduct as a regularity in the behavior of an individual, regardless of whether the individual is aware of the regularity or not and whether the rule is inherited or learned (Hayek 1967: 66–7; cf. Hayek 1973: 19, 43). Instead of “rules,” Hayek occasionally used the terms “customs,” “norms,” “practices,” “habits,” and “traditions.” Furthermore, he defined the order of a group as something that allows an observer to make reliable predictions about unknown parts of the group. In Law, Legislation and Liberty (1973), Hayek wrote: By “order” we shall throughout describe a state of affairs in which a multiplicity of elements of various kinds are so related to each other that we may learn from our acquaintance with some spatial or temporal part of the whole to form correct expectations concerning the rest, or at least expectations which have a good chance of proving correct. (Hayek 1973: 36) Instead of “order,” Hayek sometimes wrote “system,” “structure,” or “pattern.” The order of a group is produced jointly by the rules of conduct adhered to by its members and the environment in which they live. While Hayek’s definitions of “rules” and “order” remained vague, for our purposes it suffices to note that a rule is a property of the individual, while an order is a property of the group. Hayek offered a number of examples of real-life orders, which in his view can be found both in the inanimate realm, and among animals and humans. He wrote: “There are in the physical world many instances of complex orders,” among which he mentioned crystals and complex organic compounds (Hayek 1973: 39). His article “Notes on the Evolution of Systems of Rules of Conduct” (Hayek 1967: 66–81) offered a number of examples from the animal kingdom. The examples included the “arrow formation of migrating wild geese, the defensive ring of the buffaloes, [and] the manner in which lionesses drive the prey towards the male for the kill” (Hayek 1967: 69). He also pointed out that “every society

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must in this sense possess an order,” and that without an order, we would not be able to satisfy even elementary needs (Hayek 1973: 36). The distinguishing idea of Natural Law doctrine also relies critically on the distinction between the artificial and the natural, or between the man-made and the spontaneous, and Hayek (as we know) relied on the very same distinction. An artificial order – also called a “made order,” a “construction,” or an “organization” – is one that has been consciously designed and imposed on the group. In Hayek’s words, an artificial order “has been made by somebody putting the elements of a set in their places or directing their movements,” like the order of a battle (Hayek 1973: 37). Such an order can be imposed on a group, presumably, by directing the members to follow certain rules. In contrast, a spontaneous order – a “grown,” “selfgenerating,” or “endogenous” order – is one that has evolved without deliberate intervention. The spontaneous order, like any other order, emerges as a result of individual action, but unlike the artificial order it was not designed. As Hayek said, spontaneous orders are “orderly structures which are the product of the action of many men but are not the result of human design” (Hayek 1973: 37). Language, morals, law, and money are all spontaneous orders (Hayek 1979: 163), but the most important one in Hayek’s opinion is perhaps the competitive market (Hayek 1973: 38). The order of a free market was never designed by a thinking mind; in fact, Hayek wrote, it is far too complex to have been designed (Hayek 1979: 164). The distinction between natural (or spontaneous) and artificial (or man-made) order plays an absolutely critical role in Hayek’s work. In his view, the existence of orders that emerge naturally or spontaneously – that is, as the unintended result of individual action – provides the origin of and raison d’être for social science. Using the term “structure” instead of “order,” Hayek wrote: It would be no exaggeration to say that social theory begins with – and has an object only because of – the discovery that there exist orderly structures which are the product of the action of many men but are not the result of human design. (Hayek 1973: 37) Referring to the spontaneous order as an “organism,” Hayek also wrote: “The recognition of the existence of this organism is the recognition that there is a subject-matter for economics” (Hayek 1933: 131). Hayek often argued that spontaneous order is critical to prosperity. Thus, in Law, Legislation and Liberty, he wrote that “the maintenance of a spontaneous order of society is the prime condition of the general welfare of its members” (Hayek 1976: 6). Hayek’s position is particularly clear in the context of his critique of socialism, which he understood as any intervention in the spontaneous order of the market, that is, any effort to replace the spontaneous order of the market by artificial order (or by a combination of spontaneous and artificial order). As Erich Streissler put it: “From the beginning Hayek had a highly inclusive definition of socialism . . . So all ‘interventionist economic policy’ – to use Mises’s term – is Hayek-socialism” (Streissler 1992: 262). Given this definition, Hayek diagnosed the fundamental mistake of the socialists as the failure to see that spontaneous order is often superior to artificial order. Having

Hayek and the idea of Natural Law 15 explained that the order of the group is a function of the rules followed by its individual members, he wrote: “That . . . the inherited traditional rules . . . should often be most beneficial to the functioning of society, is a truth the dominant constructivistic [socialist] outlook of our time refuses to accept” (Hayek 1979: 162). Elsewhere, Hayek asserts that attempts to replace the spontaneous order of the market with an artificial order (as advocated by socialists) could only lead to disaster. In The Fatal Conceit, he wrote: “The dispute between the market order and socialism is no less than a matter of survival. To follow socialist morality would destroy much of present humankind and impoverish much of the rest” (Hayek 1988: 7). Hayek emphasized throughout, and in many different ways, how it was difficult or impossible to improve on spontaneous order and the rules underlying it. In The Constitution of Liberty, Hayek wrote that “it is unlikely that any individual would succeed in rationally constructing rules which would be more effective for their purpose than those which have been gradually evolved” (Hayek 1960: 66). Having explained how the complexity of the phenomena would frustrate any attempt to create a functioning artificial order, Hayek wrote that the spontaneous order “is therefore an order which we cannot improve upon but only disturb by attempting to change by deliberate arrangement any one part of it” (Hayek 1967: 92). In Law, Legislation and Liberty (1973), using the term “organization” to refer to artificial order, Hayek wrote: We shall see that it is impossible, not only to replace the spontaneous order by organization and at the same time utilize as much of the dispersed knowledge of all its members as possible, but also to improve or correct this order by interfering in it by direct commands. (Hayek 1973: 51) Hayek’s claim that it is difficult or impossible to improve spontaneous order and the rules underlying it would make little sense if he did not believe that spontaneous order and the rules underlying it were often better than any artificial order.7 As a result of the difficulties involved in rationally constructing rules that would be superior to those that evolved spontaneously, Hayek maintained that we should follow spontaneously evolved rules without questioning their justification in the particular instance. He wrote: “We have thus no choice but to submit to rules whose rationale we often do not know, and to do so whether or not we can see that anything important depends on their being observed in the particular instance” (Hayek 1960: 66–7). As a consequence, Hayek asserted: The [spontaneously evolved] rules of morals are instrumental in the sense that they assist mainly in the achievement of other human values; however, since we only rarely can know what depends on their being followed in the particular instance, to observe them must be regarded as a value in itself, a sort of intermediate end which we must pursue without questioning its justification in the particular case. (Hayek 1960: 67)

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Indeed, Hayek suggests that we should unquestioningly follow such rules even if we are aware that bad things may happen as a result. He wrote: If we want in this manner to achieve an overall order of our affairs, it is requisite that we follow the general rule in all instances and not only when there is no special reason to do otherwise. This may imply that we must deliberately disregard some knowledge of particular consequences which obedience to the rule in the given instance may produce. (Hayek 1967: 91) Again, Hayek’s position about unquestioning reliance on spontaneously evolved rules would make little sense if Hayek did not believe that such rules were frequently superior to such rules as we may design ourselves. Hayek also argued that it would always be irrational to try to replace spontaneous order with artificial order, or with some combination of spontaneous and artificial. The passage, quoted above, in which Hayek asserts that it would be impossible to improve on spontaneous order continues: “Such a combination of spontaneous order and organization it can never be rational to adopt” (Hayek 1973: 51). The claim that it would always be irrational to substitute artificial for spontaneous order certainly presupposes a belief that the latter tends to be pretty good by comparison to the former. It is interesting that Hayek insists that it would never be rational to adopt an artificial order, or a combination of spontaneous and artificial, in light of his admission that spontaneous order is sometimes imperfect (see next section). This admission implies that it is at least in principle possible to improve on the spontaneous order, and hence that we can imagine conditions under which it would be rational to try to do so. We can make sense of Hayek’s position here if we assume that spontaneous orders in practice tend to be so much better than artificial orders, or that the probability of success is so very low, that a rational individual would choose not to try to improve on the spontaneous order even if it is in principle possible to do so. Closely connected to the distinguishing idea of Natural Law doctrine is the notion of the superiority of naturally evolved over artificially constructed law, and this notion too is clearly present in Hayek’s work. He drew a distinction between spontaneously evolved and artificially constructed law, which he often referred to as “legislation.” As he said: “Legislation is the deliberate making of law” (Hayek 1973: 72). This distinction – which is so central, for example, in the three volumes of Law, Legislation and Liberty (1973; 1976; 1979) – is closely related to the distinction drawn by earlier Natural Law philosophers between natural law and positive law. As Frank van Dun (1994) argued: Hayek’s distinction between law and legislation is familiar to natural law theorists. For Hayek, as for them, most law, indeed the most important law, could not be legislated law. They also, of course, accept Hayek’s claim that law is something to be discovered, not made. (van Dun 1994: 270)

Hayek and the idea of Natural Law 17 Either way, because Hayek thought of law in terms of spontaneously evolved rules, the superiority of naturally evolved law follows directly from the superiority of spontaneously evolved rules. Another notion intimately linked to the distinguishing idea of Natural Law doctrine is the notion that social organization should to the greatest extent possible mirror spontaneous order, and this notion is evident in Hayek’s work as well.8 We have already seen expressions of this view in Hayek’s critique of socialism, but it is explicit elsewhere. Talking about economic analysis since the time of Smith and David Hume (1711–76), Hayek wrote: In short, it showed that an immensely complicated mechanism existed, worked and solved problems frequently by means which proved to be the only possible means by which the result could be accomplished, but which could not possibly be the result of deliberate regulation because nobody understood them. Even now, when we begin to understand their working, we discover again and again that necessary functions are discharged by spontaneous institutions. If we tried to run the system by deliberate regulation, we should have to invent such institutions, and yet at first we did not even understand them when we saw them. (Hayek 1933: 129–30) Thus, the only manner in which we could reach the same goals by artificially constructing a workable alternative would be to mimic spontaneously evolved institutions. Elsewhere, Hayek used a physical analogy to make the point that in many cases we have no choice but to rely on spontaneous order if we want to achieve a given result. In a later work, Hayek added: Though people more familiar with the manner in which men order physical objects often find the formation of such spontaneous orders difficult to comprehend, there are, of course, many instances in which we must similarly rely on the spontaneous adjustments of individual elements to produce a physical order. We could never produce a crystal or a complex organic compound if we had to place each individual molecule or atom in the appropriate place in relation to the others. We must rely on the fact that in certain conditions they will arrange themselves in a structure possessing certain characteristics. (Hayek 1960: 160) Analogously, the only way to achieve a functioning social order is to rely on spontaneous forces. Thus, in Hayek’s view, social organization should rely on or mirror natural order. In sum, Hayek’s emphasis on order, his distinction between artificial and natural order, and his commitment to the superiority of spontaneous over artificial order are plainly evident. He often emphasized the superiority of spontaneous over artificial order, as well as the superiority of spontaneously evolved over artificially constructed norms, rules and practices. He argued that it is difficult or

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impossible to improve on spontaneous order by replacing it with artificial order, and that it would be irrational to try to do so. He added that spontaneously evolved moral rules must be followed without questioning their justification in particular instances, even if we know that doing so may have negative consequences. Finally, Hayek also committed himself to the superiority of spontaneously evolved over artificially constructed law, and he believed that social organization should to the greatest extent possible mimic spontaneously evolved order. In passing, it may be worth saying a few things about what Hayek may have meant when he described spontaneous order as, for example, more beneficial than artificial order.9 The most commonsensical interpretation of these passages – as well as those in which he asserted that spontaneous orders cannot be improved, and so on – is that he used this language (at least some of the time) to say that spontaneous order tends to be better or more desirable than artificial order, and that it is impossible or very difficult to make them more so. That is to say that Hayek used these terms (at least some of the time) in an unambiguously normative sense. According to an alternative interpretation of these passages, by contrast, Hayek’s normative language should always be read as shorthand for some purely descriptive property, such as “more able to survive given its environment.” That is to say that Hayek used these terms in some purely descriptive sense, without any normative implications whatsoever. In my view, the alternative (non-commonsensical) interpretation is hard to sustain. It is evident that much of Hayek’s mature work was intended to defend the spontaneous order of the market from socialist criticism. The socialists, of course, argued that a socialist society would be better (in some unambiguously normative sense) than a capitalist society. When Hayek denied that claim, which he did, and when he backed up this denial with argument, which he did too, he was making normative statements as well. Moreover, if Hayek always used terms like “beneficial” in a purely descriptive sense, it would not follow that we should adhere to evolved rules without questioning their justification in particular instances, as he asserted. Similarly, it would not follow that it would always be irrational to substitute artificial for spontaneous order, as he maintained. The non-commonsensical interpretation may be motivated in part by a fear that any other interpretation implies that Hayek committed the so-called naturalistic fallacy, but as I will show in Chapter 5 this worry is unfounded. Like his predecessors in the Natural Law tradition, then, Hayek believed that spontaneous order was frequently superior in some unambiguously normative sense to artificial order.

Hayek and varieties of Natural Law doctrine In the previous section, we saw that the notion that spontaneous order is frequently superior to artificial order is plainly evident in Hayek’s work; in this way, at least, he clearly is a Natural Law philosopher. So far, however, I have said very little about what kind of Natural Law philosopher he is. Earlier in this

Hayek and the idea of Natural Law 19 chapter, we saw that Natural Law doctrine differs along at least three different dimensions. In this section, I discuss how Hayek’s position relates to those three. First, it is quite clear that Hayek believed the natural order was potential rather than actual. He clearly recognized that the spontaneous order of which he was talking was not necessarily actual, in part because existing social institutions are often partly the result of conscious design (Hayek 1973: 89). He clearly presupposed the existence of natural or spontaneous tendencies for order to appear, however. In Hayek’s work, spontaneous orders are “orderly structures which . . . are not the result of human design” (Hayek 1973: 37), and therefore must emerge through another process. In Chapter 5, I will discuss the process by which spontaneous orders appear in much greater detail. Thus, Hayek was not part of the tradition associated with Plato, according to which the natural order is actual, but rather of that associated with Aristotle, according to which the order is potential. Second, regarding the source of authority, Hayek did not take the order to have divine authority. As we will see in Chapter 3, he was not a religious man. Instead, he repeatedly emphasized how the orders emerge as “the result of human action but not of human design” (Hayek 1973: 21). Whatever this means, it suggests that the order is not the result of divine intervention. Indeed, Hayek’s work on cultural evolution (see Chapter 5) represented in part an effort to explain how it is possible for there to be orders in the absence of conscious design, whether human or superhuman. Third, Hayek strongly rejected the view of natural laws – at least in economics – as inexorable. Consider Hayek’s views about evolution, which are important because the theory of cultural evolution will provide the theoretical underpinnings for his ideas about spontaneous order. In evolutionary theory, Hayek wrote, there are no laws “in the sense of a statement of a necessary sequence of particular stages or phases through which the process of evolution must pass and which by extrapolation leads to predictions of the future course of evolution” (Hayek 1973: 23). The reason why we cannot find laws and make precise predictions is that the exact course of evolution depends on a great number of facts that we can never hope to know in their entirety. Hayek concluded: “We are in consequence confined to ‘explanations of the principle’ or to predictions merely of the abstract pattern the process will follow” (Hayek 1973: 24). The last phrase clearly suggests that we can make predictions about orders, which by definition are abstract patterns, even though we cannot make predictions about many other things. Either way, Hayek’s belief in the tendency for orders to appear spontaneously, then, is not to be read as a belief in inexorable law. It is much better described as a belief in rough description of tendencies, or statistical law. This characterization of Hayek’s position is further supported by his denials that spontaneous order must always be perfect, and that it must always be superior to artificial order. Hayek recognized that spontaneous order may be imperfect, and that it may even be inferior to artificial order. In The Constitution of Liberty (1960), Hayek wrote: These considerations, of course, do not prove that all the sets of moral beliefs which have grown up in a society will be beneficial. Just as a group may owe

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Hayek and the idea of Natural Law its rise to the morals which its members obey . . . so may a group or nation destroy itself by the moral beliefs to which it adheres. (Hayek 1960: 67)

In Law, Legislation and Liberty, he wrote: “The fact that law that has evolved in this way has certain desirable properties does not prove that it will always be good law or even that some of its rules may not be very bad’’ (1973: 88). Again, it is quite clear that Hayek rejected the view that natural order must always be superior to artificial order. It is worth noticing that this contention is not at odds with the claim that Hayek was a Natural Law philosopher, as we saw, since many Natural Law philosophers in fact denied the inexorability of natural laws. Incidentally, it appears that Hayek’s position here is very similar to the manner in which Taylor interprets Natural Law doctrine. Taylor explicitly denies that the doctrine implies that “we live in the best of all possible economic worlds”; rather, he says, it just means that “the ‘natural’ or spontaneous tendencies which work themselves out in a more or less freely ‘competitive’ society are very often socially desirable tendencies” (Taylor 1929: 30–1). By asserting that spontaneous tendencies are often, but not always, socially desirable it is possible to adhere to the doctrine while denying that spontaneous tendencies are always for the better. His use of the term “socially desirable” strongly suggests that he is making a normative claim. Although Hayek’s position may still be unclear in certain ways, I trust that it is clear enough for present purposes.

Did Hayek deny being part of the Natural Law tradition? In this section, I discuss a possible objection to the thesis that Hayek was a Natural Law philosopher in the sense that he clearly committed himself to the distinguishing feature of Natural Law doctrine. My thesis may seem to be contradicted by a passage in the second volume of Law, Legislation and Liberty (Hayek 1976: 59–60), in which Hayek rejects the use of the term “Natural Law” as applied to his work. It is not the case that my thesis would be conclusively disconfirmed if it turned out that Hayek denied it, since it is possible to be part of a tradition without realizing it. In this case, however, Hayek only said that it would be misleading – not that it would be false – to characterize his theory as Natural Law doctrine. Hayek anticipated that he would be seen as a modern representative of the Natural Law tradition. He wrote: The position maintained in this book is . . . likely also to be represented by positivists as a natural law theory. But though it is true that it develops an interpretation which in the past has been called “natural” by some of its defenders, the term as currently used is so misleading that it ought to be avoided.10 (Hayek 1976: 59)

Hayek and the idea of Natural Law 21 Notice, first of all, that Hayek protested that characterizing his theory as Natural Law theory would be misleading, not that it would be incorrect. In fact, Hayek was quick to point out that there is nothing wrong with using the term “natural” to refer to phenomena that – like law – are the product of human action but not of human design. He wrote: [As] we have seen, the term “natural” was used earlier to assert that law was the product not of any rational design but of a process of evolution and natural selection, an unintended product whose function we can learn to understand, but whose present significance may be wholly different from the intention of its creators. (Hayek 1976: 59) In this sense, Hayek suggested, it is perfectly appropriate – and in fact perfectly correct – to refer to law as “natural.” These quotes show that Hayek did not think that it would be incorrect – only misleading – to refer to his theory as Natural Law theory. Why, then, did Hayek think that it would be misleading to characterize his position as Natural Law doctrine? Hayek wrote that many legal thinkers have succumbed to a false dichotomy in that “their constructivist approach allows only that the law should be either the product of the design of a human or the product of the design of a superhuman intelligence” (Hayek 1976: 59). Thus, Hayek was afraid that the term “Natural Law” would mislead readers into thinking that in his view law is due to a superhuman intelligence. While Hayek did not adopt a version of Natural Law doctrine with theological connotations, many other thinkers in the Natural Law tradition – including the Church Fathers – in fact did. Thus, Hayek had reason to be concerned about this particular kind of misreading. A second reason to think that it might be misleading to refer to Hayek’s theory as Natural Law theory appears in the following paragraph: Though there can be no justification for representing the rules of just conduct as natural in the sense that they are part of an external and eternal order of things, or permanently implanted in an unalterable nature of man, or even in the sense that man’s mind is so fashioned once and for all that he must adopt those particular rules of conduct, it does not follow from this that the rules of conduct which in fact guide him must be the product of a deliberate choice on his part; or that he is capable of forming a society by adopting any rules he decides upon; or that these rules may not be given to him independent of any particular person’s will and in this sense exist “objectively.” (Hayek 1976: 59–60) Again, Hayek denies the view that rules, norms, and practices must stem from human or superhuman intelligence, will, or design. He also denies that the exact result of the natural process of development – including the rules, norms,

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and practices that will regulate behavior under the spontaneous order – is predetermined. Insofar as the term “Natural Law theory” suggests that Hayek endorses either one of these claims, it is misleading. Again, because many thinkers in the Natural Law tradition in fact thought of natural laws as inexorable, Hayek had every reason to be concerned with this kind of misreading. My interpretation of these passages is very much in line with that of Gordon (1981), who wrote: “Hayek avoids the use of the term ‘natural law’ in Law, Legislation and Liberty, but only because he feels that it is often misinterpreted, or used to characterize all theories opposed to legal positivism” (Gordon 1981: 477). In brief, Hayek made it perfectly clear that the term “natural law” should be avoided not because it was false, but because it was misleading. As a result, these passages do not contradict the claim that Hayek’s system can accurately be described as Natural Law theory, if that term is properly understood.

Are all economists part of the Natural Law tradition? Another line of criticism, very different from the previous one, is the argument that all economists have, in some sense or other, a Natural Law heritage, and that therefore the thesis that an individual economist like Hayek is a Natural Law philosopher is trivially true. It can in fact be argued that Natural Law doctrine has made its mark on economics of virtually all kinds. In this section I explore some writings that make this point, but argue that this does not in fact trivialize my thesis. Several historians of economics have convincingly argued that Natural Law doctrine inspired economists, like it inspired other scientists, in multiple ways. D. P. O’Brien (1975) said that “economics grew out of the natural-law systems” (O’Brien 1975: 24). Similarly, Struve (1921) wrote that “the science of political economy is characterized throughout its development by a tendency to clarify the entire complex variety of economic phenomena by the conception of Natural Law” (Struve 1921: 294).11 More specifically, historians of economics have suggested that Natural Law doctrine inspired economists to search for and articulate laws of nature (Myrdal 1930: 92–3). As Taylor noted: “Economic theory of the traditional type has always purported to be a ‘scientific’ statement of the most general ‘laws’ of society’s economic life” (Taylor 1929: 1). The idea that science should aspire to uncover laws of nature, and the conviction that it is capable of doing so, may well have their roots in the tradition of Natural Law. In the following passage, Schumpeter (1954) elaborates: I have said that social science discovered itself in the concept of natural law. This will be particularly clear if we visualize it . . . as distilled from the “nature of the case,” the rei natura. Taken in this sense, the ideal of natural law embodies the discovery that the data of a social situation determine – in the most favorable case, uniquely – a certain sequence of events, a logically coherent process or state, or would do so if they were allowed to work themselves out without further disturbance. (Schumpeter 1954: 112)

Hayek and the idea of Natural Law 23 There is another quite general manner in which the Natural Law tradition can be said to have inspired economists throughout the ages. It can be argued that the tradition of Natural Law also inspired economists to adopt – or retain – an irreducibly normative element in their system of thought, that is, to engage in prescriptive as well as descriptive analysis. Myrdal (1930) put it in the following way: [The scientific concept of law was] borrowed from Natural Law philosophy. As long as “natural law” reflected the ambiguity of the word natural, natural law was consistent both with the conception of social reality as governed by law, and the view that economics aims to construct “social utility” using theoretical means. (Myrdal 1930: 93)12 Quite arguably, the normative element is more strongly present in economics – throughout its development – than it is in other sciences. Economists have always been concerned not only with identifying and articulating the most general principles governing the economy, but also with what makes a social change desirable, and how to bring such change about. For example, one of the most central questions of the prominent subdiscipline of welfare economics concerns under what conditions a change is socially desirable. Now, even if we used a very weak criterion to determine who is in the Natural Law tradition – suppose, for instance, we used the belief that the world is ruled by general laws, inexorable or not – not all economists can be accurately described as Natural Law philosophers. Consider the Historical School, whose most famous proponents Wilhelm Georg Friedrich Roscher (1817–94) and Gustav von Schmoller (1838–1917) explicitly rejected Natural Law doctrine (Perlman and McCann 1998: 411–20). In particular, they rejected the view that economic phenomena were governed by general laws: Central among the beliefs was a rejection of natural law doctrines . . . The French philosophes believed that natural law was discoverable by reason and, once revealed, was applicable to all human societies. Echoing Hegel and Herder, the German historians demurred. For them, each society was unique, each had its own complex developmental history, and each had its own Geist, or “nature,” which depended on the specific characteristics of its people. (Caldwell 2004a: 43) Because of the view that social phenomena are inherently unique and varied, the Historical School favored detailed description over broad generalization (Caldwell 2004a: 44). Here, however, I use a much more stringent criterion for somebody to be called a “Natural Law philosopher,” namely, the belief in the superiority of spontaneous over artificial order. As Hayek repeatedly pointed out, this belief was not shared by all. Consider one of his favorite examples, rival John Maynard Keynes (1883–1946).

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Hayek quoted, with evident disgust, a passage in which Keynes described himself and his friends c.1905. Keynes wrote: We entirely repudiated a personal liability on us to obey general rules. We claimed the right to judge every individual case on its merits, and the wisdom, experience, and self-control to do so successfully . . . . So far as I am concerned, it is too late to change. I remain, and will always remain, an immoralist. (Keynes 1949: 97; quoted in Hayek 1973: 26) As Hayek saw it, Keynes refused “to recognize as binding any rules of conduct whose justification had not been rationally demonstrated” (Hayek 1973: 25). Keynes clearly does not share Hayek’s views about natural orders and the rules that undergird them, or the presumption that it is better to follow inherited rules of conduct than to follow rules of our own design. In fact, Hayek would have said that very few contemporary economists adhered to the notion that spontaneous order is frequently superior to artificial order. Recall that Hayek thought of socialists as people who thought they could improve on the spontaneous order by replacing it by an artificial one. Hayek asserted that in this sense “there are, of course, very few people left today who are not socialists” (Hayek 1933: 135). We know that Hayek thought of himself as part of a small minority of people who recognized that spontaneous order is frequently superior to artificial order. It is not my goal here to explore exactly who can be accurately described as a member of the Natural Law tradition, and who cannot be so described, or to judge their relative numbers. The point is simply that not all economists were part of the Natural Law tradition, as I use those terms here. In brief, the criterion is not too weak: the emphasis on order, the commitment to a meaningful distinction between the natural and the artificial, and the belief in the superiority of the natural over the artificial are not shared by everyone. The description “Natural Law philosopher” as I am using it clearly did not apply to the various representatives of the Historical School, and it did not apply to Keynes and many other economists besides. Consequently, my thesis is not trivially true.

Discussion In this chapter, I have argued that the Natural Law tradition, in spite of its diversity, is characterized by a relatively simple idea, namely, the doctrine that spontaneous or natural order is frequently superior to man-made or artificial order. Closely connected to this idea is the notion of the superiority of natural over artificial law, and the idea that social organization should to the greatest extent possible mirror the natural order. We have seen that this idea and connected notions are both explicit and implicit in Hayek’s work. Hayek often emphasized the superiority of spontaneous over artificial order, in exactly those terms. He repeatedly claimed that it was difficult or impossible to improve on the spontaneous order, and he asserted that it would be irrational to try to do so. Moreover, he believed that spontaneously

Hayek and the idea of Natural Law 25 evolved rules should be followed without questioning their justification in particular instances. Hayek also expressed his belief in the connected idea of the superiority of natural over artificial law, and strongly defended the view that social organization should to the greatest extent possible rely on spontaneous order. All of these claims support Hayek’s commitment to the belief that spontaneous order tends to be superior to artificial order. It follows that there is at least this one way in which Hayek can be said to be a Natural Law philosopher.

3

Hayek’s Natural Law heritage

In this chapter, I explore another way in which Hayek was part of the Natural Law tradition: he was born, raised, and educated in an environment in which Natural Law doctrine infused religious, political, legal, social, and economic thought. Moreover, many of the thinkers whose work Hayek read and built on throughout his career shared a Natural Law heritage. Finally, as we will see below, there are moments when Hayek apparently proudly situated himself squarely in the Natural Law tradition, though he was cautious to dissociate himself from some of its later, more rationalistic incarnations. The importance of somebody’s early influences in shaping his or her thought was underscored by William M. Johnston, author of The Austrian Mind (1972): The example of parents, schools, and church, and later of military service, profession, and hobbies channels a man’s thinking, reinforcing some options and foreclosing others. Early influences leave an indelible imprint precisely because a child cannot choose them; he inherits them. (Johnston 1972: 3) It goes without saying that insofar as a writer’s thought is shaped by his or her background, knowledge of the latter can lead to a better understanding of the former. Interestingly, Hayek himself affirmed both the extent to which his thought was shaped by his background, and the importance of knowing the latter to understand the former. In the Preface to Constitution of Liberty (1960), Hayek wrote: Perhaps the reader should also know that, though I am writing in the United States and have been a resident of this country for nearly ten years, I cannot claim to write as an American. My mind has been shaped by a youth spent in my native Austria and by two decades of middle life in Great Britain, of which country I have become and remain a citizen. To know this fact about myself may be of some help to the reader, for the book is to a great extent the product of this background. (Hayek 1960: iv)

Hayek’s Natural Law heritage 27 It is unfortunate that Hayek did not say more about the ways in which he imagined that his background had shaped his thought, or the exact nature of the obstacles facing the American reader. Nevertheless, this passage certainly suggests that Hayek would have approved of the effort to understand his background as a means to better understand the nature of his project. When I say that Hayek was a “Natural Law philosopher,” that he was “part of ” the Natural Law tradition rather than “influenced by” it, this is to emphasize that it was not as though Hayek the fully formed individual was bumbling along and all of a sudden encountered Natural Law doctrine. Rather, the fact that he was born and raised and spent his whole life working in that tradition, makes it part of his identity, of who he was. Of course, this is not meant to suggest that Hayek adopted every belief that every other Natural Law thinker held at some point or other; as a matter of fact, he did not. At any rate, it would have been impossible for him to do so, since Natural Law thinkers disagreed among themselves about many issues (see Chapter 2). What I am saying is that Hayek lived and worked in an enormously powerful intellectual tradition, which – quite possibly without his conscious awareness – appears to have shaped his thought in significant ways. The Natural Law perspective suggests a novel account of Hayek’s emphasis on order, his distinction between natural and artificial orders, and his commitment to the superiority of the former over the latter.1 According to the present account, Hayek’s thought on order was due to his exposure – throughout his career, but especially during the early years – to Natural Law doctrine. Hence, Hayek’s thought on order emerged as a result of his Roman Catholic upbringing, though it was further strengthened by his legal and economic studies in Vienna as well as his further reading of the classical liberal economists thereafter. This account is intended to add to rather than replace more traditional accounts that focus on Hayek’s intellectual debt to the classical liberal economists.

Hayek’s childhood and youth One early source of exposure to Natural Law doctrine for Hayek was his Roman Catholic upbringing in Vienna. Some clues about Hayek’s early exposure to, and his attitudes toward, the teachings of the Catholic Church can be gleaned from his autobiographical reminiscences in Hayek on Hayek (1994a). According to Hayek, his parents were members of the Roman Catholic Church, and his school required him to receive religious instruction and to attend mass (Hayek 1994a: 40). Around the age of 10 or 11, Hayek said, he developed “strong religious feeling under the influence of a religious teacher” (Hayek 1994a: 41). Meanwhile, Hayek said, his parents “held no religious beliefs” and offered him frequent excuses not to go to church (Hayek 1994a: 40). Perhaps under the influence of his parents, according to Hayek, by the age of 15 he had convinced himself that it was meaningless to affirm a belief in God (Hayek 1994a: 41). Although Hayek’s upbringing cannot be called religious, he was obviously immersed in a Roman Catholic intellectual environment. In spite of the fact that Hayek did not develop mature religious feeling, he may still have internalized

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many of the beliefs and attitudes explicit or implicit in the teachings of the Church. As Johnston (1972) wrote: “Among impulses that are first inherited only later to be embraced or rejected, religion plays a paramount role . . . Even the most secularized of Austrian thinkers imbibed during childhood Jewish or Christian attitudes that could not easily be shed” (Johnston 1972: 3). A belief in Natural Law, especially in the teaching of the Church Fathers, was, of course, a central part of the belief system of the Roman Catholic Church. During his studies at the Gymnasium, Hayek came across Aristotle’s thought. Hayek said: The beginning of my definite interest in economics I can clearly trace back to a logic lesson in the seventh form of the Gymnasium, late in 1916, when the master explained to us the threefold Aristotelian division of ethics into morals, politics, and economics – which seemed to me perfectly to cover the field in which I was interested. (Hayek 1994a: 47) This logic class may not have been the only time Hayek heard about Aristotle, or other Natural Law philosophers, since the Gymnasium education that Hayek received contained a definite classics component. In the words of Johnston (1972): As late as 1914 the curriculum at gymnasium required eight years of Latin, studied six hours per week except for two years of eight hours per week, as well as five or six years of Greek at five hours per week. In better gymnasien . . . the Greek course culminated in the reading of Aristotle. (Johnston 1972: 68) The exact extent of Hayek’s acquaintance with Aristotle and other Natural Law philosophers at this stage is unclear. However, even if he did not study Natural Law doctrine in any detail, his Gymnasium education certainly helped prepare him for his later studies of classical thought (see the following section). His early education may also have made him more receptive to the ideas he encountered during those studies.

Hayek’s legal studies in Vienna Even more so, Hayek was exposed to Natural Law doctrine during his studies toward the first degree in law at the University of Vienna. The reasons why he first decided to study law appear to have been practical, as he envisioned a career in the diplomatic service. Though the fall of Austria-Hungary undermined this plan, he decided to pursue such studies anyway, since they would include economics, and since he thought he might want to be a lawyer or civil servant (Hayek 1994a: 48). In the end, he appears to have spent as little time on law as he could get away with, since his main interests were in psychology and economics.

Hayek’s Natural Law heritage 29 Hayek said: “Strictly speaking I devoted only the one academic year (1920–21) to an intense study of modern law” (Hayek 1994a: 62). Nevertheless, it is clear that Hayek came out of his studies with good knowledge of, and appreciation for, the history of law. Hayek said that “what legal knowledge I have retained is much more due to the three-semester course on the history of law, and particularly Roman law, than to this year of cramming for the examination” (Hayek 1994a: 63). Hayek was impressed with his teachers at the faculty of law, whom he called “very brilliant” (Hayek 1994a: 53). He said: Among the lawyers there were some great scholars, like Wlassak in Roman law and Stooss (criminal law); and a few brilliant lecturers like Bernatzik (who died halfway through an encyclopedic introduction to the political sciences to which I went during my first year). (Hayek 1994a: 53) The reason why a legal education at the time contained a significant element of history of law – especially the history of Roman law – was that the Austrian legal system (which was modeled on that of Imperial Germany) in many ways was based on ancient Roman law (Johnston 1972: 88). It is hard to imagine that a course in the history of law, with special emphasis on Roman law, would not have included significant segments on Aristotle, the Stoics, Cicero, and the Roman jurists, as well as the Church Fathers, that is, on the tradition of Natural Law. The fact that Hayek learned so much in this course indicates that he for some reason found the history of law – perhaps especially Roman law – particularly interesting. There is evidence that Hayek as a student had little patience for subjects in which he was not interested. About his early education, for example, Hayek said: “Except for biology, few of the school subjects interested me, and I consistently neglected my homework, counting on picking up enough during lessons to scrape by” (Hayek 1994a: 42). For this reason, he was “commonly regarded as intelligent but lazy” (Hayek 1994a: 44). Similarly, an “encyclopedic introduction to the political sciences” is likely to have covered a sequence of Natural Law philosophers as well. This is particularly plausible given that Hayek’s teacher Edmund Bernatzik (1854–1919), author of, for example, Rechtsprechung und materielle Rechtkraft: Verwaltnungsrechtliche Studien (1886) and Das österreichische Nationalitätenrecht (1917), was a legal scholar as well as a political scientist. There is at least one other way in which Hayek’s legal studies may have affected the course of his later work. The German/Austrian concept of Ordnung has a much more prominent place in Austrian political thought than does the concept of order in Anglo-Saxon thought. Whereas a contemporary German dictionary of economics contains two entries for “natural order” (Heller 1926), Robert Harry Inglis Palgrave’s three-volume Dictionary of Political Economy (1910) does not contain a single one, except in the sense of “bill or note payable to” (Palgrave 1910: 39). Although The New Palgrave: A dictionary of economics (Eatwell et al. 1987) has no entry for “order,” its entry for “natural order” reads: “See NATURAL LAW” (Eatwell et al. 1987: 605).

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Moreover, the German concept has different connotations than the corresponding English one. The entry for “Ordnung” in Cassell’s German Dictionary reads: “[i] arrangement; [ii] classification, order, system, array; [iii] tidiness, orderliness; [iv] class, rank; [v] order, succession, series; [vi] rules, regulations” (Betteridge 1978: 452). Of particular interest is (vi), “rules, regulations.” In the context where Hayek grew up, “order” refers not just to a state of orderliness, but also to rules and norms regulating behavior. This fact may reflect the assumption that order on the social level requires individuals to follow applicable rules and regulations.

Hayek’s economic studies in Vienna and beyond Perhaps the most important source of Natural Law doctrine, however, were the economists that Hayek studied in Vienna and beyond. These include primarily the Austrian economists, especially Carl Menger, Friedrich Freiherr von Wieser (1851–1926), and Ludwig Edler von Mises (1881–1973). They also include, of course, the British moral philosophers of the eighteenth century, most notably Bernard Mandeville (1670–1733), David Hume, Adam Smith, and Adam Ferguson (1723–1816), but also Jeremy Bentham (1748–1832). The vast affinities between the thought of these thinkers and Hayek’s own will be explored more fully in subsequent chapters. Here, my goal is just to show how Hayek was exposed to their thought from an early stage on, and explore some of the ways in which these thinkers were part of the Natural Law tradition.2 An early source of Natural Law doctrine for Hayek was the influence of the Austrian School of Economics. This school had its origins in Menger’s work and emerged as an independent intellectual tradition in the late nineteenth century (Perlman and McCann 1998: 420). Menger held a chair in economics at the University of Vienna between 1873 and 1903 (Gamble 1996: 13). Although Hayek never met Menger personally, there is little doubt that Menger’s impact on Hayek’s intellectual development was extraordinarily important. Hayek himself explained that he decided to pursue a degree in economics at the University of Vienna shortly after World War I because he had read Menger’s Principles of Economics (1871) and “really got hooked” (Hayek 1994a: 48). Hayek returned to Menger’s texts many times. In 1934, for example, Hayek accepted the task of editing a new edition of Menger’s writings (Hayek 1994a: 13–14). Other prominent Austrian economists include Menger’s disciple Eugen von Böhm-Bawerk (1851–1914). In the words of Perlman and McCann: “Menger initiated the program which was to become Austrian economics; Böhm-Bawerk fabricated the superstructure” (Perlman and McCann 1998: 429). Böhm-Bawerk’s brother-in-law Wieser was another disciple of Menger’s, and succeeded Menger as economics chair after his retirement (Perlman and McCann 1998: 434). Wieser was also Hayek’s teacher at the University of Vienna (Hayek 1994a: 57). The fourth Austrian figure who will be mentioned in this section is Mises. In the words of Perlman and McCann: “Mises perceived himself principally as a follower and intellectual successor of Carl Menger and Böhm-Bawerk, placing him squarely in the third generation of Austrian economist-scholars” (Perlman and McCann 1998: 442).

Hayek’s Natural Law heritage 31 Hayek only got to know Mises in 1921, when Hayek started working for the Office of Accounts, which Mises directed (Hayek 1994a: 64). In 1927, Mises would help Hayek set up the Austrian Institute for Business Cycle Research, which Hayek headed from its inception (Hayek 1994a: 69). Meanwhile, Hayek closely studied the British moral philosophers of the eighteenth century. It appears that Hayek became acquainted with them in Vienna, well before his arrival in England. Hayek said: “To begin with, I think it was Mises himself who made me familiar with utilitarianism, and in my early stages I studied them very much” (Hayek 1994a: 140). Also, Menger’s Principles (1981 [1871]) – which Hayek (1994a: 48) said had such an impact on him – contains a number of references, for example, to Smith. In any case, the fact that Hayek makes reference to both Hume and Smith in his inaugural lecture at the London School of Economics (LSE) (Hayek 1933: 129) suggests that he was well aware of the significance of their work by the time he arrived in London. Hayek continued his studies of the British eighteenth-century thinkers during his time in England. In London, he studied the papers of Jeremy Bentham and in fact undertook “the highly urgent task” of organizing them, he said, although his work was cut short by World War II (Hayek 1994a: 140). Judging by Hayek’s published work, the British moral philosophers received greater prominence in his thought after his arrival in England. Consider his 1945 lecture published as “Individualism: True and False” (Hayek 1949: 1–32), according to which “true individualism” . . . began its modern development with John Locke, and particularly with Bernard Mandeville and David Hume, and achieved full stature for the first time in the work of Josiah Tucker, Adam Ferguson, and Adam Smith and in that of their great contemporary, Edmund Burke. (Hayek 1949: 4) True individualism, obviously enough, contrasts with “false individualism” which “is represented mainly by French and other Continental writers” (Hayek 1949: 4). Hayek was not just the product of an environment in which Natural Law doctrine infused social, economic, political, religious, and legal thought, he also continued to study and draw on thinkers in the Natural Law tradition throughout his career. These thinkers include the British eighteenth-century moral philosophers (cf. Ebenstein 2001: 248–9). Here I will consider a small number of passages in which Hayek clearly reveals his continued interest in the Natural Law tradition and its proponents. For example, Hayek’s historical study “The Legal and Political Philosophy of David Hume” was delivered as a lecture in 1963 and published in 1967 (Hayek 1967: 106–21). His paper “Dr. Bernard Mandeville” was offered as a lecture in 1966 (cf. Hayek 1978: 249–66), and “Adam Smith’s Message in Today’s Language” was first printed in 1976 (cf. Hayek 1978: 267–9). The impression is confirmed by a simple reference count. The number of references to Hume rose from one in Road to Serfdom (1944), to 21 in Constitution of Liberty (1960) to 43 in Law, Legislation and Liberty (1973; 1976; 1979). References to Smith in the same books rose from 0 to 17 to 22. Since the books get progressively longer,

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we should perhaps expect a rising number of references. Yet, references to Mises went from 0 to 20 to 10. This suggests, at least, that his interest in the British moral philosophers of the eighteenth century did not wane after his arrival in the US, and that it may even have gained in prominence relative, for example, to Mises.3 Consider, as another example, Hayek’s paper “Dr. Bernard Mandeville” (Hayek 1978: 249–66). In the paper, Hayek argued that Mandeville developed “all the classical paradigmata of the spontaneous growth of orderly structures: of law and morals, of language, the market, and of money, and also of the growth of technological knowledge” (Hayek 1978: 253). Hayek then proceeded to explore “the conceptual scheme into which these phenomena had somewhat uneasily been fitted during the preceding 2,000 years” (Hayek 1978: 253). He argued that the ancient Greeks “had not been unaware of the phenomena,” and added: It is remarkable how close . . . some of the ancient thinkers came to an understanding of the evolutionary processes that produced social institutions. There appears to have existed in all free countries a belief that a special providence watched over their affairs which turned their unsystematic efforts to their benefit. (Hayek 1978: 254) Notice how Hayek clearly and explicitly acknowledges these thinkers’ commitment to the idea that natural processes of development are to some degree beneficial. Next, Hayek mentioned the view of the “Roman lawyers of classical times” who believed that the “Roman legal order was superior to others” because it was not deliberately designed (Hayek 1978: 254–4). He continued: This tradition was then handed on, chiefly through the theories of the law of nature; and it is startling how far the older theorists of the law of nature, before they were displaced by the altogether different rationalist natural law school of the seventeenth century, penetrated into the secrets of the spontaneous development of social orders in spite of the handicap of the term “natural.” (Hayek 1978: 255) Hayek then went on to assert that “the last of the Schoolmen, the Spanish Jesuits . . . produced what I should call the first modern theories of society” (Hayek 1978: 255). He expressed regret, however, that the traditional conception of the law of nature was transformed from the idea of something which had formed itself by gradual adaptation to the “nature of things,” into the idea of something which a natural reason with which man had been originally endowed would enable him to design. (Hayek 1978: 255–6) In these passages, Hayek revealed his knowledge of and appreciation for the Natural Law tradition, from the ancient Greeks through the Roman jurists to

Hayek’s Natural Law heritage 33 the great scholastic thinkers and onwards. He clearly approved of the insights generated by this tradition, especially when it comes to the nature and origin of grown institutions, which he recognized were often assumed to be superior to their man-made counterparts. Indeed, Hayek apparently proudly situated himself squarely in the tradition he just described, though he is cautious to distance himself from the later more rationalistic instantiations. Andrew M. P. Denis (2001) agreed, arguing that Hayek “claims intellectual descent from the ancient and medieval tradition of natural law” (Denis 2001: 163). Hayek himself said as much. After discussing the sense of “natural” according to which something is natural just in case it has grown spontaneously, that is, without human contrivance, Hayek added: “In this sense our traditional, spontaneously evolved morals are perfectly natural rather than artificial, and it would seem fitting to call such traditional rules ‘natural law’ ” (Hayek 1988: 143). Either way, there is little doubt that Hayek continued to study, and draw inspiration from, the Natural Law tradition also during his later career. As a last example, the subject index to Law, Legislation and Liberty (1979: 217–44) indicates that Hayek made explicit reference to Natural Law doctrine at least 24 times. Throughout the book, he quoted a great number of thinkers in the Natural Law tradition, and often acknowledged his debt to them. Hence, Hayek indicated that the distinction between spontaneous and artificial orders had roots in classical Greek philosophy: Classical Greek was more fortunate in possessing distinct single words for the two kinds of order, namely taxis for a made order, such as, for example, an order of battle, and kosmos for a grown order, meaning originally “a right order in a state or community.” (Hayek 1973: 37) In fact, Hayek occasionally used the Greek terms himself. Hayek also traced the idea to the Scholastic thinkers. He wrote: “There occurred later one promising development in the discussion of these questions by the medieval schoolmen, which led close to a recognition of the intermediate category of phenomena that were ‘the result of human action but not of human design’ ” (Hayek 1973: 21; cf. p. 84). He also noted: “It would seem that the currency of the concept of order in political theory goes back to St. Augustine” (Hayek 1973: 155). Even a cursory look at the various thinkers that Hayek invoked in his support gives a fairly good idea about Hayek’s extensive knowledge of, and affinity to, the Natural Law tradition. Again, there is strong evidence that Hayek continued to study thinkers in this tradition throughout his career. There are, of course, a great number of thinkers not mentioned here who may have shared a Natural Law heritage, and whose work could have inspired Hayek’s thought one way or another. These thinkers include Georg Wilhelm Friedrich Hegel (1770–1831), whose system Schumpeter characterized as an expression of “evolutionism” (Schumpeter 1954: 413). Particularly interesting in the context is Hegel’s view of the development of freedom. As H. B. Acton put it in

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The Encyclopedia of Philosophy (1967): “Hegel considered that the history of the human race is a development from less to greater freedom and from less adequate forms of freedom to freedom in its perfection” (Acton 1967: 446). According to Acton, important aspects of this view derived from the philosophers of the Enlightenment (Acton 1967: 436). As in the case of many other thinkers, the exact degree to which Hegel may have served as a source of inspiration for Hayek is unclear. The situation is complicated by the fact that Hayek was sharply critical of Hegel, among other things for the belief that “evolution must run a certain predetermined course” (Hayek 1973: 24). The main point to note is how common ideas about spontaneous development, and about the harmony, freedom, etc. associated with the result of such development, were among philosophers and social thinkers at the time.

The Natural Law heritage of classical liberal economics In this section, I want to support my case further by exploring the Natural Law origins of classical liberal economics. These origins are well documented.4 A number of historians of economics have offered a plausible case that classical liberal economics was an outgrowth of the Natural Law tradition in one of its forms. Struve, for one, wrote: When the economists of the eighteenth century, when thinkers like François Quesnay and Adam Smith searched for the natural laws of economic life, they continued and developed the work of an old philosophical tradition, which took the idea of natural order to be at the basis of the entire edifice of the world. (Struve 1921: 295)5 Here I want to discuss that heritage in some detail. For various reasons, it is interesting to discuss not just the Austrian economists and Smith, but also the Physiocrats.6 The latter group of thinkers are interesting not only because the Natural Law origins of their doctrine are so clear, but also because Smith’s acquaintance with them may well have affected the development of his thought. In the eighteenth century, the notion of Nature as something endowed with ends and goals – as we have seen, a fundamental idea of some versions of Natural Law doctrine – was common and widespread. In the words of Taylor (1930): The idea of “Nature” as a power that works towards ends, was embodied in commonplace phrases which occur with special frequency in eighteenth-century literature. Physical science appeared to have revealed a harmonious order in the physical universe, which “Nature” was supposed to maintain or ensure by imposing the laws of physics on all bodies. And there was a belief that “Nature” would produce a similar harmonious order in the system of human activities constituting the life of society, if men, rightly using the faculties which Nature had given them for this purpose, would recognize and obey her moral laws or precepts for the proper regulation of these activities. (Taylor 1930: 211)

Hayek’s Natural Law heritage 35 Thus, Natural Law doctrine – including the view of the world as a spontaneously ordered place and of natural tendencies as conducive to harmony – found application in the realm of the social as well as the physical. It was in this environment that the Physiocratic School, and its most important representative François Quesnay (1694–1774), emerged. The school is perhaps best known for its conviction that agriculture is the only truly productive sector of the economy and the only real source of national wealth, and that as a result, internal tariffs should be removed and agricultural activity stimulated (Perlman and McCann 1998: 162). Their doctrine was explicitly based on a foundation of Natural Law. In the words of Perlman and McCann (1998): “Formally known as les économistes, the group adhered to a socio-political-economic doctrine predicated on the rule of Natural Law – the word Physiocracy in fact means ‘natural rule’ ” (Perlman and McCann 1998: 162). The Physiocrats are particularly interesting in this context since their doctrine and its Natural Law roots are more explicit than in the work of later writers in the same tradition. According to Taylor (1930), the Physiocrats “gave explicit and clear-cut development to the fundamental ideas of the political economy of liberalism; ideas which in the writings of other and more influential architects of that system remained latent or half-expressed” (Taylor 1930: 215). Moreover, as we will see later in this section, there is reason to think that the Physiocrats exerted a certain influence on later writers, including Adam Smith and the Austrian economists. The Physiocratic vision of Natural Law is forcefully presented in Quesnay’s 1765 article “Natural Right,” originally published as “Le droit naturel” in the Journal de l’agriculture, du commerce et des finances (see Quesnay [1765] 1962: 43–56). Unfortunately, the argument is often difficult to follow. Indeed, one might say, as one of his translators did, that “Quesnay’s style is often extremely irritating” (Meek 1962: 39). Though the text offers the possibility for alternative interpretations, the Natural Law foundation is plainly visible. Quesnay gave an idea of what he meant by Natural Law in the following passage, which I assume serves to define the term. According to Quesnay, Natural Law consists of two types of law: Natural laws are either physical or moral. I am here taking physical law to mean the regular course of all physical events in the natural order which is self-evidently the most advantageous to the human race. I am here taking moral law to mean the rule of all human action in the moral order conforming to the physical order which is self-evidently the most advantageous to the human race. These laws taken together constitute what is called natural law. (Quesnay [1765] 1962: 53)

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Quesnay went on to claim that the natural laws were “instituted by the Supreme Being” and “are immutable and indisputable and the best laws possible” (Quesnay [1765] 1962: 53–4). Indeed, “their aim is to bring about good” (Quesnay [1765] 1962: 50). On Quesnay’s account, natural law is directly accessible through the use of reason, which explains his frequent use of the term “self-evident” and its cognates. Natural right is defined in the following way: “The natural right of man can be loosely defined as the right which man has to things suitable for his use” (Quesnay [1765] 1962: 43). However, the term used in the French original, jouissance (cf. Quesnay [1888] 1965) means “enjoyment” or “joy, pleasure, delight” as well as “possession, use” (Girard 1962: 438). Presumably the idea is that the ideal order, which conforms to, or is produced by, natural law, is one in which natural right is respected and people experience pleasure and enjoyment. In Quesnay’s view, of course, natural right should serve as a basis for legal right. As he wrote: The natural right of man differs from his legal right, or the right conferred by human laws, in that it is self-evidently recognized through the light of reason, and through this self-evident character alone is binding independently of any coercion; whereas legal right, defined by positive law, is binding because of the penalty attached to transgression by the sanction of this law. (Quesnay [1765] 1962: 45) Since natural laws are for the best, they should serve as a basis for positive law. Quesnay wrote that natural laws “are the foundation of the most perfect government, and the fundamental rule for all positive laws. For positive laws are nothing but laws of administration relative to the natural order which is self-evidently the most advantageous to the human race” (Quesnay [1765] 1962: 54). As a matter of fact, however, actual legal right typically fails to conform to natural right. As Quesnay put it: Legal right often restricts natural right, because the laws of man are not as perfect as the laws of the Author of nature . . . The host of contradictory and absurd laws which nations have successively adopted proves clearly that positive laws are often apt to deviate from the immutable rules of justice and of the natural order which is most advantageous to society. (Quesnay [1765] 1962: 45) Thus, there is a natural order that conforms to, or is constituted by, natural laws. However, there is often a great deal of tension between this natural right and the legal right. In Quesnay’s view, it seems, the many negative consequences of positive laws that conflict with the Natural Law support the claim that natural laws are advantageous for mankind.

Hayek’s Natural Law heritage 37 Some of these passages may strike a modern reader as confusing, as they seem to conflate a number of different ideas. In Taylor’s view, the Physiocrats’ concept of social or moral law can be said to include at least three separate ideas: It includes the rules of droit naturel, which, as embodied in legislation and in the moral consciousness of citizens in the new social order, will regulate their behavior in accordance with their natural rights and duties. It may also be said to include the rules of rational economic behavior, which will guide individuals in pursuing their economic interests within the limits fixed by the rules of justice. Both of these sets of rules are precepts or injunctions of Nature, which men must discover and obey. But the general conception also includes the laws of economics in the proper sense of that expression, i.e., the laws of the causal interconnections among the actions of separate individuals which make up economic life . . . It was the view of the Physiocrats that this process would ensure the working out of all desirable adjustments in the economic system, when all individuals should have become rational or prudent men, living in a rational and just society with its “natural” scheme of institutions. (Taylor 1930: 219–20) No matter what the exact relation between these ideas, it is clear that the Physiocrats associated the just, the harmonious, and the rational, and believed that the natural laws were conducive to all of the above. This aspect of their Natural Law doctrine provided the underpinnings for the Physiocratic vision of the proper role of government. Since they took agriculture to be the only truly productive sector of the economy, they believed that policy should be designed in such a way that agriculture is stimulated. Specifically, Quesnay and the Physiocrats favored free trade in corn, since this would stimulate investment in agriculture. They favored a single tax on land as the least destructive means to raise funds. Moreover, they opposed policies that favored manufacturing and trade at the expense of agriculture (Young 2002: 11). At a more fundamental level, however, the policy prescriptions were based on the idea of Natural Law. As Taylor put it: With universal free exchange and competition, prices and incomes would be kept at their “natural” levels, supplies in all markets would adjust themselves to demands, and the economic system would become the efficient and harmonious mechanism which Nature intended it to be. (Taylor 1930: 224) Although the Physiocrats wanted to repeal tariffs and promote trade, their ideal government does not remain passive. In Taylor’s words: It should be clear from what I have said that the laissez faire maxim, as used by the Physiocrats, was not a counsel of inaction. Their “legal despotism” was to be a vigorous and active government, but active only along the wise lines pointed out by Nature. The immediate program of action which they had in

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Hayek’s Natural Law heritage mind, of course, was one of destruction of old abuses. But the permanent task of enforcing the rules of droit naturel meant the carrying out of a definite tho simple program of “social control” of economic life. (Taylor 1930: 224)

The Physiocrats’ policy prescriptions, then, were firmly grounded in their belief in a natural order. It should be clear that Quesnay and the Physiocrats accepted the distinguishing feature of the Natural Law tradition and several connected ideas. They were firmly committed to the superiority of natural order. There is, in their work, a firm belief in a rational, harmonious and just natural order, instituted by the Supreme Being. There is, moreover, a commitment to natural laws, which describe or govern natural tendencies, and which tend toward order. Humans, being endowed with freedom, can oppose this order. However, they do so at their own peril. The natural order is for the better; indeed, its aim is the common good. Positive legislation should be modeled on the natural law, so that the role of government is to help enforce the natural order. This means that government is often required to stand aside and let the natural tendency run its course, but it does not imply complete inaction. As we will see, many of these ideas are reflected also in the work of Adam Smith. Adam Smith (1723–90) was an Oxford-educated Professor of Moral Philosophy at Glasgow (Perlman and McCann 1998: 58). Smith is best known as the author of An Inquiry into the Nature and Causes of the Wealth of Nations ([1776] 1976), and the metaphor of the invisible hand. The metaphor also appears in the earlier The Theory of Moral Sentiments ([1759] 2002), which many consider his better work. Many historians of economics have argued that Natural Law doctrine plays a central role throughout Smith’s writings. T. E. Cliffe Leslie (1870) claimed: [The] original foundation [of Smith’s philosophy] is in fact no other than that theory of Nature which, descending through Roman jural philosophy from the speculations of Greece, taught that there is a simple Code of Nature which human institutions have disturbed, though its principles are distinctly visible through them, and a beneficial and harmonious natural order of things which appears wherever Nature is left to itself. (Leslie 1870: 551) Roll ([1938] 1956) added: “Again and again Smith will make a particular argument the occasion for emphasizing the supreme beneficence of the natural order and for pointing out the inevitable imperfections of human institutions” (Roll [1938] 1956: 146). He continued: The consequences of this belief in the natural order are simple. Government can rarely be more effective than when it is negative. Its intervention in human affairs is generally harmful. Let it leave each member of the community to

Hayek’s Natural Law heritage 39 seek to maximize his own advantage and, compelled by natural law, he will contribute to the common good. (Roll [1938] 1956: 147) Roll, then, appears to see much of Smith’s thought as a simple expression of Natural Law doctrine. The Natural Law element in Smith’s thought may be in part a result of the fact that the Scottish legal system (unlike the English) was based on Roman Law (Gordon 1995: 15), to which ideas of Natural Law are fundamental. Smith was presumably well aware of this fact, having lectured on jurisprudence in Glasgow (Perlman and McCann 1998: 58). Indeed, Smith’s lectures on jurisprudence were sufficiently extensive that reports by his students fill an entire volume of The Glasgow Edition of the Works and Correspondence of Adam Smith (Smith [1762–66] 1978). These reports contain multiple references to various Natural Law philosophers, especially Roman legal thinkers. Here is the first paragraph from one of the reports: Jurisprudence is that science which inquires into the general principles which ought to be the foundation of the laws of all nations. Grotius seems to have been the first who attempted to give the world any thing like a regular system of natural jurisprudence, and his treatise on the laws of war and peace, with all its imperfections, is perhaps at this day the most compleat work on this subject. (Smith [1762–66] 1978: 397) Regarding Smith’s Natural Law heritage, Mark Blaug noted: “There can be no doubt that scholastic doctrines were transmitted to Adam Smith by way of the 17th-century natural-law philosophers, Hugo Grotius and Samuel von Pufendorf ” (Blaug [1962] 1978: 30).7 Because of the prominent place of Natural Law thinking in Smith’s system, in combination with the extraordinarily strong influence he exerted on later economic thought, he did much to promulgate central tenets of Natural Law doctrine among economists. As Charles M. A. Clark (1992) put it: For all practical purposes, the Natural Law Outlook becomes part of preconceptions of economic theory through the work of Adam Smith. This is not to downplay the importance of the Natural Law Outlook for the Mercantilists, or particularly the Physiocrats, but merely to note the paramount influence of Smith on the subsequent development of economic theory. With Smith, the Natural Law Outlook becomes synonymous with a scientific approach to the study of society. (Clark 1992: 35) Others too have suggested that Adam Smith played a role in making central tenets of Natural Law doctrine part of economics, especially in its classical liberal form. Roll wrote that “for a long time [after Adam Smith] the theory of harmony and an optimistic view of social development were to remain essential qualities of classical economic thought” (Roll [1938] 1956: 153). This, and the fact that Hayek’s thought

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had such strong affinities with Smith’s, is the explanation for my emphasis on Smith, as opposed to other eighteenth-century moral philosophers, in this chapter. There are indications that Smith was impressed by the success of Newtonian mechanics, and that Newton’s system served as a model for Smith’s own. According to Clark (1992), for example: “Smith studied Newton and his method, and was directly influenced by him” (Clark 1992: 36). Smith appears to have thought that Newton had validated the Natural Law approach in science, and aspired to follow him because his method had been proven to reveal the natural laws and God’s design (Clark 1992: 42). Newton’s influence appears to have gone beyond this, however, to include the notion of the world as an ordered, harmonious place. Taylor (1930) wrote: The task of the natural sciences, according to Smith, is to find “connecting links” between events or phenomena which at first appear unrelated. In this way it reduces the apparent chaos of phenomena to an ordered system, and in the end gives us the inspiring conception of the universe as a single, vast “machine,” whose parts work together as if according to a plan. (Taylor 1930: 228) As Taylor suggested, it is eminently plausible that Smith tried to do for political economy – the study of “the nature and causes of the wealth of nations” (Smith [1776] 1976: 200) – what Newton had done for natural philosophy (Taylor 1930: 228). The affinities between Smith and the Physiocrats have been widely discussed. Thus, Whittaker wrote: “The ‘invisible hand’ of the Wealth of Nations was akin to the ‘natural order’ of the French physiocrats . . . It was a social force which, according to the physiocrats and Adam Smith, caused individual action to promote the general good” (Whittaker 1960: 101). Smith’s agreement with Natural Law doctrine, and the similarities between his views and those of the Physiocrats, are perhaps nowhere clearer than in book IV, chapter IX of The Wealth of Nations (1976 [1776]: 182–209). The chapter, which discusses and evaluates Physiocratic doctrine, concludes with several paragraphs that point to a shared Natural Law heritage. Smith asserted: It is thus that every system which endeavors, either, by extraordinary encouragements, to draw towards a particular species of industry a greater share of the capital of the society than what would naturally go to it; or, by extraordinary restraints, to force from a particular species of industry some share of the capital which would otherwise be employed in it; is in reality subversive of the great purpose which it means to promote. It retards, instead of accelerating, the progress of the society towards real wealth and greatness. (Smith [1776] 1976: 208) In Smith’s view, there exists a natural share of capital that would be used in a certain industry in the absence of preference or restraint by government. Moreover, this natural share of capital is that which best promotes national wealth.

Hayek’s Natural Law heritage 41 Many policies upset this natural state of affairs, however, to the detriment of wealth and greatness. The assumption underlying this argument is that if people are free to invest into whatever venture they prefer, then each industry will receive the natural share of capital. This assumption is more explicit in the following passage, in which the famous invisible hand makes an appearance. After noting that it is often more profitable for a given private individual to invest in domestic rather than foreign industry, Smith argued: By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectively than when he really intends to promote it. (Smith [1776] 1976: 478) Thus, perhaps surprisingly, the common good is better served by individuals pursuing their private interest than by individuals deliberately trying to promote the common good. What, then, is the proper role of government under the system of natural liberty? Smith offers a brief characterization in the following quote: According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain; because the profit could never repay the expence [sic] to any individual or small number of individuals, though it may frequently do much more than repay it to a great society. (Smith [1776] 1976: 208–9) Thus, the role of government is relatively circumscribed, and in the main dedicated to enforcing the natural system of liberty. Smith was not the dogmatic laissez-faire theorist that he is sometimes made out to be, however. Although there is a certain amount of disagreement about the exact extent of his tolerance for government activity, he obviously saw a role for state action in a range of situations. In a book chapter called “Public Economic

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Policy: Adam Smith on What the State and Other Public Institutions Should and Should not Do,” Richard Stone (1992) outlined Smith’s views about the role of the state in the following manner: The first duty of the state is that of protecting the society from the violence and invasion of others . . . The second duty is that of protecting as far as possible every member of the society from injustice and oppression of other members, which means establishing an efficient administration of justice. The third is that of promoting works and institutions which facilitate commerce. The fourth is encouraging the education of the people. And the fifth is supporting the dignity of the sovereign. (Stone 1992: 64) Like that of the Physiocrats, therefore, Smith’s government does not remain passive. Indeed, in Smith’s view the government should be actively involved in the organization of a functioning administration of justice, the provision of certain public works and institutions, and so on. Smith’s system of natural liberty may be intimately connected with his moral psychology, and in particular with his account of “sympathy.” In The Theory of Moral Sentiments, Smith used “sympathy” to denote “our fellow-feeling with any passion whatever” (Smith [1759] 2002: 13). Part of the reason why people’s individual self-interested actions tend to lead to a harmonious order, rather than complete chaos, may be that humans have a propensity to feel sympathy for others. In the presence of sympathy, self-interested behavior is not typically selfish. In Smith’s work, as Taylor (1930) put it: The natural propensities and feelings of men . . . were represented as the main agencies at work. And in the fact that these propensities and feelings, which were due to the original endowments of human nature, tended to produce a harmonious order in social life, he found warrant for an inference that “Nature” or the “Author of Nature” was working through human propensities and feelings to realize a beneficent purpose that transcended human purposes. (Taylor 1930: 229) Put another way, “the moral feeling that makes us approve what is in fact socially useful is produced, not by our conscious intention to promote society’s welfare and our knowledge of how to promote it, but by the springs with which Nature has equipped our mental and emotional machinery” (Taylor 1930: 230). The presence of sympathy, therefore, can be seen as part of Smith’s argument in favor of the beneficence of Natural Law (cf. Clark 1992: 50). The role of sympathy also has important epistemological implications. In Smith’s view, it appears, we learn about Natural Law through empirical study of the working of man’s mind (including his feelings of sympathy). In this Smith differs from the Physiocrats and earlier Natural Law thinkers, who believed in essential properties more directly accessible to the mind (cf. Young 2002).

Hayek’s Natural Law heritage 43 In sum, Smith’s system is in many ways similar to those of Quesnay and the Physiocrats. There are differences, of course. First, Smith used his moral psychology to offer a different – and more sophisticated – argument for the beneficence of Natural Law. Second, while Smith’s view of the role of God is still a matter of contention (cf. Young 2002: 21–2), he is best understood as recommending empirical study to acquire knowledge of Natural Law. Other than that, however, the similarities are remarkable. In the words of Taylor (1930): The economic and social philosophies of the Physiocrats and Adam Smith, though very different in character, thus came to similar results. Under a “natural” régime of institutions, or of law and policy, a “natural” economic process would ensure the working out of the right adjustment in the economic system and the maximization of economic wealth. For the Physiocrats, the “natural” legal system was the one indicated by Nature, through certain simple and obvious facts of social life, to the “reason” of the reformer, as the system intended and calculated to promote the general welfare. For Adam Smith it was the system which harmonizes with the moral sentiments that Nature engenders in men’s minds through the workings of sympathy. (Taylor 1930: 239) The two systems were similar also in their policy conclusions. Taylor (1930) continued: The character of the ideal system was about the same for both. It would guarantee to all men certain rights and liberties, thereby denying to every man all the privileges inconsistent with the rights of others. It was therefore not a system that implied passivity on the part of governments, or an absence of “social control” of individual behavior and the course of economic events. The “natural” economic process was not an uncontrolled process but the process intended by Nature, and capable of complete realization as the actual economic process only if the state should do its part by establishing the laws and policies prescribed by Nature. (Taylor 1930: 239) In spite of their slightly different foundations, the policy prescriptions that came out of their systems were substantially alike. It is unclear exactly how much the Physiocrats affected the development of Adam Smith’s thought (cf. Young 2002: 7). Taylor wrote: “Their influence upon Smith, especially in respect of such ideas as I am here concerned with [i.e., Natural Law], was probably almost nil” (Taylor 1930: 215). However, there are a number of considerations that contradict this contention. For one thing, Smith visited prominent members of the Physiocratic School in France in 1766, after he had published The Theory of Moral Sentiments ([1759] 2002), but before he had published The Wealth of Nations ([1776] 1976) (cf. Young 2002: 10). Moreover,

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Smith had many positive things to say about the theory offered by Quesnay and the Physiocrats. Consider: This system, however, with all its imperfections, is, perhaps, the nearest approximation to the truth that has yet been published upon the subject of political œconomy, and is upon that account well worth the consideration of every man who wishes to examine with attention the principles of that very important science. (Smith [1776] 1976: 199) I will not try to resolve this question here. On a related note, it is interesting to note that Smith was well aware of the ancient Greek roots of Natural Law. Thus, in The Theory of Moral Sentiments, he made reference to several Natural Law philosophers, including the Stoics. In one passage, he wrote: The ancient Stoics were of the opinion, that as the world was governed by the all-ruling providence of a wise, powerful, and good God, every single event ought to be regarded, as making a necessary part of the plan of the universe, and as tending to promote the general order and happiness of the whole: that the vices and follies of mankind, therefore, made as necessary a part of this plan as their wisdom or their virtue; and by that eternal art which educes good from ill, were made to tend equally to the prosperity and perfection of the great system of nature. (Smith [1759] 2002: 44) Again, I will not try to resolve this issue, but it is interesting to note that Smith was well aware of the intellectual roots of his system. Smith’s Natural Law heritage lived on in the Austrian economists. Menger, Böhm-Bawerk, Wieser, and Mises deserve our attention in this context, both because of the Natural Law element in their theorizing and because of their relationship to Hayek. The Natural Law background of the Austrian economists has not (to my knowledge) received anything like the attention bestowed upon Smith’s. One exception is H. H. Leibhafsky (1971) who argued that Mises “adopts a crude natural law point of view in a disguised form” (Leibhafsky 1971: 567). Similarly, R. A. Gonce (1993) claimed that “Mises’ system embodies individualistic, secular natural law philosophy” (Gonce 1993: 491). In this section, I will try to show that the work of the Austrians in fact contains important elements of Natural Law doctrine.8 This is important, since Hayek’s thought was strongly shaped by the Austrian economists. One place in which the Natural Law element in Austrian thought is relatively evident is in Menger’s account of institutions of “organic origin.” Such institutions were discussed in both of his main works: Principles of Economics ([1871] 1981) and Problems of Economics and Sociology ([1883] 1963). According to Menger, to say that a social structure is of organic origin is to say that it was not organized by a thinking mind, but arose in a natural process of development. In Menger’s words, phenomena of organic origin are not the result of “an intention aimed at this purpose,”

Hayek’s Natural Law heritage 45 but “present themselves to us as ‘natural’ products (in a certain sense), as unintended results of historical development” (Menger [1883] 1963: 130). Menger believes that social structures of this kind are relatively common, and include phenomena such as law, language, money, and markets (Menger [1883] 1963: 130, 158). Consider Menger’s paradigmatic account of the origin of money, a case that he discussed in both Principles and Problems (see Menger [1871] 1981: ch. 8; [1883] 1963: 152–8). The institution of money appeared, according to Menger, because economizing individuals realized that it was in their interest, first, to trade goods for some commodity desired only because it is easily tradable for other goods, and second, to trade that commodity for goods desired for their own sake (Menger [1871] 1981: 257–60). He wrote: As each economizing individual becomes increasingly more aware of his economic interest, he is led by this interest, without any agreement, without legislative compulsion, and even without regard to the public interest, to give his commodities in exchange for other, more saleable, commodities, even if he does not need them for any immediate consumption purpose. With economic progress, therefore, we can everywhere observe the phenomenon of a certain number of goods . . . becoming . . . acceptable to everyone in trade, and thus capable of being given in exchange for any other commodity. (Menger [1871] 1981: 260) The case of money illustrates how it is possible for social structures of organic origin to appear as the unintended consequence of individual action. In Menger’s view, the institution of money was established when people naturally came to accept some easily saleable good or goods as a means of exchange. Judging by this example, at least, institutions of organic origin appear as the result of individuals’ learning how to act in their personal interest (cf. Menger [1883] 1963: 158). Like many other writers in the Natural Law tradition, Menger drew a distinction between “law” and “positive legislation.” He described positive legislation as the “intended result of the will of an organized national community or of its rules” (Menger [1883] 1963: 223). Law need not appear as the result of positive legislation, but may be the result of an organic process (Menger [1883] 1963: 223). Menger also suggested that law of organic origin is often conducive to the common good. He wrote that “here, as in the above case of money, we are met with a social structure which in the most outstanding sense benefits the common welfare” (Menger [1883] 1963: 223). Indeed, accounting for the existence of such structures is one of the most important problems of social science: An unintended product of social development which conditions and advances the welfare of society, and this perhaps to a higher degree than any social institution which is the work of human intention and calculation – the explanation of this remarkable phenomenon is the difficult problem which social science has to solve. (Menger [1883] 1963: 223)

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Thus, Menger appears to have shared the belief that the natural process of development is, at least at times, for the better. It should be noted, however, that Menger did not entertain the naïve belief that institutions of organic origin are always for the best, and could not possibly be improved upon. Concerning the alleged “higher wisdom” of common law, for example, he wrote: The meaning of the allusion can rationally be only that common law, in spite of its not turning out to be the result of a social will aimed consciously at the common good, benefits the latter nonetheless to a higher degree than a corresponding positive legislation could. This assertion is, however, erroneous in every conceivable respect. For . . . [it] contradicts experience. (Menger [1883] 1963: 233) In another, distinctly sarcastic passage Menger dismisses such assertions as “conservative basic principles highly useful to the ruling interests” (Menger [1883] 1963: 91). According to Emil Kauder, Menger, Böhm-Bawerk, and Wieser were committed to a version of the belief in a natural order with a clear normative aspect. Kauder (1957) wrote: Obviously in this field a far-reaching difference between the three authors cannot be found. All three authors are social ontologists. They believe that a general plan of reality exists. All social phenomena are conceived in relation to this master plan. This structure of reality serves “both as a logical starting point and as a criterion of validity.” The ontological structure does not only indicate what is, but also what ought to be. Man will understand the essence of economizing and then must organize his actions so that the frictionless functioning of the eternal organon will be materialized in real life.9 (Kauder 1957: 417) If Kauder is correct, then one of the most central convictions of the Natural Law tradition, namely, that the natural order was also a normative order, was present in the Austrian economists discussed in this chapter. The Austrian economists’ place in the Natural Law tradition is perhaps clearest when it comes to their policy prescriptions. To a great extent, the policy prescriptions of the Austrians reflect their classical liberal belief in a natural order that is easily disturbed by policy. Judging by the lectures that Menger gave to the Crown Prince Rudolph, Menger showed a deep commitment to Smith’s vision of the function of the market and the role of the state. Erich Streissler wrote: Menger himself was a very decided and outright economic liberal, though he published little on these questions. But the lecture notes of Crown Prince Rudolph in 1876 show him teaching a liberalism possibly even more rigorous than that of Adam Smith. In “normal” cases economic action of the state is

Hayek’s Natural Law heritage 47 always harmful: it is only to be allowed in “abnormal” cases. In a very modern way state action is solely justified by external effects (as the abnormal cases), i.e., interactions between private individuals who do not enter into the economic calculations of those individuals who cause them, and therefore make market prices faulty indicators of economic scarcity. (Streissler 1988: 201) This stance was supported by skepticism about the power of the state to improve matters by policy-making. As Streissler wrote: “Menger was evidently also imbued with Adam Smith’s notion of the futility of much of state action” (Streissler 1988: 201). There is little doubt that Menger and the Austrian economists drew on Smith. Similarly, it is clear that they were in the tradition of the Physiocrats. At the time, it was well known that the concept of a natural order went back to the Physiocrats. Consider the entry for Natürliche Ordnung in a contemporary German dictionary of economics, Nationalökonomie: Theorie und Geschichte (Heller 1926). The entry reads: “one of the basic concepts of the Physiocratic doctrine. It refers to the undisturbed fundamental context of social relationships, etc. especially economic relationships” (Heller 1926: 121).10 Incidentally, the French term ordre naturel must have been in relatively common use at the time, for the dictionary has a separate entry for it (Heller 1926: 125). This fact supports my contention that the Physiocratic roots of the concept were well known.

The Natural Law origins of Hayek’s thought on order Hayek’s Natural Law heritage suggests a novel account of the origin of Hayek’s thought on order. According to the present account, Hayek’s emphasis on order is a reflection of his Natural Law heritage. It is a fact, as we know from Chapter 2, that the concept plays a central role both in Hayek’s system and in Natural Law doctrine. Hayek’s solid Natural Law heritage suggests that this fact is not a complete coincidence. Rather, it is plausible to assume that Hayek’s focus on order is due to the fact that he was exposed to Natural Law doctrine throughout his life, during his early education, university studies and beyond. The notion that Hayek’s thought on order was due to his exposure to the Natural Law tradition is further supported by the fact that Hayek was well aware of the historical roots of the concept in Natural Law doctrine, and apparently proudly situated himself squarely in that tradition. The notion that Hayek’s thought on order emerged early, during his education in Vienna, is also supported by the fact that the concept had a much more prominent place in Austrian than in Anglo-Saxon political thought. Much the same thing appears to be true for Hayek’s distinction between natural and artificial order, as well as his commitment to the superiority of spontaneous over artificial order. As we have seen, the idea of the superiority of natural (or spontaneous) order is absolutely central to both Hayek’s project and the distinguishing idea of Natural Law doctrine. The idea, of course, presupposes the meaningfulness of drawing a distinction between the natural (or spontaneous) and

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the artificial (or man-made). Hayek’s Natural Law heritage suggests that his distinction between the natural and the artificial, as well as his commitment to the superiority of the former over the latter, is not a complete coincidence either. It is plausible to assume that both the distinction and the commitment – like his emphasis on order – reflect his Natural Law heritage. According to the present account, then, Hayek’s emphasis on order, his distinction between the natural and the artificial, and his commitment to the superiority of the former over the latter were due to his exposure – throughout his career, but especially during the early years – to Natural Law doctrine. I would argue that Hayek’s thought on order emerged as a result of his upbringing in an environment in which Natural Law doctrine infused social, economic, political, religious, and legal thought. It was further strengthened by his legal and economic studies at the University of Vienna – as we have seen, these studies included a significant Natural Law component – and by his further studies into the historical origins of classical liberal economics. It should be eminently clear from what has been said earlier in the chapter that I do not wish to deny that Hayek was indebted to the eighteenth-century British moral philosophers, especially Smith, and to Menger. Indeed, my account assumes rather than denies that Hayek was inspired by them. Thus, the present account is intended to add to rather than replace traditional accounts about the origin of Hayek’s thought on order (e.g. Bladel 2005). That said, the present account has a significant advantage over more traditional ones, in that it helps explain both Hayek’s adoption of his thought on order, and why the classical liberal economists’ thought should be so appealing to him. It is perfectly legitimate to ask why Hayek was drawn to these thinkers in the first place, why he bothered to read them in any detail, why he found them relevant to his purposes, and why he chose to build on their ideas in his own work. The present account offers an answer to these questions. Hayek was particularly receptive to the classical liberals’ ideas, I would argue, because he shared their Natural Law heritage, including the emphasis on order, the distinction between the natural and the artificial, and the commitment to the superiority of the former over the latter. Insofar as the present account helps explain something that the traditional accounts cannot, it comes across as more explanatorily powerful. Nothing that has been said here implies that it was inevitable that Hayek would be a Natural Law philosopher or that he would be attracted to the classical liberal economists at all. As a result, the fact that others who shared Hayek’s heritage did not turn into Natural Law philosophers does not constitute a counterargument to my thesis. What I am saying is that given the fact (established in Chapter 2) that Hayek did adopt the distinguishing idea of Natural Law doctrine, his heritage helps us explain how he came to do so. By pointing to the fact that Hayek was a product of an environment in which Natural Law doctrine infused many aspects of intellectual life, we can articulate a perfectly straightforward, coherent and (I think) plausible account of Hayek’s use of the concept of order, his distinction between the natural and the artificial, and his commitment to the superiority of the former over the latter, as well as his attraction to the classical liberal economists.

Hayek’s Natural Law heritage 49

Discussion In this chapter, I have explored another way in which Hayek was part of the Natural Law tradition: he was the product of an environment in which Natural Law doctrine infused social, economic, political, religious, and legal thought. We have seen that Hayek was exposed to Natural Law doctrine during his early education, both as a result of his Roman Catholic upbringing and his studies at the Gymnasium. We have also seen how Hayek studied Natural Law doctrine as part of his legal education at the University of Vienna. Moreover, we have seen how the classical liberal economists, whom Hayek studied closely and in whose footsteps he walked, can be argued to have a Natural Law heritage. Finally, there are moments when Hayek apparently proudly situated himself squarely in the Natural Law tradition, though he was cautious to dissociate himself from some of its later, more rationalistic incarnations. Thus, there are many reasons to consider Hayek the product of an environment in which Natural Law doctrine infused many aspects of intellectual life. The Natural Law perspective suggests a novel account of Hayek’s emphasis on order, his distinction between natural and artificial orders, and his commitment to the superiority of the former over the latter. According to the present account, Hayek’s thought on order was due to his exposure – throughout his career, but especially during the early years – to Natural Law doctrine. Hence, Hayek’s thought on order emerged as a result of his Roman Catholic upbringing, though it was further strengthened by his legal and economic studies in Vienna as well as his further reading of the classical liberal economists thereafter. This account, which I have argued is explanatorily powerful, is intended to add to rather than replace more traditional accounts that focus on Hayek’s intellectual debt to the classical liberal economists.

4

Hayek on information and coordination

In this chapter, I discuss another way in which Hayek was part of the Natural Law tradition. I argue that his work on information and coordination can be thought of as substantiating the distinguishing idea of Natural Law doctrine. The themes of information and coordination are present in Hayek’s work throughout his career, and they are on all accounts critical to his project. As we will see in the following sections, his writings in this area explain how the spontaneous order of the market – but not a central authority – is capable of coordinating individual actions in the presence of dispersed information. Thus, Hayek’s work on information and coordination can be seen as part of his case for the superiority of spontaneous order – and in particular the spontaneous order of the market – over alternative arrangements. That is, Hayek’s work on information and coordination can be described as substantiating the distinguishing idea of Natural Law doctrine. The Natural Law perspective suggests a novel account of the historical roots of Hayek’s work on information and coordination. According to this account, Hayek decided to develop an analysis of information and coordination because he wanted to defend the distinguishing idea of Natural Law doctrine, and because his reading of the classical liberal economists (especially Smith and Menger) had convinced him that this goal could be accomplished by developing such an analysis. The present account is intended to add to rather than replace more traditional accounts that emphasize the importance of the classical liberal economists for the development of Hayek’s thought on information and coordination. It may be objected that this account gets the order of events backwards, and that Hayek came to believe that spontaneous order is often superior to artificial order only as a result of his work on information and coordination. I believe this objection is implausible, but I will postpone discussion of it until Chapter 7.

Hayek’s work on information and coordination Virtually all of Hayek’s work on information and coordination proceeds from one basic fact, namely, the “division of knowledge.”1 This is the fact that knowledge “never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess” (Hayek 1945: 519). In Hayek’s view, each individual knows

Hayek on information and coordination 51 a number of useful facts that are not known to anybody else. As he put it, “practically every individual has some advantage over all others in that he possesses unique information of which beneficial use might be made” (Hayek 1945: 522). The unique knowledge is often “very important but unorganized,” and it includes “the knowledge of the particular circumstances of time and place” (Hayek 1945: 521). In Hayek’s view, the division of knowledge has several important implications. One such implication is that the knowledge accumulated by society as a whole is not held by any one individual. As Hayek said: “It is not much better than a metaphor to speak of the knowledge of society as a whole. The sum of the knowledge of all individuals exists nowhere as an integrated whole” (Hayek 1960: 25). Another implication is that each individual is ignorant of a great number of facts that are known to others. This ignorance cannot be escaped, in Hayek’s opinion, because it would be impossible for one mind to grasp all the relevant information. Since ignorance is an inescapable consequence of the division of knowledge, which he saw as a basic fact, Hayek sometimes spoke about “[the] fundamental fact of man’s unavoidable ignorance” (Hayek 1960: 22). The fact that the information accumulated by society as a whole is inevitably dispersed raises the issue of how it is at all possible to make use of it. Hayek wrote: “The great problem is how we can all profit from this knowledge, which exists only dispersed as the separate, partial, and sometimes conflicting beliefs of all men” (Hayek 1960: 25). What makes the problem particularly interesting is that the use of dispersed information is not just an abstract possibility, in Hayek’s view, but an actual fact; somehow, society as a whole does succeed in profiting from dispersed information. Hayek wrote: [The] knowledge which any individual mind consciously manipulates is only a small part of the knowledge which at any one time contributes to the success of his action. When we reflect on how much knowledge possessed by other people is an essential condition for the successful pursuit of our individual aims, the magnitude of our ignorance of the circumstances on which the results of our action depend appears simply staggering. (Hayek 1960: 24) Indeed, in Hayek’s view, the ability to make use of dispersed information is a sine qua non for social life as we know it. As he put it: Most of the advantages of social life, especially in its more advanced forms which we call “civilization,” rest on the fact that the individual benefits from more knowledge than he is aware of. It might be said that civilization begins when the individual in the pursuit of his ends can make use of more knowledge that he has himself acquired and when he can transcend the boundaries of his ignorance by profiting from knowledge he does not himself possess. (Hayek 1960: 22)

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The fact that Hayek took a solution to the problem of the division of knowledge to be a precondition for social life helps explain why he called that problem the “really central problem of economics as a social science” (Hayek 1937: 49). The challenge for economics in particular and social science in general, then, is to explain how it is possible for the economic mechanism to reach a state of affairs that reflects the knowledge that exists in the economy in spite of the fact that no one individual has – in fact, ever could have – access to all that knowledge. As Hayek put it: The problem which we pretend to solve is how the spontaneous interaction of a number of people, each possessing only bits of knowledge, brings about a state of affairs in which prices correspond to costs, etc., and which could be brought about by deliberate direction only by somebody who possessed the combined knowledge of all those individuals. And experience shows us that something of this sort does happen, since the empirical observation that prices do tend to correspond to costs was the beginning of our science. (Hayek 1937: 49) Notice, again, that Hayek emphasizes how society as a whole does succeed in benefiting from dispersed information. In Hayek’s opinion, the problem had been sadly neglected by social scientists in general and economists in particular. In his famous 1937 paper “Economics and Knowledge,” he wrote: Clearly there is here a problem of the Division of Knowledge which is quite analogous to, and at least as important as, the problem of the division of labour. But while the latter has been one of the main subjects of investigation ever since the beginning of our science, the former has been completely neglected, although it seems to me to be the really central problem of economics as a social science. (Hayek 1937: 49) Nevertheless, in Hayek’s view, economists had made some progress toward solving this problem. As he put it: [Economics] has come nearer than any other social science to an answer to that central question of all social sciences, how the combination of fragments of knowledge existing in different minds can bring about results which, if they were brought about deliberately, would require a knowledge on the part of the directing mind which no single person can possess. (Hayek 1937: 52) In what follows, I will sketch the outlines of Hayek’s solution to the problem.

Hayek on information and coordination 53 The solution centers on the function of the price system and its ability to coordinate the actions of multiple individuals. According to Hayek: “Fundamentally, in a system where the knowledge of the relevant facts is dispersed among many people, prices can act to coördinate the separate actions of different people” (Hayek 1945: 526). Coordination between disparate individuals is critical, in Hayek’s view; society could not exist without it. He wrote: Living as members of society and dependent for the satisfaction of most of our needs on various forms of co-operation with others, we depend for the effective pursuit of our aims clearly on the correspondence of the expectations concerning the actions of others on which our plans are based with what they really will do. This matching of the intentions and expectations that determine the actions of different individuals is the form in which order manifests itself in social life. (Hayek 1973: 36) Prices serve to coordinate actions of disparate individuals because they communicate information about facts relevant to the decision at hand. Thus, for instance, prices contain information about the scarcity of a good, and about whether there are profitable uses for the good elsewhere (Hayek 1945: 526). The beauty of the price system is that the individual does not need to know anything about those uses; the price of the good contains all the information he or she needs to make the decision. Notice, incidentally, Hayek’s use of the concept of order in the last sentence; we will return to this topic in Chapter 5. The price system can work only if people are free to form and implement their own plans of action on the basis of the information available to them. In Hayek’s words: What is essential to the functioning of the process is that each individual be able to act on his particular knowledge, always unique, at least so far as it refers to some particular circumstances, and that he be able to use his individual skills and opportunities within the limits known to him and for his own individual purpose. (Hayek 1960: 29) Insofar as individuals are not free to form and implement their own plans of action, they are unable to make use of the information available only to them. Hence, the individual can make use of dispersed knowledge “only if the decisions depending on it are left to him or are made with his active coöperation” (Hayek 1945: 521–2). The sense of “freedom” that Hayek has in mind is freedom in the sense of absence of coercion (Hayek 1960: 11). What the analysis shows is that freedom in this sense is a necessary condition for coordination, which (as we have seen) is a necessary condition for the existence of society. Hayek’s analysis of the division of knowledge, therefore, leads directly to a defense of freedom (or liberty) in the sense of absence of coercion. As he put it,

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“the case for individual freedom rests chiefly on the recognition of the inevitable ignorance of all of us concerning a great many of the factors on which the achievement of our ends and welfare depends” (Hayek 1960: 29). Again, at greater length: If there were omniscient men, if we could know not only all that affects the attainment of our present wishes but also our future wants and desires, there would be little case for liberty . . . Liberty is essential in order to leave room for the unforseeable and unpredictable; we want it because we have learned to expect from it the opportunity of realizing many of our aims. It is because every individual knows so little and, in particular, because we rarely know which of us knows best that we trust the independent and competitive efforts of many to induce the emergence of what we shall want when we see it. (Hayek 1960: 29) While dictators and autocrats are hobbled by their inevitable ignorance, “a free society can make use of so much more knowledge than the mind of the wisest ruler could comprehend” (Hayek 1960: 30–1). Thus, Hayek’s analysis amounts to an argument for freedom and “against all exclusive, privileged, monopolistic organization, [and] against the use of coercion to prevent others from trying to do better” (Hayek 1960: 37). Hayek’s analysis of information and coordination allowed him to answer the question of what constitutes the ideal economic order. This is the question with which he began his 1945 article “The Use of Knowledge in Society.” There, he wrote: “What is the problem we wish to solve when we try to construct a rational economic order?” (Hayek 1945: 519). The problem, as he saw it, was this: It is . . . a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge not given to anyone in its totality. (Hayek 1945: 520) Hayek concluded that the only way to utilize the knowledge not given to anyone in its totality is to rely on the price system, which presupposes the existence of a functioning market. Thus, without ever assuming that the spontaneous order of the market is flawless, the upshot of Hayek’s work on information and coordination is that the spontaneous order of the market is superior to any artificial order, as it were, imposed from above. In brief, Hayek’s work on information and coordination serves to prove the claim that the spontaneous order of the free market is superior to any artificial order. Because that claim follows directly from the distinguishing idea of Natural Law doctrine, we can also think of Hayek’s work on information and coordination as establishing the truth of a direct implication of the distinguishing idea of Natural Law doctrine, or, as establishing the truth of that idea in one particular instance, namely, when it comes to the spontaneous order of the market.

Hayek on information and coordination 55 Or, we can think of Hayek’s work on information and coordination as partial confirmation of the more general claim that spontaneous order is superior to artificial order. Thus, we can think of his work in this area as partial confirmation of the distinguishing idea of Natural Law doctrine. Either way, we can think of Hayek’s work on information and coordination as substantiating the distinguishing idea of Natural Law doctrine.

Smith and Menger on information and socialism It is uncontroversial that Hayek’s thought on information and coordination was significantly inspired by his reading of earlier classical liberal economists, especially Smith and Menger. This contention is supported by the fact that many of Hayek’s central ideas are clearly present in the work of Smith, Menger, and others, in combination with the fact – explored in Chapter 3 – that Hayek studied their work closely throughout his career, and that he often expressed his intellectual debt to them. In all, it is very difficult to deny that Hayek’s work on information and coordination was inspired by Smith, Menger, and other classical liberal economists. The extent of Hayek’s intellectual debt to Smith and Menger, as well as to Wieser and Mises, has been firmly established by Streissler (e.g. 1988; 1992). In his paper “The Intellectual and Political Impact of the Austrian School of Economics” (1988), Streissler wrote that the liberal arguments against socialism that were formulated by the earlier Austrian economists were summarised in Hayek’s very widely read Road to Serfdom (1944) and in more comprehensive fashion in his The Constitution of Liberty [1960]. Through Hayek’s work they have become the common property of the classical liberal counter-revolution against the welfare state of our time.2 (Streissler 1988: 201) In “Hayek on Information and Socialism,” Streissler (1992) pointed out that Smith, as well as Menger, Wieser and Mises had developed arguments against socialism on the basis of considerations about information and its distribution, as well as our ability to make use of existing information. Hayek’s reliance on the classical liberal economists is so extensive that Streissler felt prompted to ask (though rhetorically) whether there was anything original in Hayek’s writings on information and socialism at all. Thus: Smith, Menger, Wieser, and Mises, that makes four famous economists altogether from whom Hayek could have taken ideas on information: The notion of the significance of the use of knowledge in society, and in particular of the difficulties which certain types of economic organization or certain types of economic policy may encounter if they disregard the problem of the creation, gathering and transmission of economic information just seems to have too many fathers to credit Hayek with it. (Streissler 1992: 260–1)

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Hayek on information and coordination This state of affairs, Streissler went on, may suggest the following scenario: If a young scholar asks you how he should go about to gain a Nobel Prize in economics you might answer: “Take the well-known idea of four of the best known leaders of the profession; repeat and reiterate this idea often enough; and you are sure to gain a Nobel Prize (as proof of this, just look at Hayek)!” For Hayek did get his Nobel Prize in large measure for his ideas about information – and, in extension, about socialism. (Streissler 1992: 261)

At the end of the day, Streissler does conclude that Hayek in fact had original, path-breaking ideas on information and socialism (Streissler 1992: 261). True innovations, according to Streissler, include the following argument: “Knowledge is uncentralizable because we do not even know what knowledge we use and therefore cannot communicate it fully to others” (Streissler 1992: 277). But the fact that Hayek did have original ideas does not undermine the thesis that many of the ideas that he expressed on the topic were borrowed from the work of his Austrian predecessors and from that of Smith. Streissler (1992: 258) began by quoting Gordon Tullock, who wrote: “One of the more immutable of the immutable economic laws is that every sentence in the Wealth of Nations will eventually become a book” (Tullock 1969: 287). To this, Streissler added: “In the case of Hayek, one sentence of Adam Smith apparently even became the nucleus of a Nobel-prize-winning idea” (Streissler 1992: 258). The sentence that Streissler has in mind is the one in which Smith discusses the “natural system of justice.” In Streissler’s view, this sentence is critical to Smith’s project: “This sentence is not merely incidental to Adam Smith’s argument; it is much rather the key sentence, in which he presents his ideal system” (Streissler 1992: 258). That system is described by Smith himself in the following passage: The natural system of justice establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and his capital into competition of any other man, or order of men. (Smith [1776] 1976: 208) What characterizes the natural system of justice above all is that it permits individuals to invest their labor and capital anywhere they like. The system, therefore, permits individuals to pursue their own interest in the manner they see fit, assuming that they do not violate the laws of justice. Notice, also, that Smith said that the natural system of justice “establishes itself of its own accord,” clearly implying that it exists independently of human contrivance. Passages like these point to strong affinities between Hayek’s thought and that of Smith. When Hayek spoke about “the spontaneous order of the market,” he clearly had in mind something very much like what Smith was talking about when he discussed “the natural system of justice.” As Hayek described it, the spontaneous order of

Hayek on information and coordination 57 the market certainly was not established as a result of human contrivance – that is, of course, why it is called “spontaneous” in the first place – and it certainly allows people to pursue their own interests as they see fit. In this system of natural liberty, Smith continued: The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of society. (Smith [1776] 1976: 208) Here, Smith argued that the natural system of justice frees the ruler from doing what would be humanly impossible anyway: namely, to supervise private industry in the manner most useful for society as a whole. The reason why it would be impossible to complete this task, in Smith’s view, is that it would require more wisdom and knowledge than anyone could ever possess. Again, this is exactly Hayek’s position. While it may be possible in principle for the government to successfully direct the efforts of all individuals, in Hayek’s view, it is impossible in practice because it would require the centralization of more information than could ever be centralized. Streissler has also pointed out that the targets of Smith’s criticism, in a sense, coincide with those of Hayek’s. While Smith criticized those who wish to interfere with the natural system of justice, Hayek criticized those who wish to interfere with the spontaneous order of the market. As we know, these are the people to whom Hayek referred as socialists. As Streissler put it, the Smith quote tells us immediately what Hayek meant by socialism. Any “sovereign,” i.e. any administration with coercive powers, which tries to direct “private people” in their “employments,” practices “socialism” as he understands it . . . To attempt to do so is not only sure proof of utter folly, but also shows arrogant presumption, contempt for other people’s abilities by those who perpetrate this rash act. (Streissler 1992: 259) Thus, there are several ways in which Hayek’s work on information and socialism mirrors Smith’s. There is another crucial sentence, from The Wealth of Nations, in which Smith argued that no sovereign is fit to make judgments about individuals’ investments. Smith wrote: What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any attempt to direct private people in what manner they ought to employ their capitals,

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Hayek on information and coordination would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would no-where be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it. (Smith [1776] 1976: 478)

In this sentence, Smith offered an additional reason to distrust the ability of a central authority to make adequate decisions about private investments. Smith suggested that it would not just be unnecessary for the authority to get involved in private individual’s decision making, but that it would actually be harmful. Why would the individual in the “local situation” be better situated to make such decisions? The answer is not explicit, but a plausible guess is that the individual in Smith’s view knows something that the central authority does not, and possibly could not. Again, Hayek’s position mirrors Smith’s. Hayek often emphasized how individuals have access to information that is both relevant to their decision making and unavailable to central authorities, as for example, when he talked about the importance of “the knowledge of the particular circumstances of time and place” (Hayek 1945: 521). Indeed, Hayek himself quoted the Smith passage as proof that Smith knew that “Man’s knowledge . . . is dispersed” (Hayek 1988: 14). In his commentary on these passages, Streissler wrote: Here we have Hayek in a nutshell: his strictures on the intellectual haughtiness of the “constructivist”; his doubts even of the wisdom to assign too many economic duties, particularly the rights of economic redistribution, to parliaments; and, finally, his best-known notion of “dispersed knowledge.” (Streissler 1992: 259) It is curious, also, how Smith’s suggestion that power is particularly dangerous in the hands of those who see themselves fit to exercise it is mirrored in Hayek’s discussion about how in socialist economies “the worst get on top” (Hayek [1944] 1994b: 148–67). To further support his case, Streissler could also have quoted the moment in The Theory of Moral Sentiments in which Smith criticized the arrogance of “the man of system” ([1759] 2002: 274–6). The man of system, Smith said, is often motivated by a certain “fellow-feeling with the inconveniences and distresses to which some of our fellow-citizens may be exposed” (Smith [1759] 2002: 274). Smith continued: The leaders of the discontented party seldom fail to hold out some plausible plan of reformation which, they pretend, will not only remove the inconveniences and relieve the distresses immediately complained of, but will prevent, in all time coming, any return of the like inconveniencies and distresses. They often propose, upon this account, to new-model the constitution, and to alter, in some of its most essential parts, that system of

Hayek on information and coordination 59 government under which the subjects of a great empire have enjoyed, perhaps, peace, security, and even glory, during the course of several centuries together. The great body of the party are commonly intoxicated with the imaginary beauty of this ideal system, of which they have no experience, but which has been represented to them in all the most dazzling colours in which the eloquence of their leaders could paint it. (Smith [1759] 2002: 274) Smith’s description of “the man of system” is very close to Hayek’s account of “socialists” and “constructivists.” The similarity is particularly clear regarding their effects on the general population. But again the man of system, in Smith’s view, is under an illusion. Smith continued: He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse [sic] to impress upon it. If these two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder. (Smith [1759] 2002: 275) Again, the spirit of much of Hayek’s work is very close to the spirit of this passage. The fact that this very quote serves as the epigraph to Chapter 2 of Law, Legislation and Liberty suggests that Hayek was well aware of it (Hayek 1973: 35). A similar case can be made for Smith’s passage in which he warns that any departure from the system of natural liberty would lead to tyranny and oppression. In the context of an argument to the effect that governments should abandon all policies “of preference and restraint,” Smith wrote: little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice; all the rest being brought about by the natural course of things. All governments which thwart this natural course, which force things into another channel, or which endeavour to arrest the progress of society at a particular point are unnatural, and to support themselves are obliged to be oppressive and tyrannical. (Smith 1755; in Ross 1995: 108) Earlier in this chapter, we saw that, in Smith’s view, governments that abandon the natural system of liberty must attempt to superintend the industry of private

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people, and that this task would be too complicated for mere humans. In the last quote, the idea is that rulers who do attempt to violate the natural system of justice also become oppressive and tyrannical. This may very well, in Smith’s view, be a consequence of their efforts to direct private activity. Either way, of course, the main thesis of The Road to Serfdom (Hayek 1944) is that any attempt to substitute an artificial order for the spontaneous order of the free market – as socialists want to do – involves a considerable danger of sliding into serfdom. As Hayek wrote in his 1956 preface to the book, “fascism and communism are merely variants of the same totalitarianism which central control of all economic activity tends to produce,” and “even democratic socialism is a very precarious and unstable affair” (Hayek 1994b: xxxii). Notice also how in Smith’s view, the desirable outcome obtains not as a result of human contrivance, but “by the natural course of things,” and how efforts to interfere with this course of things are described as “unnatural.” Without having offered a complete account of the various ways in which Hayek’s work mirrors that of Smith, it should be clear that Hayek’s work on information and socialism, though not identical to Smith’s, is very much in line with it. Both Smith and Hayek explore the consequences of what Hayek called dispersed information, that is, the fact that individuals know things that rulers do not or cannot know. Both develop arguments against those who wish to interfere with what Hayek called the spontaneous order of the market, and what Smith called the natural system of justice. These similarities are hardly coincidental. We know from Chapter 3 that Hayek studied Smith closely, and the fact that Hayek used several of these quotes in support of his position suggests that he saw them as highly relevant to his project. This evidence strongly supports the thesis that Hayek drew on Smith when developing his thought on information and socialism. The extent of Hayek’s intellectual debt to Smith, Menger, and other classical liberal economists can also be usefully explored by examining their views about the proper role of government. What was Hayek’s view about the role of the government? The key to Hayek’s position, as we have seen earlier, is the importance of the freedom to engage in transactions as one pleases. In Hayek’s opinion, constraints to the freedom to engage in transactions in a free market undermine the operation of the price system, which serves to convey information that allows the effective coordination of individual efforts (cf. Hayek 1994b: 42). As he put it: It is necessary in the first instance that the parties in the market should be free to sell and buy at any price at which they can find a partner to the transaction and that anybody should be free to produce, sell and buy anything that may be produced or sold at all. And it is essential that the entry into the different trades should be open to all on equal terms. (Hayek [1944] 1994b: 42) Although both conservatives and laissez-faire liberals claim him as one of their own,3 Hayek in fact explicitly rejected both. In his 1956 preface to the Road to

Hayek on information and coordination 61 Serfdom (Hayek 1994b: xxvii–xliv), Hayek strongly rejected conservatism, which he denounced for “its paternalistic, nationalistic, and power-adoring tendencies” as well as for its “traditionalistic, anti-intellectual, and often mystical propensities” (Hayek 1994b: xxxvi). In the body of the text, he also explicitly distanced himself from a dogmatic laissez-faire position. He wrote: It is important not to confuse opposition against this kind of planning with a dogmatic laissez-faire attitude. The liberal argument is in favor of making the best possible use of the forces of competition as a means of co-ordinating human efforts, not an argument for leaving things just as they are. It is based on the conviction that, where effective competition can be created, it is a better way of guiding individual efforts than any other. It does not deny, but even emphasizes, that, in order that competition should work beneficially, a carefully thought out legal framework is required and that neither the existing nor the past legal rules are free from grave defects. Nor does it deny that, where it is impossible to create the conditions necessary to make competition effective, we must resort to other methods of guiding economic activity. (Hayek [1944] 1994b: 41) In fact, Hayek approved of, or at least accepted, a great deal of government action, including the provision of “an extensive system of social services,” the “adequate organization of certain institutions like money, markets, and channels of information – some of which can never be adequately provided by private enterprise,” the provision of a functioning legal system “designed both to preserve competition and to make it operate as beneficially as possible,” and, in the presence of externalities and the like, the substitution for competition of some other method to provide goods and services (Hayek [1944] 1994b: 42–4). Thus, Hayek’s views about the proper role of government can hardly be adequately characterized as either conservatism or dogmatic laissez-faire. While Hayek’s position is not particularly close to either conservatism or laissezfaire, at least as these terms are often understood, it is very close to that of Smith and the other classical liberal economists. As we saw in Chapter 3, these economists all believed in natural tendencies that were in general for the better. Therefore, with a small number of exceptions, their general stance was one of non-intervention. However, none of the classical liberal economists adhered to the dogmatic laissezfaire position. As we have seen, all of them accepted and in fact encouraged government action in some domains, and this is, in brief, exactly Hayek’s position.4 The fact that Hayek’s views about government are in many ways reminiscent of Smith’s and Menger’s constitutes additional evidence that he drew on their work.

The Natural Law origins of Hayek’s thought on information and coordination Earlier in this chapter, I argued that Hayek’s work on information and coordination can be described as substantiating the distinguishing idea of Natural Law doctrine.

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This fact – in combination with Hayek’s solid Natural Law heritage – suggests a novel account of Hayek’s thought on information and coordination. According to this account, Hayek developed his analysis of information and coordination because he wanted to defend the distinguishing idea of Natural Law doctrine, and because he thought that he could accomplish this goal by developing an analysis of information and coordination. That is, Hayek developed his analysis of information and coordination because he took it to substantiate the distinguishing idea of Natural Law doctrine. I will explain what I have in mind by way of Taylor’s 1929 paper, which usefully illuminates the classical liberals’ view about the role of the government. As we saw in Chapter 2, many thinkers in the Natural Law tradition tended to view the laws of nature – which simultaneously regulate what happens in the world, and allow us to predict and explain it – as conducive to harmony, efficiency, and so on. That is, Natural Law philosophers tended to think of the laws of nature as in some measure beneficial. According to Taylor and others, this notion was picked up by the classical liberal economists, who adopted the view that economic laws – that is, the laws that regulate the operation of the economic mechanism – were to some extent conducive to societal harmony and the greater good (Taylor 1929: 16–17). Taylor referred to this view as the “doctrine of economic harmonies.” Here is how he put it: In the eighteenth century, and by many writers in the nineteenth, the economic mechanism was regarded as a wise device of the Creator for causing individuals, while pursuing only their own interests, to promote the prosperity of society; and for causing the right adjustment to one another of supplies, demands, prices, and incomes, to place automatically, in consequence of the free action of all individuals. This doctrine of “economic harmonies” was entirely in accord with the corresponding notions of contemporary natural, as well as moral, scientists. (Taylor 1929: 16–17) In brief, as Taylor described it, the laws “are calculated to insure the harmonious mutual adjustment and proper functioning of things” (Taylor 1929: 17). In Taylor’s view, the doctrine of economic harmonies played an important role in the classical liberal economists’ argument to the effect that government action is often futile or worse. Their general view, as Taylor described it, was “that government could only do a few things to increase economic welfare, and that much of its more or less well-intentioned and quite effective activity was mischievous” (Taylor 1929: 23). In Taylor’s words: In the first place, they retained, as I have said, a limited form of the belief in economic harmonies. Individuals, if free to seek their best markets, would generally do just the things that were best for the nation, because the “operation” of economic laws would insure a coincidence of their own interests with the national interest . . . In other words, this kind of “interference” with “natural”

Hayek on information and coordination 63 tendencies was opposed on the ground that the latter are, not irresistible or unalterable, but better for the nation than the new tendencies “artificially” created by the interference. (Taylor 1929: 24) It is not that governments are unable to interfere with the operation of the economic mechanism; in fact they are quite able to do so. The problem is that because economic laws tend to be beneficial, as they are conducive to harmony and the common good, any interference with the economic mechanism would be likely to prevent it from having its beneficial effects. It is important to notice that the doctrine of economic harmonies as Taylor construed it does not say that relying on the “natural” tendencies is always for the best. As we saw in Chapter 2, in fact, the classical economists allowed for the possibility that it was not. As O’Brien commented: “The Classical economists from Smith onwards recognized fundamental flaws in the harmony of the unregulated natural order” (O’Brien 1975: 24). Hence, the doctrine does not entail that “we live in the best of all possible economic worlds” but simply that “the ‘natural’ or spontaneous tendencies which work themselves out in a more or less freely ‘competitive’ society are very often socially desirable tendencies” (Taylor 1929: 30–1). As a result, the doctrine of economic harmonies by itself offers only limited support for the proposition that government interference is typically futile or worse. Because the classical economists recognized that the operation of the economic mechanism is sometimes for the worse, they had to acknowledge the possibility (at least in principle) that government interference may be for the better. However, there was another consideration supporting the view of government action as frequently futile or worse. In Taylor’s words: In the second place, such methods as were then available or even conceivable for changing or modifying the action of other “natural” economic tendencies that were freely admitted to be less beneficial to the nation, were in may cases regarded by the economists, for one reason or another, as unpromising, unsafe, or undesirable. (Taylor 1929: 23–4) The second consideration supporting the reliance on the natural system of justice is that there is reason to think that interference with the economic mechanism would be ineffective (“unpromising”) or destructive (“unsafe, or undesirable”). This is so, of course, even if the intervention is motivated by the very best intentions. To summarize, Taylor argued that two main considerations supported the classical liberal economists’ view of government interference as often futile or worse. The first consideration is the doctrine of economic harmonies, that is, the proposition that economic laws are conducive to harmony and the common good. The second consideration is that government action is, for other reasons, more likely to do harm than good. Together, these two considerations constitute a case

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to the effect that government activity, even when well intentioned, is likely to be futile or worse. Taylor’s analysis of the classical liberal economists’ attitude toward government intervention is amply confirmed by the discussion earlier in this chapter. There is little doubt that the classical liberal economists thought of government intervention as often futile or worse. Certainly, one reason why they thought so was that they believed that economic laws are conducive to harmony and the common good. It is enough to think of Smith’s “natural system of justice,” which undoubtedly can be characterized as both harmonious and beneficial, and which “establishes itself of its own accord” (Smith [1776] 1976: 208). Another reason why the classical liberal economists distrusted the efficacy of government action was that they took government action, even when perfectly well intentioned, to be likely to do more harm than good. As an example, consider Smith’s emphasis on the insufficiency of human wisdom or knowledge, on the importance of knowledge available only in the local situation, on the associated difficulties of superintending the industry of private people, and on the tendency of rulers who do attempt to violate the natural system of justice to become oppressive and tyrannical. Although the classical economists recognized that the operation of the economic mechanism was not always for the best, they were sufficiently convinced of the beneficial properties of the natural order, and sufficiently skeptical of the possibility that government could do better, for them to often recommend reliance on natural tendencies also in cases when the natural order was imperfect. The account I want to defend is that Hayek developed his analysis of information and coordination for much the same reason that Smith developed his. The two positions are, in fact, extremely closely related. Quite arguably, Hayek too adopted a version of the doctrine of economic harmonies. While I will have more to say about it in Chapter 5, here it is sufficient to note that in Hayek’s view, the spontaneous order of the market is in fact characterized by a certain measure of harmony and beneficence. The harmony in question is most clearly seen when it comes to the coordination between beliefs and actions within and across individuals, as discussed earlier in this chapter. The beneficence follows from his commitment to the superiority of spontaneous over artificial order. Similarly, there is little doubt that Hayek was deeply convinced that government action is often ineffective or destructive. As we know, Hayek often emphasized how our inevitable ignorance makes it hard or impossible to improve on spontaneous order, and how efforts to do so run the risk of putting us on the road to serfdom. In my view, Hayek – like Smith and other classical liberal economists – developed these themes because he took them to offer a scientific basis for the distinguishing idea of Natural Law doctrine. Like them, Hayek thought that harmonious and largely beneficial spontaneous orders can establish themselves without conscious human intervention, and that government intervention, even when well intentioned, is likely to do more harm than good. Like Smith and others, Hayek realized that exploring themes of information and coordination would allow him to defend both theses. The fact that Hayek followed their lead on this should not be a surprise, given Hayek’s desire to defend the distinguishing idea of Natural

Hayek on information and coordination 65 Law doctrine, and given his intimate knowledge of the classical liberal economists’ defense of what he called spontaneous order. Because Hayek was already committed to the superiority of spontaneous order, he was receptive to arguments supporting that view and quite understandably chose to modify and improve those arguments rather than starting from scratch. Hence, Hayek developed his own arguments, inspired especially by Smith’s writings but designed to convince his contemporaries, to substantiate the distinguishing idea of Natural Law doctrine. Interestingly, both Struve (1921) and Taylor (1929) noted that economists had not abandoned Natural Law doctrine and the doctrine of economic harmonies. As Struve put it: “the idea of ‘Natural Law’ has not, and could not, disappear from political economy. In a whole series of recent works, the idea constantly reappears” (Struve 1921: 308).5 Taylor even insisted that the doctrine of economic harmonies had gained ground over the previous century: while the notion that economic laws are inexorable has been decaying in recent decades, the notion that they are in some measure beneficent, or that they guarantee a certain measure of “harmony” in the working of the whole economic system, has hardly shown the same signs of disappearing completely. Accepted by the classical economists only in a limited form, it enjoyed, in the second half of the nineteenth century, a certain renaissance and further development. (Taylor 1929: 30) In retrospect, Hayek’s commitment to the distinguishing feature of Natural Law doctrine supports the notion that the doctrine of economic harmonies is not entirely dead. Either way, I have attempted to show that Hayek’s work on information and coordination can also be described as an effort to prove the doctrine of economic harmonies (in one of its forms), as well as the view of government interference as frequently ineffective or worse. These two considerations together allowed him – like earlier economists – to build a solid case for the spontaneous order of the market and against efforts to improve that order by replacing it with artificial order. It should be immediately clear from what I have said so far that the present account does not deny that Smith, Menger, and other classical liberal economists played a central role in the development of Hayek’s thought about information, coordination, and socialism. To the contrary, this account assumes rather than denies that their writings – especially Smith’s, apparently, in light of the vast affinities between their analyses – were critically important to the development of Hayek’s thought on information and coordination. Consequently, the present account is intended to add to, rather than to replace, the traditional account about the origin of Hayek’s thought about information, coordination, and socialism. (Again, this is not to say that Hayek’s past necessitated his later intellectual development.) The present account has an important advantage over more traditional accounts, however, in that it can explain both why Hayek developed an analysis of information and coordination, and why the classical liberal economists’ – especially

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Smith’s – analysis of information and coordination would be so appealing to him. The question of why Hayek should have found inspiration, for example, in Smith’s work is not one that can be addressed by pointing to the fact that he did. The present account, by contrast, does have an answer to the question. Hayek was receptive to the classical liberal economists’ analysis of information and coordination because he shared their Natural Law heritage, including their commitment to the distinguishing idea of Natural Law doctrine, and because he thought that the analysis supported it. Since the present account can explain something that more traditional accounts cannot, it has greater explanatory power. This is a significant advantage.

Discussion In this chapter, I have argued that Hayek’s work on information and coordination can be seen as substantiating the distinguishing idea of Natural Law doctrine, that is, the superiority of spontaneous over artificial order. More specifically, Hayek’s work on information and coordination serves to support both the doctrine of economic harmonies – that is, the idea that economic processes are to some extent conducive to societal harmony and the greater good – and the idea that government intervention frequently does more harm than good. Together these ideas constitute a case for the superiority of spontaneous order. Here, then, is another way in which Hayek can be said to be a part of the Natural Law tradition: his work on information and coordination – on all accounts central to his enterprise – can be seen as providing evidence for the distinguishing idea of this tradition. The Natural Law perspective suggests a novel account of the historical origins of Hayek’s work on information and coordination. According to this account, he developed his analysis of information and coordination because he wanted to substantiate the distinguishing idea of Natural Law doctrine. The question of why exactly he wanted to defend that idea will be further explored in Chapter 6. Because Hayek was already committed to the superiority of spontaneous order, he was receptive to arguments supporting that view and chose to modify and improve those arguments rather than starting from scratch. As he realized that the classical liberal economists, especially perhaps Smith and Menger, had supported their case for the superiority of spontaneous order by means of such an analysis, Hayek decided to follow their lead. As a result, Hayek decided to develop his own arguments, inspired especially by Smith’s writings but designed to convince his contemporaries, to substantiate the distinguishing idea of Natural Law doctrine. This account, which I have argued is explanatorily powerful, is intended to add to rather than replace more traditional accounts that emphasize Hayek’s intellectual debt to the classical liberal economists.

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Hayek on cultural evolution

In this chapter, I explore yet another way in which Hayek was part of the Natural Law tradition. I argue that his work on cultural evolution – like his work on information and coordination – can be thought of as substantiating the distinguishing idea of Natural Law doctrine. The theory of cultural evolution played an important role in Hayek’s writings from the 1960s through the 1980s, and is often described as the very centerpiece of his project. As we will see in this chapter, the theory simultaneously explains how order can appear without being the result of human contrivance – that is, how there can be spontaneous order at all – and how spontaneous order can be superior to artificial order. The theory also explains how it is possible for people to fail to appreciate the benefits conferred to them by the order under which they live. Thus, Hayek’s work on cultural evolution – like his work on information and coordination – can be seen as part of his case for the superiority of spontaneous over artificial order. That is, Hayek’s work on cultural evolution can be described as substantiating the distinguishing idea of Natural Law doctrine. The Natural Law perspective suggests a novel account of the historical origins of Hayek’s work on cultural evolution. According to this account, Hayek decided to develop a theory of cultural evolution through group selection because he wanted to defend the distinguishing idea of Natural Law doctrine, and because his reading of the classical liberal economists (especially Smith and Menger) and contemporary biologists (especially Alexander M. Carr-Saunders) had convinced him that this goal could be accomplished by developing such a theory. The present account is intended to add to rather than replace more traditional accounts that emphasize the importance of the classical liberal economists for the development of Hayek’s evolutionary thought. As in the previous chapter, it may be objected that this account gets the order of events backwards, and that Hayek came to believe that spontaneous order is often superior to artificial order only as a result of his work on cultural evolution, but I will postpone discussion of the objection until Chapter 7.

Hayek’s theory of cultural evolution Hayek scholars have agreed on the importance of cultural evolution to Hayek’s system of thought. Ebenstein, for instance, wrote: “The survival of the fit and of

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unanticipated, undirected evolutionary development were central in Hayek’s thought” (Ebenstein 2001: 14). According to Viktor J. Vanberg, “the evolutionary outlook is, in fact, an aspect that permeates, and gives coherence to, [Hayek’s] entire work” (Vanberg 1994: 315). Geoffrey M. Hodgson maintained that “[Hayek’s] conception of socioeconomic and cultural evolution is the centerpiece of his mature theory” (Hodgson 1994: 408). As we saw in Chapter 1, Hayek himself seems to have considered his theory of cultural evolution to be one of his signal achievements, arguing that it had allowed him to paint a “tolerably clear picture of the nature of the spontaneous order of which liberal economists have so long been talking” (Hayek 1967: 92). Hayek thought that the theory of evolution was capable of explaining the existence of structures of all kinds: “We understand now that all enduring structures above the level of the simplest atoms, and up to the brain and society, are the results of, and can be explained only in terms of, processes of selective evolution” (Hayek 1979: 158).1 Hayek’s first systematic presentation of the theory of cultural evolution appears in his paper “Notes on the Evolution of Systems of Rules of Conduct,” which was published in Studies in Philosophy, Politics and Economics (Hayek 1967: 66–81). The theory figures prominently in all of his major publications thereafter, especially Law, Legislation and Liberty (1973; 1976; 1979) and The Fatal Conceit (1988). Hayek’s exposition of the theory starts off with a discussion of the concept of order, and of the distinction between spontaneous and artificial order (as discussed in Chapter 2). His theory of cultural evolution, as we will see, is a theory about the nature and origin of spontaneous order. Spontaneous orders, Hayek maintained, evolve in a process of cultural evolution in which natural selection operates on the order of the group. He said that “what may be called the natural selection of rules will operate on the basis of the greater or lesser efficiency of the resulting order of the group” (1967: 67). In cultural evolution, then, natural selection operates directly on the order of the group, which in turn is produced by the individuals following certain rules. Thus, selection operates on acquired characteristics like rules indirectly, through the order they produce. Some groups, Hayek added, have rules and orders that are more “efficient” (Hayek 1967: 71), “advantageous” (Hayek 1967: 71), or “beneficial” (Hayek 1978: 162). Such rules and orders are more conducive to survival, Hayek believed, and confer an advantage to the group in the struggle for existence. He often quoted the following sentence: “Those groups practicing the most advantageous customs will have an advantage in the constant struggle with adjacent groups” (Carr-Saunders 1922: 223; quoted, for example, in Hayek 1967: 67). Because some groups follow rules that generate more advantageous orders, there is differential survival. As Carr-Saunders put it, the traditions of a group might enable it to overcome groups with traditions that are “less valuable” (Carr-Saunders 1922: 417). This means that groups with more efficient rules and orders tend to grow and multiply, while groups with less efficient rules and orders tend to perish

Hayek on cultural evolution 69 and disappear. In Hayek’s own words: The individual may have no idea what this overall order is that results from his observing such rules as those concerning kinship and intermarriage, or the succession of property, or which function this overall order serves. Yet all the individuals of the species which exist will behave in that manner because groups of individuals which have thus behaved have displaced those which did not do so. (Hayek 1967: 70) This quote, in particular, emphasizes how individuals may have no idea of the function served by the rules, norms, and practices that they follow. One consequence of this fact is that order can appear even in the absence of a conscious design. Similarly: “The structures [i.e., orders] formed by traditional human practices are . . . the result of a process of winnowing or sifting, directed by the differential advantages gained by groups from practices adopted for some unknown and perhaps purely accidental reasons” (Hayek 1979: 155). In sum, in Hayek’s view, cultural evolution is a matter of natural selection operating on the order of the group. Since the order is produced in part by the rules followed by group members, selection operates indirectly on characteristics that may be acquired. Since some groups survive and prosper because their rules and order are more efficient, beneficial, or advantageous, Hayek went on to describe evolved rules and orders in those very terms. He also described them as functional. In The Constitution of Liberty, for example, Hayek approvingly quoted Alexander Macbeath (1888–1964), who wrote that “no institution will continue to survive unless it performs some useful function” (Macbeath 1952: 120; quoted in Hayek 1960: 433). Later, he clarified that “the term ‘function’ . . . is an almost indispensable term for the discussion of those self-maintaining structures which we find alike in biological organisms and in spontaneous social orders” (1973: 28). In another passage, he wrote: “we are bound to explain the fact that the elements [i.e., the individuals] behave in a certain way by the circumstance that this sort of conduct is most likely to preserve the whole” (Hayek 1967: 77). Hayek further explained that the properties of the individuals which are significant for the existence and preservation of the group . . . have been shaped by the selection of those from the individuals living in groups which at each stage of the evolution of the group tended to act according to such rules as made the group more efficient. (Hayek 1967: 72) Occasionally, Hayek even went so far as to suggest that following evolved rules is a necessary condition for survival. He argued: “Society can thus exist only if by a process of selection rules have evolved which lead individuals to behave in a manner which makes social life possible,” and added: “Such an order will always constitute an adaptation” (Hayek 1973: 44). Either way, as

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Hayek described them, evolved rules do not only tend to be advantageous, efficient, beneficial, adaptive, and functional, they are also necessary for survival. Hayek offered several examples of institutions that he considered to be the outcome of cultural evolution through group selection. The most prominent examples are private property and the family. Consider the following passage: Capitalism presumes that apart from our rational insight we possess a traditional endowment of morals, which has been tested by evolution but not designed by our intelligence. We have never invented private property because we understood these consequences, nor have we ever invented the family. It so happens that these traditions . . . cannot be the result of our intellectual insight but must be the result of a moral tradition, which as I now put it is the result of group selection and not individual selection, something we can ex post interpret. (Hayek 1994a: 72–3) Clearly, both private property and the family are examples of institutions that are not only the result of cultural evolution, but beneficial too. Incidentally, it is perhaps no coincidence that Hayek’s two examples are well known in the Natural Law tradition. Aristotle talked about the family, and any number of Natural Law philosophers – including Aquinas – talked about property rights as natural (Perlman and McCann 1998). It is important to note that individual members of a group need neither have any understanding of the process by which these institutions developed, nor any appreciation for the function that they serve. This point is implicit in the most recent quote above, but also in a 1984 essay called “The Origin and Effects of Our Morals: A problem for Science.” There, Hayek wrote: Group selection thus does not primarily choose what the individuals recognize as serving their own ends, or what they desire. It will elect customs whose beneficial assistance to the survival of men are not perceived by the individuals. The group thereby becomes dependent for the very survival of its increased numbers on the observance by its members of practices which they cannot rationally justify. (Hayek 1984: 324; cf. p. 328) Thus, individuals may be unable to see the function served by evolved rules, norms, and practices. This feature of the account was critical for Hayek’s case against socialism. He wished to argue, of course, that the spontaneous order of the market is superior to artificial order whether or not people recognize that this is so. In Chapter 2, we saw that Hayek did not think spontaneous orders are necessarily, or always, superior to artificial order. The same thing is true for rules and orders that emerged in the process of group selection. In The Fatal Conceit,

Hayek on cultural evolution 71 for example, Hayek wrote: “It would however be wrong to conclude, strictly from such evolutionary premises, that whatever rules have evolved are always or necessarily conducive to the survival and increase of the populations following them” (Hayek 1988: 20). A few pages later, he added: “I do not claim that the results of group selection of traditions are necessarily ‘good’ – any more than I claim that other things that have long survived in the course of evolution, such as cockroaches, have moral value” (Hayek 1988: 27). The obvious interpretation of these passages, especially in light of the discussion in Chapter 2, is that in Hayek’s view, evolved rules and orders tended to be, or were likely to be, beneficial, advantageous, efficient, and so on. This reading is consistent both with Hayek’s frequent emphasis on the value of evolved rules and orders, and his denial that they are always or necessarily superior. It should be mentioned that Hayek occasionally gave the impression that cultural evolution works through imitation rather than natural selection. According to the mechanism of imitation, members of less prosperous groups either join more prosperous ones, or choose to adopt their rules and customs (Hayek 1979: 159; cf. Vanberg 1986: 85). On the basis of such remarks, some readers have concluded that Hayek’s theory of cultural evolution relies primarily on imitation (e.g. Tomlinson 1990: 48). This interpretation, I believe, is difficult to maintain. Hayek made it quite clear that he saw group selection as the most important mechanism of cultural evolution. He even wrote that “cultural evolution is founded wholly on group selection” (Hayek 1984: 318). By the late 1970s, Hayek had realized that group selection was no longer as popular among biologists as it used to be. Nevertheless, he insisted that his theory of cultural evolution remained correct. He wrote: “Although the conception of group selection may now not appear as important as it had been thought after its introduction . . . there can be no doubt that it is of the greatest importance for cultural evolution” (Hayek 1979: 202). Hayek’s theory of cultural evolution simultaneously serves several different purposes. As Caldwell put it, Hayek’s theory was a necessary component for answering his central questions, namely: How did those rules of conduct, moral codes, and institutions of capitalism, practices that can make us so uncomfortable, that are repugnant to both our nature and to our reason, ever get established? And how is it that, once they got established, they not only persisted but thrived? (Caldwell 2000: 198–9) First, the theory explains how spontaneous orders appear in the absence of human contrivance. In particular, because the competitive market is a spontaneous order, the theory explains how it is possible for the competitive market to exist in spite of the fact that it has never been designed by a thinking mind. In short, competitive markets exist because groups who adhered to the rules underlying such markets – that is, rules requiring people to respect private property and so on – had an advantage in the struggle for existence, and won out

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over groups who did not. Second, the theory explains why spontaneous order frequently is superior to artificial order, in spite of the fact that the latter may have been designed with the very best intentions. In brief, because groups with more valuable rules and orders have an advantage in the struggle for survival, those groups that survive tend to have more advantageous rules and orders. Third, the theory explains how it is possible for individual members of a group to fail to appreciate the function served by the rules they follow: rules followed by a group may be selected in spite of the individual’s complete ignorance of their value. As a result, we can think of this theory as a defense of the idea that spontaneous order is frequently superior to artificial order. The idea presupposes that there is a meaningful way to draw the distinction between natural and artificial order. In order for the idea not to be trivially true, it also presupposes that there exists spontaneous order, that is, that it is possible for orders to appear in the absence of human contrivance. Finally, it presupposes that it is possible for such orders to be superior to artificial orders. Hayek’s theory of cultural evolution addresses all of these concerns. It explains both how we can draw the distinction between the natural and the artificial, how order can emerge in the absence of human contrivance, and how it is that spontaneous order is frequently superior to artificial order. Because the idea that spontaneous order is frequently superior to artificial order happens to be the distinguishing feature of Natural Law doctrine, we can also think of Hayek’s theory of cultural evolution as a defense of the distinguishing idea of Natural Law doctrine.

Hayek’s evolutionary argument for the spontaneous order of the market Hayek’s theory of cultural evolution also played a role in his case for the spontaneous order of the market and against socialism. As we know, the theory can be seen as substantiating the thesis that spontaneous order is frequently superior to artificial order. Hence, the fact that an order is spontaneous constitutes evidence to the effect that it is superior to any artificial order. This is not to say that, in Hayek’s view, the fact that the market is a spontaneous order guarantees that it is superior to any alternative. Because Hayek recognized that spontaneous order need not be superior to artificial order, he did not maintain that the spontaneity of an order guarantees its superiority. Nevertheless, the theory of cultural evolution provided reason to think that the spontaneous order of the market is superior to artificial order of the sort favored by socialists. In short, it helps explain why “civilization depends, not only for its origin but also for its preservation, on what can be precisely described only as the extended order of human cooperation, an order more commonly, if somewhat misleadingly, known as capitalism” (Hayek 1988: 6). Again, it is worth discussing the sense in which Hayek took evolved order to be superior to artificial order, that is, what Hayek may have meant when he described the rules, norms, and practices favored by group selection, and the orders that emerge in such a process, as “advantageous,” “valuable,” “beneficial,”

Hayek on cultural evolution 73 and so on. The most commonsensical interpretation of these passages is that he used this language (at least some of the time) to say that orders that emerged in a process of group selection tend to be better or more desirable than orders that are the result of human contrivance. That is to say, again, that Hayek used these terms (at least some of the time) in an unambiguously normative sense. Many scholars appear to share this interpretation. For example, Gordon writes: Hayek advances the view that the rules that develop in this way [as a result of human action but not of human design] are morally proper because they are the result of undesigned evolutionary processes; their moral merit is certified by the fact that they are the rules of conduct of societies that have passed the test of competition and have survived.2 (Gordon 1981: 479) Gordon’s position is that Hayek’s normative language (discussed in the previous section) should, in fact, be read as normative. That is, when Hayek talked about how spontaneous order is often more beneficial than other kinds of order, he meant that it is often better, more desirable, than artificial order. I believe Martin de Vlieghere (1994) had the same interpretation of these passages when he wrote that according to Hayek: “In the course of history only those cultural attainments can survive and spread that are beneficial. So, the very longevity of an institution proves its value” (de Vlieghere 1994: 293). It is sometimes objected that this interpretation implies that Hayek committed the naturalistic fallacy. Hayek was well aware of this objection, and vigorously disputed it: “I have no intention to commit what is often called the genetic or naturalistic fallacy,” he wrote (Hayek 1988: 27). While ethicists following G. E. Moore (1903) sometimes use the term “naturalistic fallacy” differently, in philosophically informed discussion of evolutionary thought the term refers to a fallacy identified – though not under this name – in David Hume’s essay A Treatise on Human Nature, bk. III, pt. I, sec. I ([1739] 1996: 829). This sense is rather likely to be the one adopted by Hayek as well. Hume complained that many writers commonly began by “the usual copulations of propositions, is, and is not” and without justification proceeded to use “no proposition that is not connected with an ought, or an ought not,” as if the latter were simply deduced from the former (ibid., italics in original). Yet, Hume added, since the latter express new and entirely different relations and affirmations, the transition has to be “observed and explained” (ibid.). Thus, the naturalistic fallacy, as the name indicates, is a particular kind of misguided inference, namely, from a set of purely descriptive statements – propositions that are connected with “is” or “is not,” in Hume’s terms – to a normative statement – a proposition that is connected with “ought” or “ought not.” The worry, however, is unfounded. It is easy to exonerate Hayek from the charge of committing the naturalistic fallacy. There is, in fact, a perfectly sensible reading, consistent with the commonsensical interpretation, according to which Hayek escaped the fallacy. According to this reading, Hayek believed that

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spontaneous orders tend to have (or are likely to have) some particular property, such as “the ability to utilize dispersed information,” “the ability to maintain a large population,” “the ability to survive and prosper,” “the ability to maximize average income,” or something along these lines. Till now, we have seen several passages in which Hayek made claims along these lines. Moreover, on the reading in question, he believed that having that property tends to be (or is frequently) a good thing. Surely, in Hayek’s view, the ability to utilize dispersed information, etc., is a good thing. On the basis of these two premisses – that spontaneous orders unlike artificial orders tend to have (or are likely to have) some particular property, and that having that property tends to be (or is likely to be) a good thing – Hayek could form an argument to the effect that spontaneous orders tend to be (or are likely to be) more desirable than artificial orders. This argument is inductive, not deductive. Hayek thinks that the fact that an order is spontaneous is prima facie evidence that it is desirable. That is to say, in Hayek’s view, the fact that an order is spontaneous raises the probability that an order is desirable. According to the argument, the fact that the order of the market is spontaneous constitutes evidence (though not conclusive proof) that it is desirable. Hence, Hayek did not think that spontaneous orders are always or necessarily more desirable than artificial orders; only that they tend to be, or are likely to be. Nevertheless, on the basis of these two premisses, Hayek could construct a simple inductive argument to the effect that order that emerges in a process of group selection tends to be better or more desirable than artificial order. Still, since Hayek’s argument proceeds from a normative premiss, this reading does not imply that he committed the naturalistic fallacy.3 Others disagree with this reading.4 Those who disagree tend to maintain that, at least in the context of Hayek’s evolutionary thought, his superficially normative language must in all cases be read as shorthand for something descriptive: “the ability to utilize dispersed information,” “the ability to maintain a large population,” “the ability to survive and prosper,” “the ability to maximize average income,” or something similar. So, according to this alternative interpretation, Hayek’s normative language should always be read as shorthand for something descriptive and does not properly understood have any normative implications whatsoever. According to this reading, then, Hayek’s theory of cultural evolution did not serve as a basis for an independent argument in favor of the spontaneous order of the free market. This alternative reading agrees with the commonsensical one that in Hayek’s view, spontaneous order tends to have – but does not necessarily have – some purely descriptive property, such as “able to use dispersed information.” The two readings differ, however, in that the alternative reading does not, but the commonsensical reading does, assume in addition that Hayek was committed to the view that the property in question tended to be (or was likely to be) desirable in some normative sense. Notice that for this alternative interpretation not to collapse into the commonsensical one, its adherent needs to deny that Hayek thought the property in question tended to be (or was likely to be) a good thing. That is, the adherent needs to deny that Hayek took, for example, the ability to

Hayek on cultural evolution 75 use dispersed information, or the ability to survive and prosper, to be (on the average and in the long run, or whatever) a good thing. Moreover, several considerations support the commonsensical interpretation. First, both the letter and the spirit of Hayek’s work indicates that he in fact did believe that the ability to use dispersed information, the ability to survive and prosper, or whatever property obtains in the case of evolved orders, tends to be a good thing. As we saw earlier, the adherent of the alternative interpretation must deny this in order for his interpretation not to collapse into the commonsensical one. One would assume that the reason why Hayek cared so much about the ability to survive and prosper, or the ability to use dispersed information, is that he took it to be (or to tend to be, or to frequently be) a good thing. For example, when Hayek argued that socialism would undercut our ability to survive and prosper – for example, when he warned that “[to] follow socialist morality would destroy much of present humankind and impoverish much of the rest” (Hayek 1988: 7) – it seems clear that he takes the destruction of humankind to be a bad thing. Second, Hayek had already committed himself to the view that order that emerges in a process of group selection tends to be better than artificial order. As we know from Chapter 2, Hayek believed that spontaneous order tends to be better or more desirable than artificial order. Moreover, since Hayek explicitly maintained that cultural evolution operates wholly through group selection, it appears to follow that an order (at least in the cultural context) is spontaneous just in case it emerged in a process of group selection. If so, it follows that order that emerges in a process of group selection (at least in the cultural context) tends to be better or more desirable than artificial order. Because Hayek had already committed himself to the view in question, and because he used terms like “beneficial” in an unambiguously normative sense in a closely related context, it would be odd if he did not do so here. Third, the commonsensical interpretation is supported by the testimony of at least one well-informed observer. It is significant, I think, that the alternative reading clashes with the understanding of Karl Popper (1902–94), with whom Hayek had a long-standing and close intellectual relationship. The two were colleagues and friends for a large part of their lives; they met in 1935, and by the 1950s or 1960s, Ebenstein wrote: “Popper perhaps became Hayek’s closest friend” (Ebenstein 2001: 162). In a 1985 interview, Popper criticized Hayek’s theory of cultural evolution on the grounds that it assumed that evolved orders tend to have morally desirable properties. Popper said: [The Indian caste system] is a tradition; it has survived for centuries. But I maintain that it is not one iota more plausible or desirable because of its long history. However many instances you will mention of something occurring, it will never suffice to establish it in any relevant sense. (Popper as quoted in Gissurarson 1987: 169–70) Judging by this quote, Popper did not believe that the only role of the theory of cultural evolution in Hayek’s work was to explain. It is possible, of course, that

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Popper misunderstood Hayek’s views, or that he intentionally misrepresented them to the interviewer. Yet, it is likely that Hayek and Popper discussed this important and controversial issue at some point during their long friendship. And if Popper had misunderstood Hayek in such a dramatic way, there is a fair chance that Hayek was afforded, and that he seized, the opportunity to correct him. Moreover, to the best of my knowledge, there was no obvious reason for Popper to misrepresent Hayek’s position in the interview. Although hardly conclusive, Popper’s criticism must be considered some evidence in favor of the commonsensical interpretation. While recognizing that the commonsensical reading is well supported by the evidence, it is perfectly legitimate to ask why Hayek did not say more about his definition of “advantageous,” “beneficial,” and other terms that he used to describe spontaneous orders; about how to recognize or identify an advantageous or beneficial order; and about the exact shape of his normative premisses. One answer to this question is suggested by Hayek’s Natural Law heritage. For thinkers in the Natural Law tradition, it is often assumed to be so obvious that the natural is just, expedient, and so on, that such propositions are not seen as in need of further support. Thus, a failure to clearly distinguish normative from descriptive premisses, and to make all perfectly explicit, is not unusual. Indeed, it is quite likely that Hayek considered his normative assumption entirely uncontroversial, or at least so widely shared that it would not require elaboration. Insofar as his normative premiss is simply that the ability to survive and prosper is, at least on the whole, or often enough, a good thing, it would not be surprising if Hayek took it to be so widely shared that he did not need to go out of his way to articulate and defend it. The hypothesis that Hayek never spelled out the normative premiss in his evolutionary argument because he assumed that it was widely shared helps explain why Hayek thought that he could prove the superiority of the spontaneous order of the market on scientific, as opposed to ideological grounds. For instance, in the Introduction to Law, Legislation and Liberty, he wrote: The demonstration that the differences between socialists and non-socialists ultimately rest on purely intellectual issues capable of a scientific resolution and not on different judgments of value appears to me one of the most important outcomes of the train of thought pursued in this book. (Hayek 1973: 6) In The Fatal Conceit (1988) Hayek claimed that the conflict between socialists and nonsocialists is due to a factual error by the former, and added: “As a question of fact, this conflict must be settled by scientific study” (1988: 7). This feature of Hayek’s work makes most sense in the framework of Natural Law doctrine, according to which it is virtually axiomatic that the natural, spontaneous development – which can be known by careful study of the natural world – is associated with the just, with the expedient, and with the promotion of the common good. In this tradition, the superior social arrangement is both identified

Hayek on cultural evolution 77 and defended by showing that it is the outcome of a natural process of development. Again, if we can assume that Hayek believed that the second (normative) premiss was entirely uncontroversial, or at least widely shared, this would account for his belief that disagreements on the virtues of the free market hinge on matters of fact and not of value.

Hayek’s debt to Smith, Menger, and the other classical liberal economists Many scholars have argued that Hayek’s focus on natural tendencies for order to appear – as we have seen, a fundamental part of Hayek’s system – came from Smith and the other Scottish moral philosophers, as well as from Menger. As Charles Covell put it: Hayek followed Smith in emphasizing the natural tendency of the market economy to achieve an internal equilibrium between its component parts. The special virtue of the free market, he argued, consisted in its being an essentially spontaneous form of economic ordering, which was organized around the reciprocally binding expectations between individuals that proceeded from their mutual participation in the evolutionary processes of civil society. (Covell 1992: 136) Similarly, D. P. O’Brien (1994) wrote: With the exception of David Hume, the three authors to whom Hayek refers most are Adam Smith, Adam Ferguson and Edmund Burke. It is on the work of these authors that Hayek grounded his ideas of spontaneous order, selective evolution, and the fundamental importance of unintended consequences of individual human actions taken on the basis of limited knowledge.5 (O’Brien 1994: 346) Moreover, O’Brien continued, “Hume is much the most important single source for Hayek’s general position” (O’Brien 1994: 345). O’Brien’s view has been echoed by Hodgson, who wrote that “Hayek repeatedly and proudly displays his intellectual genealogy through Carl Menger, back to Adam Smith, David Hume, and Bernard de Mandeville” (Hodgson 1994: 408). A strong case can in fact be made for Hayek’s intellectual debt to the British moral philosophers. It is true that they are well known as proponents of the idea of spontaneous order (cf. Gordon 1991: 119), and that Hayek often mentioned them as his intellectual predecessors. He frequently argued that Mandeville, Hume, Smith, and others laid the foundations for evolutionary theory when they realized that a wide range of phenomena, including language, law, and morals, appeared as the result of human action even though they were never consciously

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designed. In an essay called “The Result of Human Action but not of Human Design” (Hayek 1967: 96–105), for instance, Hayek explained that [The] British moral philosophers of the eighteenth century . . . built up a social theory which made the undesigned results of individual action its central object, and in particular provided a comprehensive theory of the spontaneous order of the market. There can be little question that the author to whom more than any other this “anti-rationalist” reaction is due was Bernard Mandeville. But the full development comes only with Montesquieu and particularly with David Hume, Josiah Tucker, Adam Ferguson, and Adam Smith. (Hayek 1967: 99) Hayek wrote that Mandeville developed a theory of law, in which laws grow “not through the design of some wise legislator but through a long process of trial and error” (Hayek 1978: 260), that Hume “demonstrates that our moral beliefs are . . . an ‘artifact’ in the special sense in which he introduces this term, that is, a product of cultural evolution, as we would call it” (Hayek 1967: 111), and that Ferguson talked about the spontaneous formation of social orders when he wrote: “Nations stumble upon establishments, which are indeed the result of human action, but not the execution of any human design” (Ferguson 1767: 187; quoted in Hayek 1973: 159). Passages that may have been particularly inspirational for Hayek include those in which Smith spoke about the “system of natural liberty.” When Smith argued that “the obvious and simple system of natural liberty establishes itself of its own accord” (Smith [1776] 1976: 208), it is not as a result of human contrivance. As we saw in Chapter 4, Smith emphasized how “the highest degree of opulence” can be “brought about by the natural course of things,” assuming, of course, that government does not “thwart this natural course” (Smith 1755; in Ross 1995: 108). Smith also said that “projectors disturb nature in the course of her operations in human affairs; and it requires no more than to let her alone, and give her fair play in the pursuit of her ends, that she may establish her own designs” (Smith 1755; in Ross 1995: 108). As we know, in this system of natural liberty every man is free to pursue his own interests and will in fact do so, and hence the system of natural liberty is conducive to individual happiness as well as national wealth. Just as in the case of Smith and the other Scottish moral philosophers, Hayek scholars agree that Hayek’s thought – especially when it comes to the origin of social institutions – was significantly inspired by Menger. John Gray, in his study Hayek on Liberty (1984), wrote that “Hayek’s debts to the Austrian school founded by Menger . . . are so many and so obvious that they tend to obscure those elements of his thoughts that are original” (Gray 1984: 16). According to Gray, Hayek developed the “general contentions of the Austrian school” (Gray 1984: 16), one of which was Menger’s “thesis that social institutions arise as a result of human action but not of human design” (Gray 1984: 33). D. P. O’Brien said that “the evolutionism

Hayek on cultural evolution 79 on which Hayek laid such stress . . . comes from what was undoubtedly the most fundamental Austrian influence on Hayek – Menger himself ” (O’Brien 1994: 348). Again, Hayek’s own testimony supports his debt to Menger. In Menger’s work, Hayek said, “[the] conception of the spontaneous generation of institutions is worked out more beautifully than anywhere I know” (Hayek 1994a: 57). Hayek’s debt to Menger is supported by their shared interest in the origin of social institutions. In fact, both Hayek and Menger argued that the existence of structures of organic origin constitutes the central problem of social science. When Hayek wrote that “social theory begins with – and has an object only because of – the discovery that there exist orderly structures which are the product of the action of many men but are not the result of human design” (Hayek 1973: 37), Menger maintained: An unintended product of social development which conditions and advances the welfare of society, and this perhaps to a higher degree than any social institution which is the work of human intention and calculation – the explanation of this remarkable phenomenon is the difficult problem which social science has to solve. (Menger [1883] 1963: 223) As we saw in Chapter 3, Menger did not use the term “cultural evolution,” but instead discussed what he called the “organic origin of institutions” in two of his major works. In Menger’s words, phenomena of organic origin are “ ‘natural’ products (in a certain sense), . . . unintended results of historical development” (Menger [1883] 1963: 130, italics in original). Both Hayek and Menger believed that such phenomena included law, language, money, and markets (Menger [1883] 1963: 130; cf. p. 158). In Hayek’s view, Menger actually provided a theory of cultural evolution closely analogous to the theory of evolution in the biological realm (Hayek 1967: 101). Clearly, both Hayek and Menger were concerned with the unintended consequences of individual action, and both emphasized that phenomena such as law, language, money, and markets are the result of human action but not of human design. To use the modern term, Menger and Hayek agreed that such phenomena are the result of cultural evolution. Though it is correct to say that Hayek in all likelihood was significantly inspired by Menger and the British moral philosophers, these thinkers clearly could not have provided him with his theory of cultural evolution. Smith’s and Menger’s ideas about the origin of social institutions are substantially different from those of Hayek. Notably, the Scottish moral philosophers, who were active before Darwin, did not have access to a coherent theory of natural selection at all (Hodgson 1994: 408). Meanwhile, Menger defended a conception based on individuals’ learning to act in their self-interest rather than a conception based on natural selection. Evidently, therefore, Hayek could not have borrowed the idea of cultural evolution through natural selection from them. Thus, the influence of the British moral philosophers and of Menger underdetermines the most characteristic element of Hayek’s evolutionary thought.

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Carr-Saunders and Oxford zoology In this section, I continue to explore the historical origins of Hayek’s evolutionary thought. It has been suggested that Hayek’s interest in biology was in part due to his early exposure to botany, which Hayek himself described as his “most sustained hobby” (Ebenstein 2001: 12; cf. Hayek 1994a: 42–3). His father August von Hayek – who, according to Ebenstein, “had more influence on [Friedrich] than anyone else” (Ebenstein 2001: 15) – was a dedicated amateur botanist, who introduced his son to the ideas, methods, and practices of botany at an early stage. In Ebenstein’s words: “Hayek was the little scholar helping his father with his botanical work and attending meetings of the Vienna Zoologic and Botanical Society with him” (Ebenstein 2001: 14).6 Interestingly, August Hayek also exposed his son to evolutionary theory relatively early. In Ebenstein’s words: “At fourteen or fifteen, growing intellectually dissatisfied with the classificatory aspects of biology, he desired more theoretical knowledge” (Ebenstein 2001: 14). Hayek said: “When my father discovered this, he put in my hand what was then a major treatise on the theory of evolution” (Hayek 1983: 22; quoted in Ebenstein 2001: 14). Though Hayek later claimed that he was too young to appreciate the book at the time, he added: “If he had given me this a year later, I probably would have stuck with biology. The things did interest me intensely” (Hayek 1983: 22; quoted in Ebenstein 2001: 14; cf. Hayek 1994a: 43–4). It is conceivable that Hayek’s early exposure to botany and evolutionary theory helped him appreciate biological models and metaphors, and may therefore have played a role in the development of his evolutionary thought. The point of this section, however, is to argue that Hayek’s evolutionary thought was significantly inspired by Alexander M. Carr-Saunders (1886–1966), a British biologist turned demographer and sociologist. Because this part of Hayek’s intellectual heritage is not as well known as that discussed in the previous section, I will discuss it in greater detail.7 Born in 1886, Carr-Saunders was educated at Eton and at the University of Oxford, where he proved to be a gifted student of biology (Stamp 1968: 319). He served as demonstrator in zoology from 1921 to 1923, when he accepted the Chair of Social Science at the University of Liverpool (Morrell 1997: 48–9). In 1937 he became Director of the London School of Economics, where he remained until his retirement in 1957 (Stamp 1968: 319). He is also known for his key involvement in the British eugenics movement (Blacker et al. 1967: 4), and for his active role in establishing university colleges overseas (Stamp 1968: 319). He was knighted in 1946, and he died in 1966. A reader of Hayek’s work on cultural evolution will be struck by the sheer number of references to The Population Problem (Carr-Saunders 1922). Indeed, from 1967 to 1988, Hayek looked to the book for support in virtually every passage in which he discussed the theory of cultural evolution.8 It is clear that Hayek was well aware of Carr-Saunders’ work, and took it to be highly relevant for his own purposes. Thus, there is prima facie evidence that Carr-Saunders’ work had an impact on Hayek’s thought on evolutionary matters. Furthermore, as we will see

Hayek on cultural evolution 81 next, there are striking structural similarities between Hayek’s theory of cultural evolution and that of Carr-Saunders. The Population Problem is a treatise on the “quantity and quality of the population” (Carr-Saunders 1922: 17). The book is an attempt to put problems of population in a new perspective by giving them a systematic treatment from a historical and evolutionary perspective (Carr-Saunders 1922: 5). Every people at every time, in Carr-Saunders’ view, faces problems of quantity, and the need to solve it has had “a profound effect on all societies” (Carr-Saunders 1922: 476–7). In particular, the threat of overpopulation among what Carr-Saunders called “primitive races” has spawned powerful traditions of abstention, abortion, and infanticide (CarrSaunders 1922: 476). When it comes to problems of quality, Carr-Saunders discussed how the development of human races has been affected by “germinal changes” in physical and mental characteristics (Carr-Saunders 1922: 477–8). He concluded that germinal changes might improve the physical condition of the human race, but that “the course of history is in the main dependent upon changes in tradition” (Carr-Saunders 1922: 481–2). Central to the argument of The Population Problem is the thesis that every population has an optimum size. Given an area of land, the arts of production, social conditions, and so on, there is an optimum number, namely, the number that maximizes return per capita (Carr-Saunders 1922: 200–1, 476). Carr-Saunders maintained that as a matter of fact human populations regulate their numbers in such a way that the optimum size is approximated. Several different factors serve to regulate numbers, and in particular to limit the increase of the population. For example, “primitive peoples” rely on prolonged abstention from intercourse, abortion, and infanticide to maintain their optimum size, and these factors tend to be present to the appropriate degree (Carr-Saunders 1922: 214). Carr-Saunders asked how the customs limiting population growth came to be practiced to the appropriate degree. He answered: Now men and groups of men are naturally selected on account of the customs they practise just as they are selected on account of their mental and physical characters. Those groups practising the most advantageous customs will have an advantage in the constant struggle between adjacent groups over those that practise less advantageous customs. Few customs can be more advantageous than those which limit the number of a group to the desirable number, and there is no difficulty in understanding how – once any of these three customs had originated – it would by a process of natural selection come to be so practised that it would produce an approximation to the desirable number. (Carr-Saunders 1922: 223) The question is answered in terms of “group selection,” a term that Carr-Saunders used freely (Carr-Saunders 1922: 455). According to the theory he developed, first, there are differences between groups of people, in particular between the customs

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and traditions adhered to by different groups. Second, natural selection acts on differences between groups, in particular on the differences in customs between groups. Third, groups practicing the most advantageous customs have an advantage in the struggle with other groups. Thus, the surviving groups practice the most advantageous customs – in this case, customs that serve to regulate numbers in the appropriate way. In a carefully worded passage, Carr-Saunders continued: the tradition acquired and present at any one time may form the basis for the selection of men and of groups of men. There are often, especially among the higher races, differences in tradition as between the groups and classes in the same race. The differences are usually much greater between different races. The tradition present in a race, whether because it includes a higher degree of skill, enables a greater degree of coherence to be realized, is the foundation of more vigorous endeavour, or because it is a combination of these and other elements, may enable one race, when in conflict with other races, to overcome those other races, should the latter be possessed of a tradition, which, taken as a whole, is, relatively to the conditions of the contest, less valuable. (Carr-Saunders 1922: 416–17) The first part of the quote repeats Carr-Saunders’ claim that natural selection acts not only on individuals, but on groups as well. As a result, selection acts on differences between races and between classes within a race. In this process of selection, races that practice more valuable traditions will tend to overcome those that practice less valuable ones. By way of illustration, Carr-Saunders discussed the differences between those European races that are “larger and more prosperous,” and those that are “smaller and weaker” (Carr-Saunders 1922: 416). In particular, he said, “The attitude of the Englishman is very different from that of the Dane, who will tell you that Denmark is only a little country that wants to be left alone” (Carr-Saunders 1922: 416). There is no doubt here which race possesses the more valuable tradition. CarrSaunders apparently also believed that the upper classes were the most valuable, as he deplored the “unfavorable germinal changes” which would result from a reduction in their birthrates (Carr-Saunders 1922: 475–6). If the upper classes were more valuable as a result of cultural evolution, this would be consistent with Carr-Saunders’ claim that group selection operates between classes as well as between races. Carr-Saunders’ theory of cultural evolution is strikingly similar to that of Hayek. Both believed that cultural evolution is a matter of group selection rather than of individual selection, imitation, or some other mechanism. While Carr-Saunders did not draw Hayek’s distinction between rules and order, both of them believed that selection operates (directly or indirectly) on the rules or traditions adhered to by different groups. Furthermore, both maintained that the characteristics on which selection operates may be acquired as well as inherited. In Carr-Saunders’ terms,

Hayek on cultural evolution 83 differences in traditions between groups may or may not be “a measure of more fundamental [germinal] differences” (Carr-Saunders 1922: 417). Thus, with the exception of the distinction between rules and order, the two main elements of Hayek’s theory of cultural evolution are clearly present in Carr-Saunders’ work. The similarities between the theories of Hayek and Carr-Saunders are especially notable since a belief in cultural evolution in no way implies a commitment to any particular theory or mechanism of evolution. While not conclusive by themselves, strong structural similarities suggest that one of the two thinkers inspired the other, or that they borrowed from similar sources. Clearly, Carr-Saunders could not have drawn on Hayek’s work, since The Population Problem was published when Hayek was still a student at the University of Vienna (Gamble 1996: 15–16), some 45 years before the appearance of Hayek’s “Notes” in 1967. Furthermore, Hayek explicitly said he knew of no one before Carr-Saunders who articulated the thesis that selection operates on acquired habits and traditions (Hayek 1988: 16). This statement undercuts the hypothesis that the structural similarities between Hayek’s theory and that of Carr-Saunders result from their drawing on similar sources.9 Thus, the influence is likely to have run from Carr-Saunders to Hayek. The fact that Hayek repeatedly quoted Carr-Saunders’ work, and the fact that their theories are so similar in relevant respects, are only some of the considerations that support Carr-Saunders’ impact on Hayek. There are several other reasons to believe that Carr-Saunders significantly inspired Hayek’s evolutionary thought. Hayek and Carr-Saunders knew each other well, as they were close colleagues at the LSE between 1937 and 1949. Hayek held a professorship at the LSE from 1932 to 1949, when he moved to Chicago (Hayek 1994a: 76), and Carr-Saunders served as the Director of the LSE from 1937 to his retirement in 1957 (Stamp 1968: 319). During World War II, the two were among a small number of teachers who were evacuated to Cambridge, where Hayek was a member of the Appointments Committee that Carr-Saunders chaired, and that, incidentally, was responsible for hiring the philosopher Karl Popper (Watkins 1997: 657–8). Thus, not only did Hayek know Carr-Saunders’ works well, he had known the man for some three decades before publishing the “Notes” in 1967. For this reason, the two had ample opportunity to discuss their scientific, social, and political views. It is hard to believe that they never seized this opportunity, especially since both were relatively well-known social theorists by the time they became colleagues. The contention that Hayek and Carr-Saunders had a close intellectual relationship is supported by the fact that they maintained a correspondence. The Hoover Institution Archives contain at least 15 letters between the two.10 Though most of their correspondence concerns administrative matters, some indicate that Hayek and Carr-Saunders read and discussed each other’s work. In 1949, for example, Carr-Saunders wrote a two-page handwritten response to a recent publication of Hayek (Carr-Saunders 1949). In the letter, Carr-Saunders listed a number of points of agreement between the two, but noted that he had “difficulties about the composition of the ‘intellectuals’ and about the way in which they

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gain and exert influence” (Carr-Saunders 1949: 1). Also, he objected that Hayek failed to discuss “socialism and the prevailing cosmology,” and argued that “naturalism” – which Carr-Saunders called “demonstrable nonsense” – was in part to blame for the appeal of socialism (Carr-Saunders 1949: 2). Hayek appears to have kept Carr-Saunders informed about his publications also after leaving London. So, in 1952 Carr-Saunders wrote to thank Hayek for sending a copy of his book The Sensory Order, which was published that year (Carr-Saunders 1952).11 As we have seen, Carr-Saunders studied biology at Oxford, and remained there as a demonstrator of zoology for several years before moving to Liverpool. However, there are many other indications that Hayek drew inspiration from Oxford zoology, including a clearly demonstrated interest in various zoological issues, and a number of references to important Oxford zoologists other than Carr-Saunders. Incidentally, since some of the other Oxford figures themselves appear to have been inspired by Carr-Saunders, the considerations brought forth in this section indicate that Carr-Saunders, through the work of his fellow Oxford zoologists, influenced Hayek indirectly as well as directly. Even a cursory glance at some of Hayek’s writings reveals a definite interest in zoology, a field that includes ethology, the study of animal behavior, and ecology, the study of interrelationships between organisms and their environment. Consider, as an example, Hayek’s “Notes.” The article contains a wealth of references to titles like “Termite Nests: A study of phylogeny of behavior” (Emerson 1938), Behavior and Evolution (Roe and Simpson 1958), and Animal Dispersion in Relation to Social Behavior (Wynne-Edwards 1962). Moreover, the “Notes” relies on a great number of examples from the animal kingdom, as Hayek discussed the behavior of geese, buffaloes, and lions, as well as bees, ants, and termites (Hayek 1967: 69). Throughout the article, furthermore, Hayek emphasized how order results from a complex interplay between the behavior of organisms and the environment in which they live. Elsewhere, Hayek praised “the great development of the fascinating study of ethology” (Hayek 1979: 153). Beyond his interest in issues of zoology, Hayek’s work shows clear signs of an Oxford zoology influence. Most of the zoologists to whom Hayek referred were students or teachers of zoology at Oxford at some point in time, and many were there around 1920, when Carr-Saunders published his ideas on population. In what follows, I discuss three other important Oxford zoology influences on Hayek’s evolutionary thought: Julian S. Huxley (1887–1975), Alister C. Hardy (1896–1985), and Vero C. Wynne-Edwards (1906–97). This is not, however, an exhaustive list. Other names that could be mentioned in this context include 1960 Nobel laureate Peter Medawar (1915–87), a 1935 Oxford graduate who remained there until 1947 (Morrell 1997: 51),12 and 1973 Nobel laureate Nikolaas Tinbergen (1907–88), who came to Oxford in 1949 and was professor of animal behavior from 1966 to 1974 (Morrell 1997: 274).13 Julian S. Huxley, born in 1887, came to Oxford from Eton in 1906 (Zuckerman 1986: 439). He gained a degree in zoology in 1909, and won a fellowship that allowed him to work for a year in a marine biological laboratory in Naples. Later he returned to Oxford zoology as a lecturer from 1910 to 1912, and as a senior

Hayek on cultural evolution 85 demonstrator from 1919 to 1925, when he was appointed professor of zoology at King’s College, London (Zuckerman 1986: 439). During his time in Oxford, he tutored several students who were to become prominent zoologists in their own right, including Charles S. Elton (1900–1991), Wynne-Edwards, and Hardy (Baker 1976: 211). Huxley passed away in 1975. In his major work Evolution: The modern synthesis ([1942] 1974), Huxley appears to have defended both group selection (under certain circumstances) and the idea that behavior shapes evolution. About group selection, he wrote: “An interesting type of selection . . . may occur in forms which exist in numerous and relatively isolated local populations” (Huxley [1942] 1974: 479). He referred to this kind of selection as intergroup selection, and asserted: “It is probable that this type of evolution has played a considerable role in some kinds of species” (Huxley [1942] 1974: 479). As for the evolutionary significance of behavior, Huxley wrote that “an organism may in the first instance become adapted to an ecological niche merely by behaviour (whether genetic or purely habitual) and any consequent non-heritable modifications” (Huxley [1942] 1974: 524, cf. p. 304). The contrast between “genetic” and “purely habitual,” among other things, indicates that he allowed for the possibility that such behavior may not be inherited. He added: “The principle is an important one which would appear to have been unduly neglected by recent evolutionists” (Huxley [1942] 1974: 524). Hayek frequently referred to Huxley, both in support of the idea of group selection and in support of the idea of selection for acquired characteristics.14 Also, there are passages in Hayek’s work in which a debt to Huxley is not clearly acknowledged, but which nonetheless appear to reflect his influence. For example, when Hayek wrote that cultural evolution because of selection for habits and the like “simulates Lamarckism” (e.g. in Hayek 1988: 25), his phrase is identical to Huxley’s own (e.g. Huxley [1942] 1974: 304). Finally, Hayek and Huxley met at the 1959 Darwin Centennial Celebration in Chicago. Hayek was involved in some of the preparations before the meeting,15 where Huxley delivered the Convocation Address (Huxley 1970: 192). Later, when Hayek had realized that biologists no longer considered group selection quite so important, he invoked Huxley to underscore the differences between biological and cultural evolution (Hayek 1988: 25). It seems clear, therefore, that Huxley exerted some amount of influence on Hayek’s evolutionary thought. Huxley himself may have been inspired by Carr-Saunders. Though Huxley did not cite Carr-Saunders in his Evolution ([1942] 1974), Huxley referred to both Carr-Saunders and The Population Problem in his memoirs: “It was around this time [1925] that I read my old colleague Carr-Saunders’ remarkable book on population, in which he showed that primitive people all over the world had deliberately adopted some method of regulating their numbers. This made me think hard” (Huxley 1970: 149). Moreover, the two knew each other since well before 1925. They were colleagues at Oxford in the early 1920s, of course, but they also ran experiments together (Huxley 1970: 143), and jointly participated, with Elton and others, in the 1921 expedition to Spitsbergen (Huxley 1970: 128). In 1935 Carr-Saunders and Huxley collaborated on the book We Europeans

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(Huxley et al. 1935; see Huxley 1970: 216). They kept in touch also later in life, for Huxley and his wife spent a few days with Carr-Saunders and his wife shortly before Carr-Saunders’ death in 1966 (Huxley 1973: 229). Thus, it is not implausible that Huxley’s views on group selection, and the evolutionary significance of behavior, were in part shaped by Carr-Saunders’ influence. Alister C. Hardy, born in 1896, also received his education at Oxford (Porter 1994: 308), where he was tutored by Huxley (Morrell 1997: 284). Although Huxley wanted him to be demonstrator of comparative anatomy, Hardy left Oxford in 1921 – one year after his graduation – in order to work for the Ministry of Fisheries (Morrell 1997: 271). He had developed an interest in marine biology when, like Huxley, he spent a year at the Naples research station (Morrell 1997: 284). After serving at Hull and Aberdeen, he came back to Oxford as professor of zoology in 1946 (Porter 1994: 308). Hardy remained in Oxford until 1963, when he took up a lectureship in Aberdeen (Porter 1994: 308). He died in 1985. To the best of my knowledge Hardy did not defend a theory of group selection, but he did emphasize what he called “behaviour as a selective force” (Hardy 1965: 153). In particular, he dedicated a whole chapter of one of his most important books, The Living Stream (1965), to the topic. Hardy feared that contemporary evolutionary theory was incomplete, since it failed to consider “the behavioural side in the working of animal evolution” (Hardy 1965: 155). He asked: “How, in fact, do I believe that changes in behaviour alter the course of evolution? Quite simply by a form of Darwinian selection” (Hardy 1965: 161). For example, he wrote, if birds of some species learn that they can get more prey by pecking deeper into the bark of trees, over time that species is likely to develop a new shape of beak. The new shape is a result of Darwinian selection, but the “evolutionary change is one caused initially by a change in behaviour” (Hardy 1965: 170–1). Thus, the change in behavior precedes the change in genes, not the other way around. In Hardy’s view, this is “one of the major factors in the evolutionary process: by this means, the changing habits of animals become, at least in the higher groups, the dominant factor in the process” (Hardy 1965: 163). Hayek invoked Hardy in support of the thesis that selection acts on acquired characteristics, and that the acquisition of such characteristics may over time come to affect the purely genetic material of a species.16 Thus, Hayek wrote that “acquired cultural traits may affect physiological evolution – as is obvious in the case of language” (Hayek 1979: 155; cf. p. 199). He added, however, that he found it hard to believe that Hardy would be “the first to point out this reverse effect of cultural on biological evolution,” but called the idea “a major breakthrough of decisive importance” (Hayek 1979: 199). No matter, it is clear that Hayek, in Hardy’s work, found support for the thesis that natural selection operates on acquired as well as on inherited characteristics. It is unclear, however, to what extent Carr-Saunders influenced Hardy’s intellectual development. The Living Stream contains no references to Carr-Saunders’ work. Instead, Hardy credited Huxley – especially Evolution: A modern synthesis (Huxley [1942] 1974), and the passages quoted earlier – with directing him to the

Hayek on cultural evolution 87 idea of behavior shaping evolution (Hardy 1965: 161–2). Yet, it is likely that Carr-Saunders and Hardy knew each other, since they were at Oxford at the same time. Moreover, it is hard to imagine that Hardy was not exposed to the ideas expressed in Carr-Saunders’ work at some point during his time at Oxford. Born in 1906, Vero C. Wynne-Edwards came to Oxford in order to study zoology in 1924 (Wynne-Edwards 1985: 489). He was tutored first by Huxley, and then by Elton, himself a former student of Huxley (Baker 1976: 211). Elton, who was greatly interested in population ecology, was responsible for giving Wynne-Edwards his lasting interest in questions of population. In fact Elton suggested early on that Wynne-Edwards should read Carr-Saunders’ The Population Problem (Wynne-Edwards 1985: 490–2). Wynne-Edwards later served at McGill and at the University of Aberdeen (1985: 500–1). He died in 1997. Wynne-Edwards’ major work, Animal Dispersion in Relation to Social Behavior (1962) is a forceful defense of group selection among natural populations. Interestingly, Wynne-Edwards’ theory of group selection is virtually identical to that of Carr-Saunders. Wynne-Edwards too was concerned with explaining the control of population, and assumed that there is an optimum population size for each given population and habitat; that natural populations as a matter of fact closely approximate this size; and that groups of animals exhibiting the right behavior have been favored by evolution (Wynne-Edwards 1962). In his own words: “it must be highly advantageous to survival, and thus strongly favoured by selection, for animal species (1) to control their own population-densities, and (2) to keep them as near as possible to the optimum level for each habitat they occupy” (Wynne-Edwards 1962: 9); “Evolution at this level can be ascribed, therefore, to what is here termed group selection” (Wynne-Edwards 1962: 20). Just like Carr-Saunders, Wynne-Edwards allowed selection to operate also on acquired characteristics like traditions: Conventional behaviour frequently turns out to be essentially inborn or instinctive . . . But a second very important constituent of conventions is found in tradition, the distinctive feature of which is the element of learning acquired by each new generation from its predecessors. (Wynne-Edwards 1962: 449) In sum, Wynne-Edwards’ theory, though applied to species other than humans, is virtually indistinguishable from that of Carr-Saunders. Hayek repeatedly invoked Wynne-Edwards’ book, which appeared some five years before the “Notes.”17 Hayek referred to it both in support of group selection, and in support of the idea that human traditions may be the result of an evolutionary process (cf. especially Hayek 1973: 164). Because of the similarities between Wynne-Edwards’ theory and that of Carr-Saunders, Hayek is likely to have seen the two as mutually supportive. I take it for granted, therefore, that Wynne-Edwards exerted some amount of influence over Hayek’s work. So does Viktor J. Vanberg, who wrote: “When Hayek made the notion of group selection a key concept in his theory of cultural evolution he obviously

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was influenced by the discussion on ‘group selection’ in biology, and notably by V. C. Wynne-Edwards’ (1962) treatise on the subject” (Vanberg 1986: 85–6). Wynne-Edwards claimed to have developed his theory independently of CarrSaunders, and to have found out “only relatively late in the day” that “so distinguished a student” had anticipated his conclusions (Wynne-Edwards 1962: 21–2; cf. 1985: 492). Wynne-Edwards’ claim of independent discovery is somewhat dubious, however, since he made it clear that he had read The Population Problem well before developing his own theory. In the introduction to Animal Dispersion (1962), he wrote: [On] my tutor Mr. Elton’s strong recommendation, I bought a copy of The Population Problem a few months before my final examinations at Oxford in 1927; but it was not until nineteen chapters of the present work had been finished, in 1959, that I re-read Carr-Saunders’ chapter on “The regulation of numbers among primitive races,” and, not without astonishment and satisfaction, found so many of my own conclusions anticipated. (Wynne-Edwards 1962: 493) Of course, “re-read” implies having read it before. Thus it is highly likely that, at some level of consciousness, Carr-Saunders’ work also inspired that of WynneEdwards. In this section, I have argued that Hayek’s evolutionary thought was inspired by early twentieth-century Oxford zoology. Not only did Hayek have a clearly demonstrated interest in various zoological issues, but he also drew on a number of Oxford zoologists, especially Huxley, Hardy, and Wynne-Edwards. All three were present around 1920, when Carr-Saunders developed and published his ideas on population; it is hardly a coincidence that similar ideas surfaced in their work.18 It is relevant that these events took place during “the eclipse of Darwinism,” when the Darwinian conception of evolution was under heavy attack (Huxley [1942] 1974: 22; Bowler 1983), and that Oxford at the time was perhaps the main Darwinian stronghold (Morrell 1997: 269). Therefore, the evolutionary conception defended by Carr-Saunders, Huxley, Hardy, and Wynne-Edwards to a large degree reflects their common Oxford background. In passing, I have argued that at least Huxley and Wynne-Edwards, but likely also Hardy, were themselves inspired by Carr-Saunders. My emphasis on the influence exerted by Carr-Saunders, as opposed to that exerted on him, is not to suggest that the influence was a one-way affair. However, it is significant that Carr-Saunders published his ideas about group selection and selection for acquired characteristics so much earlier than the others. This fact clearly suggests that Carr-Saunders was mainly responsible for these ideas, and that he affected the others at least in this respect. Thus, this section provides evidence that CarrSaunders influenced Hayek’s evolutionary thought also indirectly, through other Oxford zoologists. It may be objected that the thesis that Carr-Saunders inspired Hayek’s evolutionary thought is undermined by the fact that Hayek’s autobiographical remarks

Hayek on cultural evolution 89 fail to acknowledge the influence of Carr-Saunders, instead emphasizing the importance of Menger and the British moral philosophers (see Hayek 1994a). There are, however, several reasons why Hayek should downplay Carr-Saunders’ influence on his intellectual development. First, it is possible that Hayek wanted to escape the criticism that he was illegitimately importing biological concepts into social science (cf. 1973, pp. 22–3). By claiming that he drew on the British moral philosophers – the very sources he claimed Darwin used – Hayek could preempt that objection. This interpretation is strengthened by the fact that Hayek’s main autobiographical work (1994) makes no mention of Carr-Saunders, Huxley, Hardy, or Wynne-Edwards. In contrast, Hayek had much to gain from associating himself with important economists and philosophers like Menger, Smith, and Hume, who were also widely respected outside of economics. Second, Hayek may have wanted to distance himself from Carr-Saunders because of the implications of his analysis. Hayek himself noted that “CarrSaunders stressed the capacity to restrict rather than to increase population” (Hayek 1988: 16). As we saw earlier in this chapter, Carr-Saunders’ analysis implied that norms favoring abortion and infanticide were adaptive; Hayek wanted to defend institutions like the family and private property. Hayek may also have wanted to distance himself from Carr-Saunders because of the latter’s association with the eugenics movement. When Hayek published his “Notes” in 1967, for example, the eugenics movement had been in decline for some time; before his death in 1966, even Carr-Saunders himself tried to gain distance from it.19 Moreover, the eugenicists were often motivated by what Hayek would have called “socialist ideology,” an ideology with which he certainly did not want to be linked. Either way, there were many reasons why Hayek, consciously or not, should downplay the importance of Carr-Saunders for the development of his thought, and instead emphasize the importance of intellectual giants like Menger, Smith, and Hume. In conclusion, there is good reason to think that Hayek’s evolutionary thought was significantly inspired by Carr-Saunders and other Oxford zoologists. As an account of Hayek’s adoption of a theory of cultural evolution through group selection, the thesis that Hayek was significantly inspired by Carr-Saunders in particular is far better supported than more traditional accounts. Unlike Menger and the Scottish moral philosophers, Carr-Saunders in fact relied on a theory of group selection. As a result, the present account does not underdetermine the most characteristic aspect of Hayek’s evolutionary thought.20 However, this account too leaves at least one question unanswered. While the claim that Hayek was inspired by Carr-Saunders and others is eminently plausible, and explains how Hayek got acquainted with the theory of group selection, it fails to address why a theory of group selection would so appeal to Hayek that he would make it the centerpiece of his theory. Even if Hayek was exposed to that theory as a result of making Carr-Saunders’ acquaintance, we can still ask why he would adopt it, that is, what Hayek was trying to achieve by adopting it. One suggestion is simply that Hayek was fascinated by the functionality of the price mechanism and posed himself the question, “How could such a marvelous functionality come into existence?”

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(de Vlieghere 1994: 285). Carr-Saunders’ theory, with its group selectionism, provided the beginning of an answer to this question. In the next section, I will explore this issue further.

The Natural Law origins of Hayek’s theory of cultural evolution Earlier in this chapter, I argued that Hayek’s work on cultural evolution can be described as substantiating the distinguishing idea of Natural Law doctrine. This fact – in combination with Hayek’s Natural Law heritage – suggests a novel account of his adoption of the theory of cultural evolution through group selection. According to this account, Hayek adopted the theory of group selection because he wanted to defend the distinguishing idea of Natural Law doctrine, and because he took the theory of group selection to support his belief in the superiority of spontaneous order over artificial order. That is, Hayek adopted the theory of cultural evolution through group selection because he took it to substantiate the distinguishing idea of Natural Law doctrine. Once more, I will explain what I have in mind by way of Taylor’s 1929 paper. By the end of his historical survey, Taylor (1929) made it clear that he wants to find the kernel of truth in Natural Law doctrine. While Taylor wished to dissociate himself from the theological connotations of certain versions of Natural Law doctrine, he also argued that we can preserve a belief in the tendency toward order and harmony (Taylor 1929: 34). This is, of course, the doctrine of economic harmonies, which we discussed in Chapter 4. Taylor wrote: For even when we reject the notion that Providence ordained the laws of nature, we do not therefore necessarily reject the belief, which must of course be tested by facts, that the processes described by scientific laws are processes of adjustment of things to changing conditions, which tend to preserve a certain measure of “order” and “harmony”; or to insure, under all conditions, the effective functioning of individual entities in the systems of which they are parts. (Taylor 1929: 31) Thus, Taylor believed that the Natural Law tradition was entirely correct in assuming that there are tendencies toward adjustment, order, and harmony, as well as toward coordination between individual members of a system. Indeed, he supported this contention by pointing to the history of science, singling out the theory of natural selection as presupposing the existence of tendencies toward increasing adjustment or adaptation: “Nor has this idea ever disappeared from scientific thought. Even the theory of evolution by natural selection . . . is an alternative explanation, and not a denial, of the ‘adaptations’ on which that argument was based” (Taylor 1929: 31). In Taylor’s view, then, the theory of natural selection substantiates the thesis that there are natural tendencies toward mutual adjustment, order, and harmony.

Hayek on cultural evolution 91 Next, Taylor added that there are important analogies between those tendencies toward order and harmony that can be found in the biological and economic realms. He wrote: There is certainly an analogy between this and the idea that in the economic life of human societies, the “natural” working of competition brings about an adjustment or adaptation of the whole economic system to the physiographic environment, and of every individual to the economic system of which he is part. (Taylor 1929: 32) Finally, Taylor suggested that the relationship between tendencies toward order in the biological and economic realms are stronger than a mere analogy. In fact, he maintained, the very same process is at work in both realms. He wrote: “[Institutions] and mores . . . have been built up by [among other things] a kind of automatic ‘natural selection’ of elements in the institutional fabric which further ‘group survival’ ” (Taylor 1929: 38). The institutions that emerge are the result of this process of natural selection which favors “group survival.” Although it would not be anachronistic to say that Taylor committed himself to a theory of group selection here, since Carr-Saunders had used that term in 1922, it would be slightly misleading, as Taylor does not use the term. Still, his focus on the survival of the group, as opposed to the individuals composing it, is certainly intriguing. Having asserted that institutions and mores evolve in a process of natural selection favoring group survival, Taylor went on to say that institutions and mores that evolved in such processes – which, as we have seen, serve to increase adjustment and adaptation – may do such good work that they are better than deliberately designed institutions. As he put it: “The automatic or ‘natural’ part of the process of the growth of institutions may do better work in the long run than deliberate efforts guided by insufficient knowledge and foresight can do” (Taylor 1929: 38). Notice that Taylor did not say that evolved institutions are necessarily perfect. Still, he did believe that there are reasons to think that they are better than deliberately designed institutions and mores. The reason why he thinks they may be better is because the designer has “insufficient knowledge and foresight.” That is, it is our ignorance – about both the present and the future, it seems – that hobbles our efforts to develop institutions that are better than those that have evolved in a process of natural selection favoring group survival. In summary, Taylor took the theory of natural selection – in a version according to which what matters is group survival – to offer a scientific basis for core ideas of Natural Law doctrine. In Taylor’s view, the theory explains how such orders can appear “automatically” or “naturally.” The theory also explains why such orders are frequently adaptive, harmonious, and efficient, and why, in spite of the fact that the resulting order may not be perfect, in light of our insufficient knowledge and foresight, it is likely to be better than any alternative. Because he took grown institutions to emerge in a process of natural selection, Taylor nowhere assumed that people living under such institutions need to know about the good work accomplished by such institutions.

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The account I want to defend is that Hayek adopted his theory of cultural evolution through group selection for much the same reasons that Taylor adopted his story of natural selection favoring group survival. The two positions, of course, are extremely closely related. Other than the fact that Hayek does, and Taylor does not, use the term “group selection” to refer to natural selection favoring group survival, the two positions are virtually indistinguishable. In my view, Hayek too took the theory of natural selection – in a version according to which what matters is the order of the group – to offer a scientific basis for the distinguishing idea of Natural Law doctrine. Like Taylor, Hayek believed that the theory explains how such orders can appear “automatically” or “naturally,” why such orders are often adaptive, harmonious, and efficient, and why, in spite of the fact that the resulting order may not be perfect, in light of our insufficient knowledge and foresight, they are likely better than any alternative. On the face of it, it is fairly plausible that somebody who is committed to the distinguishing idea of Natural Law doctrine should be tempted to develop what Hayek called a theory of cultural evolution. As we saw before, anybody who is committed to the distinguishing idea of Natural Law doctrine is also committed to the meaningfulness of the distinction between natural and artificial orders, as well as to the existence of natural orders. Thus, he or she may feel compelled to explain how it is possible for there to be natural orders in the first place, as well as how it is possible for them to be superior to artificial orders. This purpose is achieved by developing a theory of cultural evolution. Certainly Taylor felt the need to offer such an explanation; it is not implausible to suggest that Hayek did the same. It might be asked why Hayek would bother developing his own theory of group selection instead of just borrowing one from Menger or the Social Darwinists. It is instructive, therefore, to consider why Hayek rejected other attempts at developing what he called a theory of cultural evolution. Part of the answer to the question of why Hayek adopted a theory of group selection, as opposed to other kinds of theory, is that he was for various reasons disappointed with previous efforts to develop theories of cultural evolution. This idea is implicit in the following passage: Hayek turned to group selection to answer these questions because (1) he didn’t think (unlike, say, someone like Menger) that all such institutions could be explained as the outcome of self-interested individual action, and (2) he saw the only other alternative framework, that of sociobiology, as being too single-minded, too all-encompassing. (Caldwell 2000: 299) In the remainder of this section, I will discuss in greater detail Hayek’s disappointment with earlier theories of cultural evolution. When it comes to Social Darwinism, Hayek was explicit about his reason for rejecting it. In 1973, for example, Hayek wrote: “The error of ‘Social Darwinism’

Hayek on cultural evolution 93 was that it concentrated on the selection of individuals rather than on that of institutions and practices, and on the selection of innate rather than on culturally transmitted capacities of the individuals” (Hayek 1973: 23).21 Regarding Menger’s theory, there appear to have been several reasons why Hayek chose not to adopt it. It seems to me that the question should be answered by considering the role that Hayek wanted his theory of cultural evolution to play in his system. Hayek was convinced that spontaneous orders were superior to artificial ones, even though they often did not seem so to the people affected by them, and he wanted a convincing argument to this effect. As we saw earlier, Hayek’s own theory of cultural evolution could be used to develop an argument in favor of this conclusion. Since the competitive market is a spontaneous order, since spontaneous orders evolve in a process of natural selection at the level of groups, and since the outcome of an evolutionary process tends to be desirable (in a normative sense), the spontaneous order of the competitive market is a desirable social arrangement. Meanwhile, there is no reason at all to assume that the people affected by the spontaneous order should be aware of its desirable qualities. In fact, Hayek argues, people in general (intellectuals included) are often completely ignorant about the benefits associated with the competitive market. My hypothesis is that in Hayek’s view, Menger’s work did not support this conclusion strongly enough. If, say, the institution of money developed as a result of individuals learning how to act in their self-interest, it seems that they would typically realize that the institution of money makes them better off. If people did not immediately realize this, moreover, it should not be difficult to explain to them what the advantages were. Since on Menger’s theory people would in general grasp the advantages associated with orders of organic origin, the theory would not support Hayek’s position. Moreover, as far as I can tell, there is no obvious way to modify the account in such a way that it does. In contrast, by relying on the legacy of biology – especially zoology and Darwinian evolutionary theory – Hayek could develop an argument to the effect that spontaneous orders are superior but that we often fail to see it. If it is indeed true that the legacy of Menger did not (easily) allow for the development in favor of Hayek’s preferred conclusions, this goes a long way toward explaining why Hayek rejected Menger’s account of the genesis of institutions of organic origin. It should be immediately clear that the present account does not deny that classical liberal economists like Smith and Menger, as well as Carr-Saunders, played a central role in the development of Hayek’s evolutionary thought. On the contrary, this account explicitly assumes rather than denies that their writings – especially Carr-Saunders’, since he is the only one of the three who actually had a theory of group selection – were critically important to the development of Hayek’s evolutionary thought. As a result, the present account is intended to add to, rather than to replace, traditional accounts of the origin of Hayek’s evolutionary thought. (Once more, this is not to say that anything in Hayek’s past necessitated his later intellectual development.)

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The present account has an important advantage over more traditional accounts, however, in that it can explain both why Hayek adopted a theory of cultural evolution through group selection, and why the classical liberal economists’ – especially Menger’s – and Carr-Saunders’ analysis of what he called cultural evolution would exert such an appeal on him. The question of why Hayek should have found inspiration in these thinkers’ work is not one that can be addressed by pointing to the fact that he did. The present account, by contrast, does have an answer to the question. Hayek was receptive to the classical liberal economists’ analysis of cultural evolution because he shared their Natural Law heritage, including their commitment to the distinguishing idea of Natural Law doctrine, and because he thought that the analysis supported it. Hayek was receptive to Carr-Saunders’ theory of group selection because he wanted to defend the distinguishing idea of Natural Law doctrine and because he thought the theory would allow him to accomplish that goal. Since the present account can explain something that more traditional accounts cannot, it has greater explanatory power. This is a significant advantage.

Discussion In this chapter, I have argued that Hayek’s work on cultural evolution can be seen as substantiating the distinguishing idea of Natural Law doctrine, that is, the superiority of spontaneous over artificial order. More specifically, Hayek’s theory of cultural evolution through group selection explains how orders appear spontaneously – without conscious human intervention – and how spontaneous orders can be superior to artificial order. These two claims are of course closely connected, in that the process that generates orders spontaneously also has a tendency to generate advantageous orders. Incidentally, the theory also explains how it is possible for people to often fail to appreciate the benefits conferred to them by the order under which they live. Together these ideas constitute a case for the superiority of spontaneous order. In all, we have identified yet another way in which Hayek can be said to be part of the Natural Law tradition: his work on cultural evolution – often considered the very centerpiece of his mature project – can be seen as supporting the distinguishing idea of this tradition. The Natural Law perspective suggests a novel account of the historical origins of Hayek’s work on cultural evolution. According to this account, he adopted his theory of cultural evolution through group selection because he wanted to substantiate the distinguishing idea of Natural Law doctrine. The question of why he wanted to do so will be further explored in Chapter 6. Because Hayek was already committed to the superiority of spontaneous order, he was receptive to arguments supporting that view and chose to modify and improve those arguments rather than starting from scratch. As he realized that the classical liberal economists, especially perhaps Menger, had supported their case for the superiority of spontaneous order by means of what Hayek called a theory of cultural evolution, he decided to follow their lead. However, he came to think that the picture painted by Menger, according to which cultural evolution depends

Hayek on cultural evolution 95 mainly on learning, was for various reasons unsatisfactory. Instead, Hayek decided to adopt Carr-Saunders’ theory, presented so as to convince his contemporaries, to build his case for the distinguishing idea of Natural Law doctrine. This account, which I have argued is explanatorily powerful, is intended to add to rather than replace more traditional accounts that emphasize Hayek’s intellectual debt to the classical liberal economists.

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Hayek’s transformation

In this chapter, I discuss a final way in which Hayek was part of the Natural Law tradition: Hayek’s desire to defend the superiority of spontaneous over artificial order – like that of many of his predecessors – was in large part fueled by opposition to socialism. In Chapters 4 and 5, I have discussed how Hayek went about defending the distinguishing idea of Natural Law doctrine. In effect, I suggested that Hayek pursued a two-track strategy by simultaneously developing an analysis of information and coordination and a theory of cultural evolution. This answer obviously presupposes that Hayek nurtured a desire to defend the distinguishing idea of Natural Law doctrine. Given the sheer volume of his writings stressing this point there is little doubt that he did. The question I want to address now is why he did. My answer is that Hayek’s desire to defend the distinguishing idea of Natural Law doctrine was in large part – though not entirely – driven by his opposition to socialism. Because Hayek in this respect was very much like earlier economists in the Natural Law tradition, this fact constitutes another way in which Hayek can be said to be part of the Natural Law tradition. The discussion in this chapter suggests a novel account of Hayek’s transformation, that is, the episode during which he all but abandoned technical economics and instead decided to pursue broader questions in political and social philosophy. According to the present account, Hayek’s transformation is best seen as a return to his roots in Natural Law doctrine, and especially to its commitment to the superiority of spontaneous over artificial order. I will argue that Hayek’s opposition to socialism – understood as the attempt to replace spontaneous order with artificial order – though further strengthened by a series of current events was ultimately due to his early exposure to Natural Law doctrine. Moreover, the argumentative strategies that he employed in his post-transformation work were obviously borrowed from his predecessors in the Natural Law tradition. Hayek returned to his roots in Natural Law doctrine because he thought that doing so would be the best way both to develop a cogent and convincing critique of contemporary socialist tendencies and to describe and defend the nature of a more satisfactory social order.

Hayek’s notion of equilibrium In this and the following sections, I will explore some of the main factors that Hayek scholars have identified as responsible for Hayek’s transformation; as we will see,

Hayek’s transformation 97 many of them are closely tied to Hayek’s opposition to socialism. I will begin by examining the treatment of Hayek’s transformation in Caldwell’s 1988 paper. There, Hayek’s evolving definition of “equilibrium” figures prominently. Caldwell argued that in Hayek’s early work, during the late 1920s and early 1930s, he expressed a number of misgivings concerning the standard notion of a “timeless, stationary equilibrium,” but he nevertheless insisted that “any legitimate economic explanation must employ some form of equilibrium construct” (Caldwell 1988: 514). In the 1937 article “Economics and Knowledge,” Caldwell wrote, Hayek offered “a new definition of equilibrium, one which explicitly links the concept of equilibrium with an assumption concerning knowledge and its acquisition” (Caldwell 1988: 514). In Hayek’s words: “It appears that the concept of equilibrium merely means that the foresight of the different members of society is in a special sense correct” (Hayek 1937: 41). It is worth noting, by the way, that there is something inherently dynamic about the new definition of “equilibrium.” One advantage of the new concept of equilibrium, in Hayek’s view, is that it does not presuppose that the data – in the sense of objective facts, and of people’s beliefs about them – are constant (Hayek 1937: 40–1). Thus, in one sense it appears that Hayek’s transformation was associated with a movement away from statics and toward dynamics. Hayek also points out that his concept of equilibrium does not assume that the underlying process is stationary (Hayek 1937: 41). Thus, his transformation seems to be associated with a movement away from the study of stationary processes to more complex dynamic ones. In Caldwell’s treatment, the evolution of Hayek’s concept of equilibrium was a result of his emergent ideas of the central problems of social science in general and economics in particular (Caldwell 1988: 514). Hayek had said that the problem was “how the combination of fragments of knowledge existing in different minds can bring about results which, if they were to be brought about deliberately, would require a knowledge on the part of the directing mind which no single person can possess” (Hayek 1937: 52). Hayek referred to this problem as the “coordination problem.” The problem, then, is to explain how it is possible for people to acquire the knowledge (foresight) that allows them to coordinate their plans in the absence of central direction. Thus, Hayek’s new conception of the central problem, like the new notion of equilibrium, has a clear dynamic character. What may be described as the critical event in Hayek’s transformation, on Caldwell’s account, was Hayek’s realization that equilibrium methods were incapable of offering an adequate solution to the central problem of social science. Thus, according to Caldwell, in Hayek’s view “standard equilibrium theory, because it assumes perfect foresight, is incapable of providing any insight concerning the solution of the problem” (Caldwell 1988: 515). As Hayek wrote: “Our problem of knowledge here is just the existence of this correspondence which in much of the current equilibrium analysis is simply assumed to exist” (Hayek 1937: 50). Presumably, the problem afflicts not just “standard” equilibrium theories, but also those that rely on the new concept of equilibrium. In Caldwell’s view, these passages from Hayek’s work help explain why he turned away from pure economics (Caldwell 1988: 515).1 If economics has to rely on equilibrium methods, and equilibrium methods are incapable of addressing the

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central problem of social science, it is only natural that Hayek should give up on standard economic theorizing. The reason why Hayek later turned to a fuller investigation of spontaneous order, in this view, is that such a project upholds the promise of answering how a spontaneous order might solve the coordination problem (Caldwell 1988: 533).2 Hayek’s realization that equilibrium methods were inadequate to address the central problem of social science may very well have helped drive his transformation. It is worth noting that this suggestion is consistent with the main thesis that I am defending in this chapter, namely, that Hayek’s transformation was driven in large part by his opposition to socialism. Indeed, as we will see in the next section, it is plausible to assume that his rejection of traditional economic methods was itself fueled by his opposition to socialism.

The socialist calculation debate Another important factor in Hayek’s transformation was his participation in the so-called socialist calculation debate of the 1930s. As Caldwell (1988) wrote: In the 1930’s Oskar Lange, Abba Lerner, E. M. F. Durbin, H. D. Dickinson and other advocates of market socialism came up with a simple but dramatic counter to the Austrian position. The essence of their argument is that the standard static equilibrium can be used to represent either a socialist or market economy . . . Formally, there is no logical difference between a market economy and a planned one; both can be represented by the standard equilibrium model . . . Rational calculation was possible after all, at least at the theoretical level. (Caldwell 1988: 534) As Caldwell described it, Hayek’s response to this debate was to explore questions of information. In Caldwell’s terms: “A necessary assumption for such a defense [of a socialist economy] is that the planners have complete and objectively correct knowledge about the state of the economy. What better way to defeat them than to challenge [this] assumption, and to put in its place a thoroughly Austrian assumption of subjectively-held and dispersed knowledge?” (Caldwell 1988: 536). Hayek’s position in the socialist calculation debate, then, required him to explain how plans can be coordinated in a world of dispersed knowledge. In Hayek’s view, as we will see shortly, equilibrium analysis upholds no hope of solving this problem. Worse, it may give the misguided impression that the central planning of the economy may, in fact, work. Caldwell’s analysis is perfectly consistent with my discussion of Hayek’s work on information and coordination as explored in Chapter 4 above, and it goes a long way toward explaining why Hayek turned away from technical economics. The analysis is well supported by textual evidence, and Caldwell’s hypothesis about Hayek’s involvement in the socialist calculation debate, as well as the importance he assigned to the coordination problem, is convincing. Incidentally,

Hayek’s transformation 99 Hayek himself awarded special importance to the 1937 article. In a 1964 lecture, “Kinds of Rationalism” (in Hayek 1967: 82–95), he wrote: Though at one time a very pure and narrow economic theorist, I was led from technical economics into all kinds of questions usually regarded as philosophical. When I look back, it seems to have all begun, nearly thirty years ago, with an essay on “Economics and Knowledge” in which I examined what seemed to me some of the central difficulties of pure economic theory. (Hayek 1967: 91) It goes without saying that such retrospective remarks should not be taken at face value, especially given the fact that Hayek made the remarks almost thirty years after the appearance of the article. Nevertheless, Hayek’s autobiographical note gives us some reason to look closely at this particular work. As we have seen, that work indicates that Hayek’s rejection of central planning – that is, of socialism – was a major motivating factor. Moreover, we have seen that opposition to socialism was not just consistent with Hayek’s rejection of equilibrium methods, but may have played a role in Hayek’s rejection of them.

The London School of Economics and The Road to Serfdom By all accounts, Hayek’s time at the London School of Economics in the 1930s and 1940s was a most fruitful one. He obviously enjoyed the intellectual environment. For example, he said that the School included “a quite extraordinary array of great talents and conversational gifts” (Hayek 1994a: 81). Hayek’s autobiographical remarks (especially Hayek 1994a) do not reveal much about how exactly the new intellectual environment affected his thinking, except insofar as it was shaped by interactions with his new colleagues. While in England, Hayek met figures like Keynes, Carr-Saunders, and Popper. Hayek disagreed with Keynes on a range of issues and used him as a target for much of his criticism (Hayek 1994a: 88; Ebenstein 2001: 67–73). Popper may have inspired Hayek’s intellectual development in many ways, as the two were close friends and colleagues for many years (cf. Ebenstein 2001, ch. 20). Carr-Saunders’ importance has already been extensively discussed in Chapter 5. Hayek was still in London when World War II broke out. There is no doubt that the war, and the events leading up to it, had a lasting impact on Hayek’s intellectual development. In particular, it surely contributed to Hayek’s shift toward more fundamental issues, for example, in methodology and political philosophy. Hayek clearly felt the need to counteract totalitarian ideology in its various forms. I take it that the best way to do so, in his view, was not by working on, for example, monetary theory, but by addressing more fundamental issues in political thought. Presumably, as an economist, Hayek believed that he was in a good position to defend the virtues of a society based on the spontaneous order of the free market. As we saw earlier, in Hayek’s view the economist’s most important task is to study spontaneous orders.

100 Hayek’s transformation After the outbreak of the war Hayek remained in England, but joined a small number of faculty – including Carr-Saunders – who were relocated to Cambridge (Watkins 1997: 657–8). One of Hayek’s main achievements there was The Road to Serfdom (1944), the writing of which Hayek considered part of the war effort (Ebenstein 2001: 119). If Hayek’s participation in the socialist calculation debate is what led to his transformation, as Caldwell maintained, there is little doubt that the experiences associated with the writing and publication of The Road to Serfdom (1944) provided more momentum for this development. Indeed, in some autobiographical passages, Hayek took this book to mark the beginning of his work outside of technical economics. In his 1976 preface to the reprint edition of The Road to Serfdom (Hayek 1994b: xxi–xxv), for example, Hayek noted: “This book, written in my spare time from 1940 to 1943, while my mind was still mainly occupied with problems of pure economic theory, has unexpectedly become for me the starting point of more than thirty years’ work in a new field” (Hayek 1994b: xxi). The reason why he got started on this new topic, Hayek claimed in the same preface, was a common misunderstanding of the true nature of totalitarian movements. He wrote: “This first attempt in the new direction was caused by my annoyance with the complete misinterpretation in English ‘progressive circles’ of the character of the Nazi movement” (Hayek 1994b: xxi). The thought had been further developed in the original introduction to The Road to Serfdom, where he wrote: “Few are ready to recognize that the rise of fascism and naziism was not a reaction against the socialist trends of the preceding period but a necessary outcome of those tendencies” (Hayek [1944] 1994b: 6). He added: “As a result, many who think themselves infinitely superior to the aberrations of naziism, and sincerely hate all its manifestations, work at the same time for ideals whose realization would lead straight to the abhorred tyranny” (Hayek [1944] 1994b: 6). Far from being a serious alternative to nazism, in Hayek’s view, socialism was a precursor to it. Because of its socialist tendencies, he feared that England would repeat the fate of Germany (Hayek [1944] 1994b: 4). This explains why Hayek in 1944 would write a treatise against socialism at a time when national socialists and fascists were considered the great enemy. One instantiation of the socialist tendencies that Hayek deplored in “progressive circles” of the 1930s and 1940s may have been the eugenics movement. There is no doubt that Hayek at the time knew the movement from up close. CarrSaunders was one of the principal figures of the British eugenics movement, Honorary Past President of the Eugenics Society, editor of The Eugenics Review, and first recipient of the Galton Medal in 1944 for “the invaluable services which he had rendered in the past and continued to render both to the Society and to the cause of eugenics” (Blacker et al. 1967: 4). Moreover, Hayek’s colleague John Maynard Keynes was associated with the movement. Geoffrey Fishburn wrote that eugenics for Keynes was a “life-long preoccupation” (Fishburn 1983: 3). Between 1937 and 1944 he served as the vice-president of the Eugenics Society (Fishburn 1983: 5). In a 1946 tribute to Carr-Saunders at the Society, Keynes praised eugenics as “the most important, significant, and, I would add, genuine

Hayek’s transformation 101 branch of sociology which exists” (Blacker et al. 1967: 5). Surely, Hayek considered eugenicists’ attempts to improve the racial stock of society an instantiation of the socialist or “engineering” mindset, which he denounced, for example, in The Counter-Revolution of Science (Hayek 1952a: 165–82; cf. Angner 2002a: 715–16). According to Hayek, he continued to pursue the issues discussed in The Road to Serfdom because of his sentiment that they were both more difficult and more important, and in need of further attention. Again, in his 1976 preface, Hayek wrote: But though I tried to get back to economics proper, I could not free myself from the feeling that the problems on which I had so undesignedly embarked were more challenging and important than those of economic theory, and that much that I had said in my first sketch needed clarification and elaboration. (Hayek 1994b: xxii) Part of the reason, he claimed, was that in 1944 he still suffered from confusion and ignorance that needed to be cleared up. However, he also appears to have felt the need to be more constructive. He wrote: “And the discussion of the consequences of socialist policies which the book attempts is of course not complete without an adequate account of what an appropriately run market order requires and can achieve” (Hayek 1994b: xxii). Indeed, he added: “It was to the latter problem that the further work I have since done in the field was mainly devoted” (Hayek 1994b: xxii). It is true that The Road to Serfdom is in the main a negative tract, carefully describing the problems associated with central planning; it does not describe in any detail what a proper market order would look like, or how it is possible for such an order to appear even though it was never planned. Thus, he had not yet answered the question of “how a spontaneous order might emerge to solve the coordination problem” (Caldwell 1988: 533). It is clear that Hayek’s work in fields other than technical economics were motivated not only by his participation in the socialist calculation debate, but also by the socialist tendencies and naiveté of British “progressives” and by his experiences surrounding The Road to Serfdom. Judging by his own words, Hayek’s continued attention to the issues raised in this book appears motivated in part by his desire to clear up confusions in his earlier work, and to offer his readers a more constructive account about the proper functioning of a market economy. He apparently felt the need to be more constructive, and to explain both how a market order would solve the coordination problem, and how it is possible for such an order to appear in spite of not being planned. Either way, the writing of The Road to Serfdom was a direct consequence of his opposition to the socialist tendencies of the time. Insofar as the success of that book contributed to Hayek’s transformation, again, opposition to socialism comes across as a major factor in the transformation.

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It is interesting that many of the events that prompted Hayek’s transformation occurred after his arrival in England. It is clear that the shift was triggered in part by a number of important events in Europe in the 1930s and 1940s, most prominently, the rise of fascism in Italy and national socialism in Germany, and the respectability of socialism and eugenics in England. It also appears, however, that Hayek had something of a culture shock. British academics in general, and economists in particular, did not share Hayek’s view of the economy as an organism too complex to have been designed and to be rearranged at will. Hayek has made it clear that he disagreed with the view of society that he thought was favored by many British intellectuals, according to which society and the economy was a construction or at least could be rearranged at will. While Hayek emphasized the Mengerian perspective from the very beginning, the rise of nazism and fascism abroad, and the respectability of socialism and eugenics in England, appears to have suggested to Hayek that popular opinion was not only mistaken, but also dangerous. Moreover, he had developed the feeling that technical economics would not allow him to make the point in a forceful enough manner. Perhaps it is not a complete coincidence that Hayek’s transformation occurred after his arrival in England; whereas most of his colleagues in Vienna – like Adam Smith – were the product of an environment in which Natural Law doctrine infused the intellectual environment, few of his colleagues in London were.

Hayek’s World War I experiences Having discussed how Hayek’s World War II experiences may have affected the development of his thought, it should be mentioned that quite possibly, Hayek’s experiences during World War I may have played a role as well. Hayek was 15 years old when World War I broke out, and 18 when sent to the Italian front (Ebenstein 2001: 18). In Ebenstein’s view: “The political excitement connected with the war and later break-down of the Austro-Hungarian Empire shifted his interests from the natural to the social sciences” (Ebenstein 2001: 18). Hayek said: “It was during the war service in Italy that I more or less decided to do economics” (Hayek 1994a: 48). In one interview, Hayek gave a more specific idea about what drew his attention to social science. He said: I think the decisive influence was really World War I, particularly the experience of serving in a multinational army, the Austro-Hungarian army. That’s when I saw, more or less, the great empire collapse over the nationalist problem. I served in a battle in which eleven different languages were spoken. It’s bound to draw your attention to the problems of social organization. (Hayek 1994a: 48) Witnessing the descent into world war and the fall of empires can raise many questions about the nature of social orders. Many people must have asked themselves how it could be possible for an established social order to break down so completely.

Hayek’s transformation 103 Some of those who were more thoughtful must have gone further, and asked how it is possible for social orders to get established and persist at all. Given their evident fragility, it may seem like a mystery that social orders ever manage to remain intact for any extended period of time. Possibly, Hayek asked himself questions of this nature. With 10 million people dead across the continent (Ebenstein 2001: 21), there could be no doubt about the importance of the issue. According to Ebenstein, Hayek’s experiences in postwar Vienna also helped shape his interest in political, economic, and social issues. For one thing, in Vienna Hayek got better acquainted with socialist thought. He had started reading socialist pamphlets during the Gymnasium, and obviously found himself attracted to the ideas expressed in them (Hayek 1994a: 47). Indeed, this interest in socialism was in part what motivated him to study economics (Hayek 1994a: 47; 1983: 12; quoted in Ebenstein 2001: 23). Later, Hayek said he had a question about the feasibility of socialism. He asked: “I mean, how realistic were these socialist plans which were found so attractive?” (Hayek 1983: 12; quoted in Ebenstein 2001: 23). Also, he found that Marxism had suddenly become intellectually respectable (Hayek 1992: 21). Hayek said: The nearness of the communist revolution . . . the sudden academic respectability of Marxism, the rapid expansion of what we have since learned to call the welfare state, the then-new conception of the “planned economy,” and above all the experience of an inflation of a degree which no living European remembered, determined very largely the topics of discussion. (Hayek 1992: 21) Hayek said that he was “never captured by Marxist socialism. On the contrary, when I encountered socialism in its Marxist, frightfully doctrinaire form – and the Vienna socialists, Marxists, were more doctrinaire than most other places – it only repelled me” (Hayek 1983: 12; quoted in Ebenstein 2001: 23). This may well be the point in time at which he started to develop a distaste for socialism. If so, insofar as Hayek’s experiences surrounding World War I affected his intellectual development, opposition to socialism certainly played a role.

Physics and Hayek’s evolving philosophy of science Another factor in Hayek’s transformation may have been his rejection of methods borrowed from the physical sciences. This is a theme that he developed in great detail in his 1952 book The Counter-Revolution of Science (Hayek 1952a). In this book Hayek’s main concern was to refute scientism, namely, “the slavish imitation of the method and language of Science” (Hayek 1952a: 24), where Science with a capital S is to be “understood in the modern narrow meaning” (Hayek 1952a: 20). Hayek did not specify what that narrow meaning is, but he obviously had in mind the method of physical – and to some extent biological – sciences (Hayek 1952a: 20). Hayek maintained that the “ambition to imitate Science in its methods rather than its spirit . . . has contributed scarcely anything to our understanding of social

104 Hayek’s transformation phenomena,” and that it continued “to confuse and discredit the work of the social disciplines” (Hayek 1952a: 21). One important implication of Hayek’s analysis is that the kind of prediction that can be made on the basis of social science is radically different from that, for example, of physics. Whereas a physicist can in practice make precise predictions on the basis of his knowledge of the facts and the laws of physics, a social scientist will never know enough about the properties of the elements that constitute his or her subject matter to make such predictions. Hayek wrote: The number of separate variables which in any particular social phenomenon will determine the result of a given change will as a rule be far too large for any human mind to master and manipulate them effectively. In consequence our knowledge of the principle by which these phenomena are produced will rarely if ever enable us to predict the precise result of any concrete situation . . . The distinction between an explanation merely of the principle on which a phenomenon is produced and an explanation which enables us to predict the precise result is of great importance for the understanding of the theoretical methods of the social sciences. It arises, I believe, also elsewhere, for example, in biology and certainly in psychology.3 (Hayek 1952a: 73–4) In particular, Hayek claimed, the system of equations that constitute Walrasian general equilibrium theory does not allow us to make precise predictions. He wrote: These systems show merely the principle of coherence between the prices of the various types of commodities of which the system is composed; but without knowledge of the numerical values of all the constants which occur in it and which we never do know, this does not enable us to predict the precise results which any particular change will have. (Hayek 1952a: 74–5) Thus, it is our fundamental ignorance of the relevant facts that makes precise predictions impossible. It is probably no coincidence that many seminal thinkers in the neoclassical tradition – to which Hayek reacted – were inspired by physics and in particular mechanics. In the words of H. Thoben: “Especially Jevons and Walras give an explicit statement of their ambitions to construct a science of economics according to the basic pattern of mechanics” (Thoben 1982: 294). Thus, Léon Walras (1834–1910), who is credited with the development of general equilibrium theory (cf. Perlman and McCann 1998: 493), wrote that the “pure theory of economics is a science which resembles the physico-mathematical sciences in every respect” (Walras [1926] 1954: 71). Walras continued: If the pure theory of economics or the theory of exchange and value in exchange, that is, the theory of social wealth considered by itself, is

Hayek’s transformation 105 a physico-mathematical science like mechanics or hydrodynamics, then economists should not be afraid to use the methods and language of mathematics. (Walras [1926] 1954: 71) Walras himself obviously drew on methods and language borrowed from physics. He may well have borrowed the very notion of equilibrium from mechanics or hydrodynamics.4 It is easy to see how the historical background of neoclassical economics may have suggested to Hayek that it was a mistake to use physical methods and concepts in economics. Given that an application of such methods had led Walras to an extensive use of the concept of equilibrium, which Hayek felt was useless in answering the central problem of social science as well as potentially misleading, it is easy to see that Hayek would repudiate such methods. Thus, my hypothesis is that Hayek’s rejection of equilibrium methods in economics helped convince him that it was a mistake for economists to borrow their scientific methods from physics. Since his rejection of equilibrium methods was motivated by his opposition to socialism, the same thing may be true for his philosophy of science. Hayek’s views on this topic were to change. Hayek himself ascribed the change in some significant part to his new colleague Popper. In the Preface to Studies in Philosophy, Politics and Economics (1967) Hayek wrote: Readers of some of my earlier writings will notice a slight change in the tone of my discussion of the attitude which I then called “scientism.” The reason for this is that Sir Karl Popper has taught me that natural scientists did not really do what most of them not only told us that they did but also urged the representatives of other disciplines to imitate. (Hayek 1967: viii) This development is eminently relevant to the present topic. So long as Hayek believed it was a mistake to borrow “methods and language” from a natural science like biology, it is unlikely that he would have adopted a theory of natural selection. This development of Hayek’s has been traced in Caldwell’s “Some Reflections on F. A. Hayek’s The Sensory Order” (2004b). The explicit purpose of the paper is “to make sense of Hayek’s varying positions on psychology by examining the origins of The Sensory Order and its role in the development of Hayek’s thought” (Caldwell 2004b: 240). The Sensory Order (1952b) was a work in theoretical psychology, based originally on a paper Hayek had written while a student in Vienna shortly after he had spent a few weeks working in a brain anatomy laboratory (Caldwell 2004b: 240). According to Caldwell, The Sensory Order marks an important transition on Hayek’s part. While working on this book, Hayek came to see “the mind as another example of a spontaneously forming order, analogous to the social orders that formed as the result of the unintended consequences of human action” (Caldwell 2004b: 248). As a result, Hayek rejected his previous contention that

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there was a fault line between the natural and the social sciences, and instead grouped sciences on the basis of whether they dealt with simple or complex phenomena. Caldwell wrote: When he had tried to characterize the subject matter of economics and other social sciences in his “Scientism” essay in the 1940s, his basic dividing line was between the natural and the social sciences. But by the middle of the 1950s, Hayek had come to a startling observation, one fully compatible with his new readings: The complex adaptive orders that had been identified by the classical economists, by philologists and others, the sort of order that he had encountered again in his research on the brain, were in fact to be found in a variety of other scientific fields. He drew the conclusion that the basic dividing line among all the sciences was not between the natural and social, but between those that studied simple and those that studied complex phenomena. (Caldwell 2004b: 248–9) These thoughts allowed Hayek to argue that economics is a true science, even though it does not rely on the methods of physics, and even though it does not allow us to make precise predictions. In this respect, according to Hayek, economics is similar to biology. Hayek’s later conception of sciences of simple and complex phenomena, as well as the ability of different sciences to make different kinds of prediction, is elaborated especially in the 1955 essay “Degrees of Explanation” (in Hayek 1967: 3–21). In that essay, evolutionary biology figures prominently as a prime example of a science of complex phenomena (cf. Caldwell 2004b: 248). Caldwell concluded: Economics was a science, but it was one among the sciences that studied complex phenomena. That is why we can do no better than to make pattern predictions. And that implies limits on what social planners and other constructivist rationalists could accomplish. (Caldwell 2004b: 249–50) This thought is intimately connected with that expressed in The CounterRevolution of Science (1952a) concerning the impossibility of using social science to make precise predictions, and further underpins Hayek’s contention about the impossibility of central planning. Hayek’s new way of grouping the sciences was an important step toward the adoption of a theory of group selection. Clearly, as noted earlier, it would have been difficult for Hayek to adopt a theory of group selection so long as he insisted that it was a mistake for social scientists to adopt methods from the natural sciences. Now, however, he drew the distinction between sciences that dealt with simple phenomena and those that dealt with complex ones. When he needed an account of the origin of complex orders in economics, it would seem that nothing would be more natural than to look for inspiration in the (other) preeminent example of a science of complex phenomena, namely, biology.

Hayek’s transformation 107 It is true that Hayek continued to insist that the theory of cultural evolution originated not in Darwin but in the social sciences. For instance, in the first volume of Law, Legislation and Liberty (1973), Hayek wrote: As the conception of evolution will play a central role throughout our discussion, it is important to clear up some misunderstandings which in recent times have made students of society reluctant to employ it. The first is the erroneous belief that it is a conception which the social sciences have borrowed from biology. It was in fact the other way around, and if Charles Darwin was able successfully to apply to biology a concept which he had largely learned from the social sciences, this does not make it less important in the field in which it originated. (Hayek 1973: 22–3) He added: “A nineteenth-century social theorist who needed Darwin to teach him the idea of evolution was not worth his salt” (Hayek 1973: 23). These passages suffer from a critical ambiguity, in that it remains unclear what exactly Hayek meant by “evolution.” If he meant evolution by natural selection – which is probably the way in which many readers interpret this passage – the claims are difficult to sustain. In spite of many passages that are often interpreted as anticipating the theory of natural selection, thinkers before Darwin did not develop anything that can be described as a coherent theory of natural selection (Hodgson 1994: 408). One may of course ask why Hayek should continue to insist that the theory of evolution had its roots in social science. The passage above suggests that he wanted to counter a fear, which he thought might have been prevalent among social scientists, of borrowing ideas from biology. Of course, as we saw earlier, Hayek was one of the people who may have been responsible for promoting that fear. Perhaps, moreover, Hayek wanted to preempt the objection that he illegitimately imported ideas from biology. Finally, insofar as Hayek wanted to appeal to an audience of economists, it is possible that he thought it would be more rhetorically useful to refer to giants like Menger, Hume and Smith, than to Darwin. Either way, the fact that Hayek emphasized the social scientific roots of evolutionary theory does not mean that he was not guided by the biological heritage. As I argued in Chapter 5, there is a wealth of evidence that he was. In this section, I have explored how Hayek’s evolving philosophy of science helped pave the way for his transformation. It did so, it seems, at least in part by suggesting that it is acceptable for economists to rely on theories of natural selection. Hence, his evolving philosophy of science may have been an important step in Hayek’s adoption of a theory of cultural evolution through group selection. Of course, there is nothing inconsistent about saying that Hayek’s opposition to socialism and his evolving philosophy of science both contributed to his transformation. Indeed, it may be that Hayek’s opposition to socialism played a role in driving his philosophy of science. It is possible that Hayek had already seen the possibility of developing an argument for the spontaneous order of the market on

108 Hayek’s transformation the basis of a theory of natural selection, and that he was looking for a way to justify the incorporation of biological theories, models, and methods into his system. Assuming that Hayek’s theory of group selection was indeed significantly inspired by Carr-Saunders, and that he learned about this theory when the two were colleagues at the LSE, the timing suggests that this last hypothesis could be correct. Anyway, whether or not Hayek’s evolving philosophy of science played a role in Hayek’s transformation – and it in all likelihood did – this is consistent with the contention that Hayek’s transformation was fueled in large part by his opposition to socialism.

The University of Chicago What made Hayek move to Chicago in 1950 was “in the first instance solely that it offered the financial possibility of that divorce and remarriage which I had long desired and which the war had forced me to postpone for many years” (Hayek 1994a: 126). However, he added that the position “offered me almost ideal opportunities for the pursuit of the new interests I was gradually developing” (Hayek 1994a: 126). Among other things, Hayek was afforded the opportunity to run seminars of a more interdisciplinary nature (Ebenstein 2001: 179). Caldwell wrote that “the course provided him the opportunity to expand his interests in biology and other areas of investigation” (Caldwell 2000: 11). In Chicago, Hayek met several highly recognized evolutionary theorists. Resident biologists included Sewall Wright (1889–1988), who is known among other things as an adherent to group selection (Caldwell 2000: 11). Caldwell wrote that one reason why Hayek switched to biological metaphors was “the interaction Hayek began to have with natural scientists at the University of Chicago in the 1950s, among them the geneticist Sewell [sic] Wright, an early proponent of group selection” (Caldwell 2001: 542). Another important Chicago biologist was Alfred E. Emerson (1896–1976). Emerson studied social insects like termites, ants, and bees, and relied on a theory of group selection to account for the evolution of their elaborate social structures. Hayek’s work shows clear signs of Emerson’s influence. Not only is Emerson quoted in a large number of passages on cultural evolution, but when Hayek used examples from the animal kingdom he often referred to termites, ants, and bees (cf. Hayek 1967: 66–9). In 1959, the University of Chicago hosted a Darwin Centennial celebration. As Caldwell noted, the conference “was preceded by a year of paper presentations and panel discussions” (Caldwell 2001: 542). The celebration was attended by the eminent Oxford zoologist Julian S. Huxley (1887–1960), as well as by Hayek, Wright, and Emerson. It is most likely that Hayek found the conference stimulating. Caldwell notes: “Given his work on The Sensory Order, it comes as no surprise that Hayek participated on a panel called ‘The Evolution of Mind’. But another panel titled ‘Social and Cultural Evolution’ doubtless also piqued his interest” (Caldwell 2001: 542). At this conference, by the way, Hayek met Huxley, who I have argued became one source of inspiration for Hayek’s theory of cultural evolution.

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The Natural Law origins of Hayek’s transformation In this chapter, I have argued that Hayek’s transformation was in large part motivated by his opposition to socialism. This fact – in combination with Hayek’s solid Natural Law heritage – suggests a novel account of the nature and origin of Hayek’s transformation. I will argue that Hayek’s transformation can be described as a return to his roots in Natural Law doctrine. Hayek’s opposition to socialism, understood as the attempt to substitute artificial for spontaneous order, though it was strengthened by the events described earlier was ultimately due to his Natural Law heritage. Moreover, the argumentative strategies that he employed in his post-transformation work were obviously borrowed from his predecessors in the Natural Law tradition. He returned to his roots in Natural Law doctrine because he thought that doing so would be the best way both to develop a cogent and convincing critique of contemporary socialist tendencies and to describe and defend the nature of a more satisfactory social order. Once more, I will explain what I have in mind by way of Taylor’s 1929 paper. As part of his historical survey, Taylor explored what caused the classical liberal economists to affirm the benefits of relying on the natural order rather than trying to replace it by artificial order. He wrote: To look at a different aspect of the matter, opposition to socialism was undoubtedly a factor in causing various economists to argue that in our present economic system, the play of “natural” forces brings about a large or maximum social product, and a fairly equitable division or distribution of it among individuals and among social classes. The great majority of the theorists now writing are more cautious; but the doctrine of “economic harmonies,” understood not as meaning that we live in the best of all possible economic worlds, but as meaning merely that the “natural” or spontaneous tendencies which work themselves out in a more or less freely “competitive” society are very often socially desirable tendencies – this doctrine, or opinion, cannot be said to be entirely dead. (Taylor 1929: 30–1) While Taylor does not exclude the possibility that other factors played a role, he singles out opposition to socialism as a factor in economists’ commitment to the superiority of spontaneous over artificial order. In Taylor’s view, then, opposition to socialism is what motivated the classical liberal economists to affirm basic tenets of Natural Law doctrine, and the superiority of “our present economic system” over, for example, various socialist utopias. Notice, in passing, how Taylor used “natural” and “spontaneous” synonymously in this passage. Moreover, notice again that the doctrine of economic harmonies does not presuppose an absolute principle necessarily leading to a maximum product and fair distribution, but a vague or statistical tendency toward something more socially desirable. How plausible is Taylor’s characterization? It is certainly accurate in the case of Petr (Pierre) Berngardovich Struve (1870–1944), author of “L’idée de loi naturelle

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dans la science économique” (Struve 1921), which I have quoted extensively in the above. Struve was a Russian scholar, editor and journalist, member of the Russian Academy of Sciences, and a leading intellectual of the Russian revolution.5 He became friends with Vladimir I. Lenin (1870–1924) as a result of publishing a Marxist critique of Russian capitalism in 1894. After a perhaps inevitable falling out with Lenin, Struve was ultimately exiled to Paris where he died during Nazi occupation. In opposition to the Bolsheviks, he defended his ideological commitments “to liberty and the rule of law, to a patriotic regard for the Russian people and the Russian state, and to the humanist values of Western civilization” (Warth 1984: 234). Struve’s interest in Natural Law doctrine – which, he maintained, contains an important element of truth (Struve 1921: 308) – was obviously motivated by an interest in defending liberty and the rule of law as against various forms of socialism. It is perhaps no coincidence that Struve – like Hayek, the other Austrian economists, and (to some extent) Smith – had a background in law. Perhaps more importantly for the present purposes, it is well-known that much of Smith’s work was motivated by his opposition to mercantilism. Schumpeter estimated that Book IV of the Wealth of Nations, the part of the work dedicated to a critique of “the Commercial or Mercantile System” (Smith [1776] 1976: 450), takes up a full 57 percent of the total space (Schumpeter 1954: 186). The mercantilists would count as socialists using Hayek’s criterion, in light of “their heavy reliance on an alliance between the business community and the regulating and subsidizing state” (Allen 1987: 448). Here, however, I want to focus on the case of Menger, which I think is particularly instructive. In Chapter 3, we saw that Menger, like other early liberal economists, can be seen as part of the Natural Law tradition. So what was it that made Menger believe in, as Kauder put it, a “general plan of reality,” such that “[this] structure of reality serves ‘both as a logical starting point and as a criterion of validity’ ” (Kauder 1957: 417)? Several historians have pointed out that the Austrian economists were torn between two poles: the traditional Austrian paternalist tradition, and the classical liberal tradition. In the following quote, Kauder identifies the tension between the two: Until 1848 the publication of an economic textbook based on the principles of Adam Smith was not permitted by the Austrian administration. In the eyes of the Viennese censor Adam Smith was a revolutionary. The principle of laissez-faire ran counter to old Austrian statesmanship and social philosophy. The men who forbade this book believed that the paternal state is all wise and that the citizen is not intelligent enough to take care of his welfare. The archdukes, chancellors, ministers considered themselves social engineers who had to supervise and regulate the social mechanism. (Kauder 1957: 420) Different Austrian economists took different positions along this continuum; indeed, some of them were clearly flavored by the traditional Austrian paternalist

Hayek’s transformation 111 position. As Streissler wrote: “Schumpeter was mildly liberal and Wieser was by instinct at least an unabashed paternalistic interventionist, if not to say finally a fascist” (Streissler 1988: 200). Over time, Kauder claimed, Wieser returned to the old Austrian tradition of emphasizing “not freedom but order, not progress but stability” (Kauder 1957: 421). In any case, the tension between the traditional paternalistic position and the classical liberal one sheds a great deal of light on Menger’s contribution. As Kauder suggests in the previous passage, the “archdukes, chancellors, ministers” thought that the social mechanism could function adequately only if it were tightly supervised and regulated. Thus, they believed that order could exist only if it is imposed from above, or in Hayek’s terms, that order must be artificial. In an environment where such views are strongly entrenched, anybody who rejects it will face the challenge of explaining how it is possible for there to be social order that is not imposed from above, or as Hayek would have put it, how there can be spontaneous order at all. Hence, Menger’s challenge was to explain why the alternative to artificial order is not chaos, but order of organic origin, or spontaneous order. Menger’s account of the organic origin of institutions addressed precisely this question: how is it possible for there to be institutions that were never consciously designed, but which nevertheless do not only not lead to chaos, but which may even work better? My thesis is that Hayek’s motivation for defending the superiority of spontaneous order was similar to Menger’s. Especially after he arrived in England, Hayek – like Menger in Vienna – was working in an environment in which the prevailing ideology had strongly paternalistic elements. Those who accepted this ideology believed that a satisfactory order could exist only if it was deliberately designed, or in Hayek’s terms, that a satisfactory order would have to be artificial. Because of a number of current events, which strengthened Hayek’s opposition to socialism, he developed an increasingly strong desire to criticize the prevailing socialist ideology. Having come to the realization that technical economics is not ideally suited to defend the superiority of spontaneous over artificial order, he abandoned that research program in order to instead emphasize his view, with its origin in Natural Law doctrine, that society is a natural growth that can only be radically rearranged at great cost. As a result, Hayek – like Menger – was challenged to explain how there can be such a thing as institutions that were not consciously designed, but which nevertheless often worked better than those that were. Hayek’s theory of cultural evolution through group selection, in conjunction with his work on information and socialism, addressed precisely this question. In order to develop a clear and convincing case to this effect, Hayek pursued a two-track strategy, by simultaneously developing an analysis of information and coordination and a theory of cultural evolution. This strategy permitted Hayek to argue that his case was based on science, rather than ideology, and to cast his opponents as mistaken on matters of fact, rather than morally deficient. The Natural Law perspective suggests that we can describe Hayek’s transformation as a return to his roots in Natural Law doctrine. In this view, Hayek’s skepticism of the idea that spontaneously evolved orders can be improved

112 Hayek’s transformation by replacing them with orders that are the result of human contrivance was ultimately due to his early exposure to Natural Law doctrine in Vienna. As we have seen the superiority of spontaneous over artificial order is the distinguishing idea of Natural Law doctrine, and Hayek was the product of an environment in which such doctrine infused many aspects of intellectual life. Certainly, Hayek’s opposition to socialism was strengthened by his studies into the classical liberal economists and (much later) by the events described earlier. This fact, however, is consistent with my contention that Hayek’s opposition is due in large part to his solid Natural Law heritage. Moreover, the argumentative strategies that he employed in his post-transformation work were obviously borrowed from his predecessors in the Natural Law tradition. From previous chapters, we know that much of Hayek’s mature work – and, in particular, much of his most important work – can be seen as an effort to substantiate the distinguishing idea of Natural Law doctrine, and that much of this work builds extensively on previous economists in the Natural Law tradition, above all Smith and Menger. Once Hayek’s desire to oppose socialism had grown sufficiently strong, he chose to borrow the two-track strategy – that is, the strategy of simultaneously developing an analysis of information and coordination, and adopting a theory of cultural evolution – from his predecessors. Hayek’s return to his roots in Natural Law doctrine was motivated by the thought that doing so would be the best way both to develop a cogent and convincing critique of contemporary socialist tendencies and to describe and defend the nature of a more satisfactory social order. It should be clear that the present account is perfectly consistent with other accounts of Hayek’s transformation. Because I am not assuming that Hayek’s Natural Law heritage is the only factor accounting for his opposition to socialism, and because I am not assuming that opposition to socialism is the only factor accounting for his transformation, I recognize that other factors played a role. Hence, once more, the present account is intended to add to rather than replace previous accounts. The advantage of the present account is that it sheds new light on the origins of Hayek’s opposition to socialism, and on his decision to build on the work of above all Smith and Menger when developing his case against socialism and for a more acceptable social order. (Again, I am not assuming that Hayek’s background in any way necessitated his later intellectual development.)

Discussion In this chapter, I have discussed a final way in which Hayek was part of the Natural Law tradition: Hayek’s desire to defend the superiority of spontaneous over artificial order – like the desire of many of his predecessors – was in large part fueled by opposition to socialism. Without denying that more than one factor played a role in Hayek’s turn away from technical economics and toward broader issues in social and political philosophy, I have argued that opposition to socialist thought stands out as particularly important. It is clear that the shift was triggered in large part by the rise of fascism in Italy and national socialism in Germany,

Hayek’s transformation 113 but also by the respectability of socialism and eugenics in England. The shift was also fueled by Hayek’s acquaintance with British academics in general, and economists in particular, who did not share his view of the economy as an organism too complex to have been designed and to be rearranged at will. While I maintain that Hayek was committed to the superiority of spontaneous over artificial order from the very beginning, events during this era appear to have convinced Hayek that it was not only mistaken, but also dangerous, to argue that the social order could be rearranged at will. The Natural Law perspective suggests a novel account of Hayek’s transformation, that is, the episode during which he all but abandoned technical economics and instead decided to pursue broader questions in political and social philosophy. According to the present account, Hayek’s transformation is best seen as a return to his roots in Natural Law doctrine, and especially to its commitment to the superiority of spontaneous over artificial order. I have argued that Hayek’s opposition to socialism – understood as the attempt to replace spontaneous order with artificial order – though further strengthened by a series of current events was ultimately due to his early exposure to Natural Law doctrine. Moreover, the argumentative strategies that he employed in his post-transformation work were obviously borrowed from his predecessors in the Natural Law tradition. Hayek returned to his roots in Natural Law doctrine because he thought that doing so would be the best way both to develop a cogent and convincing critique of contemporary socialist tendencies and to describe and defend the nature of a more satisfactory social order.

7

Concluding remarks

In this book, I have argued that there are many ways in which Hayek’s work was continuous with the Natural Law tradition, or as I have said, that he was a Natural Law philosopher. The distinguishing idea of Natural Law doctrine is clearly present in Hayek’s work. He was the product of an environment in which Natural Law doctrine infused legal, political, social, religious, and economic thought. Much of his work can be seen as substantiating the distinguishing idea of Natural Law doctrine. His work on information and coordination was an effort to articulate how, exactly, the spontaneous order of the market is superior to man-made orders. His work on cultural evolution was an attempt to explain how it is possible for there to be spontaneous orders in the first place, and how it is possible for such orders to be superior to artificial orders. Like other economists in the Natural Law tradition, Hayek turned to Natural Law doctrine as a result of his opposition to socialism. In this concluding chapter, I sum up the argument so far, explore further how my account compares to other accounts of Hayek’s life and work, and examine the manner in which Hayek’s Natural Law heritage may have affected the reception of his work.

Summary In Chapter 2, I argued that Natural Law tradition, in spite of its diversity, is characterized by a relatively simple idea, namely, the doctrine that spontaneous or natural order is frequently superior to man-made or artificial order. Closely connected to this idea is the notion of the superiority of natural over artificial law, and the idea that social organization should to the greatest extent possible mirror the natural order. We saw that this idea is both explicit and implicit in Hayek’s work. Hayek often emphasized the superiority of spontaneous over artificial order, in exactly those terms. He repeatedly claimed that it was difficult or impossible to improve on the spontaneous order, and he asserted that it would be irrational to try to do so. Moreover, he believed that spontaneously evolved rules should be followed without questioning their justification in particular instances. Hayek also expressed his belief in the connected idea of the superiority of natural over artificial law, and strongly defended the view that social organization should to the greatest extent possible rely on spontaneous order. All of these claims indicate

Concluding remarks 115 Hayek’s commitment to a belief that spontaneous order tends to be superior to artificial order, which establishes one way in which Hayek was part of the Natural Law tradition. Thus, there is at least this one way in which Hayek can be said to be a Natural Law philosopher. In Chapter 3, I explored another way in which Hayek was part of the Natural Law tradition: he was the product of an environment in which Natural Law doctrine infused social, economic, political, religious, and legal thought. We saw that Hayek was exposed to Natural Law doctrine during his early education, both as a result of his Roman Catholic upbringing and his studies at the Gymnasium. We also saw that Hayek studied Natural Law doctrine as part of his legal education at the University of Vienna. Moreover, we saw how the classical liberal economists, whom Hayek studied closely and in whose footsteps he walked, can be argued to have a Natural Law heritage. Finally, there are moments when Hayek apparently proudly situated himself squarely in the Natural Law tradition, though he was cautious to dissociate himself from some of its later, more rationalistic incarnations. The Natural Law perspective suggests a novel account of Hayek’s emphasis on order, his distinction between natural and artificial orders, and his commitment to the superiority of the former over the latter. According to the present account, Hayek’s thought on order was due to his exposure – throughout his career, but especially during the early years – to Natural Law doctrine. Hence, Hayek’s thought on order emerged as a result of his Roman Catholic upbringing, though it was further strengthened by his legal and economic studies in Vienna as well as his further reading of the classical liberal economists thereafter. In Chapter 4, I argued that Hayek’s work on information and coordination can be seen as substantiating the distinguishing idea of Natural Law doctrine, that is, the superiority of spontaneous order over artificial order. More specifically, Hayek’s work on information and coordination serves to support both the doctrine of economic harmonies – that is, the idea that economic processes are to some extent conducive to societal harmony and the greater good – and the idea that government intervention frequently does more harm than good. Together these ideas constitute a case for the superiority of spontaneous order. The Natural Law perspective suggests a novel account of the historical origins of Hayek’s work on information and coordination. According to this account, he developed his analysis about information and coordination because he wanted to substantiate the distinguishing idea of Natural Law doctrine. Because Hayek was already committed to the superiority of spontaneous order, he was receptive to arguments supporting that view and chose to modify and improve those arguments rather than starting from scratch. As he realized that the classical liberal economists, especially perhaps Smith and Menger, had supported their case for the superiority of spontaneous order by means of such an analysis, Hayek decided to follow their lead. As a result, Hayek decided to develop his own arguments, inspired especially by Smith’s writings but designed to convince his contemporaries, to substantiate the distinguishing idea of Natural Law doctrine. In Chapter 5, I argued that Hayek’s work on cultural evolution can be seen as substantiating the distinguishing idea of Natural Law doctrine, that is, the idea

116 Concluding remarks that spontaneous order is frequently superior to artificial order. More specifically, Hayek’s theory of cultural evolution through group selection explains how orders appear spontaneously – without conscious human intervention – and how spontaneous order can be superior to artificial order. Incidentally, the theory also explains how it is possible for people to often fail to appreciate the benefits conferred to them by the order under which they live. Together these ideas constitute a case for the superiority of spontaneous order. The Natural Law perspective suggests a novel account of the historical origins of Hayek’s work on cultural evolution. According to this account, he adopted his theory of cultural evolution through group selection because he wanted to substantiate the distinguishing idea of Natural Law doctrine. Because Hayek was already committed to the superiority of spontaneous order, he was receptive to arguments supporting that view and chose to modify and improve those arguments rather than starting from scratch. As he realized that the classical liberal economists, especially perhaps Menger, had supported their case for the superiority of spontaneous order by means of what Hayek called a theory of cultural evolution, he decided to follow their lead. However, he came to think that the picture painted by Menger, according to which cultural evolution depends mainly on learning, was for various reasons unsatisfactory. Instead, Hayek decided to adopt Carr-Saunders’ theory, presented so as to convince his contemporaries, to build his case. In Chapter 6, I discussed a final way in which Hayek was part of the Natural Law tradition: Hayek’s desire to defend the superiority of spontaneous over artificial order – like the desire of many of his predecessors – was in large part fueled by opposition to socialism. It is clear that the shift was triggered in large part by the rise of fascism in Italy and national socialism in Germany, but also by the respectability of socialism and eugenics in England. The shift was also fueled by Hayek’s acquaintance with British academics in general, and economists in particular, who did not share his view of the economy as an organism too complex to have been designed and to be rearranged at will. The Natural Law perspective suggests a novel account of Hayek’s transformation, that is, the episode during which he all but abandoned technical economics and instead decided to pursue broader questions in political and social philosophy. According to the present account, Hayek’s transformation is best seen as a return to his roots in Natural Law doctrine, and especially to its commitment to the superiority of spontaneous over artificial order. I have argued that Hayek’s opposition to socialism – understood as the attempt to replace spontaneous order with artificial order – though further strengthened by a series of current events was ultimately due to his early exposure to Natural Law doctrine. Moreover, the argumentative strategies that he employed in his post-transformation work were obviously borrowed from his predecessors in the Natural Law tradition. Hayek returned to his roots in Natural Law doctrine because he thought that doing so would be the best way both to develop a cogent and convincing critique of contemporary socialist tendencies and to describe and defend the nature of a more satisfactory social order.

Concluding remarks 117

Hayek and Natural Law As I promised in the Introduction, seeing Hayek as a Natural Law philosopher allows us to see his enterprise in a new light. The Natural Law perspective suggests that Hayek’s project is best understood as an effort to articulate and defend the distinguishing idea of Natural Law doctrine: the idea that spontaneous order is frequently superior to artificial order. Of course, this understanding of Hayek’s project is consistent with that of many other Hayek scholars. Consider: Despite the diversity of Hayek’s intellectual endeavors, they are united by their concentration on one big idea: the explanation of that spontaneous order of events called, misleadingly, “society,” or more accurately, “the extended order,” and the scientific investigation of its aspects – economic, legal, political and moral. (Barry 1994: 142) Hayek’s intellectual endeavors are indeed united by their concentration on the idea of spontaneous order, its origin, and its properties. It is important to note, however, that Hayek’s project is not just about articulating, but also defending, spontaneous order over artificial order, and about warning against possibly wellintentioned but always misguided efforts to replace it by artificial order. As we have seen, the idea of the superiority of spontaneous over artificial order was not original with Hayek. What was original were his arguments, based on his predecessors’ but modified and updated so as to be more convincing to a contemporary audience, in favor of the superiority of spontaneous order. This proposal makes sense of the importance Hayek ascribed to his theory of group selection when he said that it allowed him to paint “what now seems to me a tolerably clear picture of the nature of the spontaneous order of which liberal economists have so long been talking” (Hayek 1967: 92). Hayek did not see his achievement as merely asserting the properties of spontaneous orders clearly identified by previous economists; he saw it as providing solid, scientific foundations for their ideas. The proposed understanding of Hayek’s enterprise brings out the remarkable coherence of his project. This is not to deny that certain aspects of Hayek’s work may have been less than perfectly coherent. Still, in the discussion here, the distinguishing idea of Natural Law doctrine has emerged as an organizing theme of his work, tying the various strands of Hayek’s argument – on order, information, coordination, cultural evolution, and so on – together, and showing how they are part of one and the same fabric. As a result, seeing Hayek as a Natural Law philosopher allows us to describe his mature work as a unified whole – as a long, complicated but focused effort to defend the distinguishing idea of Natural Law doctrine – as opposed to a series of more or less connected ideas. Furthermore, this understanding of Hayek’s project also emphasizes the continuity between different stages of Hayek’s career. This is not to deny that incidental, contingent facts played a role in Hayek’s intellectual development, or that discontinuities were real and important. Still, it appears that Hayek was

118 Concluding remarks committed to the distinguishing idea of Natural Law doctrine throughout his life. Though the idea may be particularly evident in Hayek’s mature work (from the 1960s and 1970s), it is also present in earlier writings (from the 1930s and 1940s). As we will see in the next section, it even emerges in some of his writings on technical economics. Because the distinguishing idea of Natural Law doctrine can be seen as underlying many of his various arguments, especially those related to order, information, coordination, and cultural evolution, and as playing a central role in Hayek’s transformation, the present account identifies at least one important element that was continuous across stages of Hayek’s career. Finally, the present understanding of Hayek’s enterprise underscores the continuity between Hayek and the thinkers who preceded him. This is not to deny that Hayek was in certain ways unique; in some trivial sense of course everybody is. My account does imply that one of the most central ideas in Hayek’s work was one that he shared with the entire Natural Law tradition. Consequently, this account identifies at least one important continuity between Hayek and a long line of predecessors. As a result, the account does not exaggerate the degree to which Hayek was sui generis or the extent to which his ideas were invented ex nihilo. The present account is supported by its explanatory power and parsimony. As I have argued throughout, Hayek’s Natural Law heritage allows us to explain a great number of facts about Hayek’s life and work: his emphasis on order, his distinction between the spontaneous and the artificial, his belief in the superiority of the former over the latter, his conviction that social organization should to the greatest extent possible mirror the natural order, his work on information and coordination, his work on cultural evolution, and his transformation. The thesis also allows us to explain why Hayek was drawn to economics and the classical liberal economists in the first place. Because my account can accommodate such a wide variety of facts about Hayek’s life and work it is extraordinarily explanatorily powerful. What should be clear at this point is that my account is also spectacularly parsimonious, in that one simple proposition – the claim that Hayek’s work is continuous with the Natural Law tradition – permits us to explain such a wide variety of facts.

Potential objections In the previous section, I have already discussed, at least in passing, some of the potential objections that may be raised against my thesis that Hayek’s work was continuous with the Natural Law tradition. Among other things, I have considered the charge that there is something anachronistic about describing Hayek in terms borrowed from the Natural Law tradition. However, as we have seen, the tradition itself can be traced back to ancient Greek philosophy and has long been described – for example, by Hayek himself – in terms of Natural Law. Because Hayek in this sense could have (though he apparently did not) explicitly describe himself as a Natural Law philosopher, there is nothing anachronistic about my thesis.

Concluding remarks 119 On a related note, it may also be objected that the thesis is undermined by the fact that Hayek did not explicitly describe himself as a member of the Natural Law tradition. Yet, as we have seen, Hayek had clear reasons for avoiding that characterization. As Hayek himself told us, he was worried that this characterization would be misleading (not that it would be false). Moreover, in other contexts he apparently proudly situated himself squarely in the Natural Law tradition. Thus, the fact that Hayek did not explicitly describe himself and his project in the same terms as I do – in terms of Natural Law – is no argument against my thesis. It is perfectly possible for Hayek to be part of the Natural Law tradition, and to defend its distinguishing idea, without explicitly acknowledging that fact. In anticipation of various other potential objections, I have pointed out that my story – though it describes Hayek’s struggle to develop a coherent argument against socialism and for the spontaneous order of the market – is not a tale of continuous linear progress from darkness to light (nor, for that matter, is it a tale of continuous degeneration). Similarly, the book does not start out with the assumption that Hayek must in the end come across as the hero (nor the villain). I do not assess Hayek’s contribution by reference to “what we now know,” or anything else. Indeed, I make no assumptions about what standards should be used when making such judgments. A more serious objection is the claim that my account gets the order of events wrong. I have argued that Hayek’s commitment to Natural Law was constant over time and in certain ways can be seen as an engine of intellectual change. Quite obviously, this position implies that Hayek’s commitment to the distinguishing idea of Natural Law doctrine was prior to his work on order, his analysis of information and coordination, his theory of group selection, his transformation, and many of the other factors that may have played a role in that transformation. My position is supported by the fact that Hayek was exposed to – and indeed, actively studied – Natural Law doctrine from an early point on. The fact that Hayek was exposed to Natural Law doctrine throughout his life, and especially so during his early years in Vienna, suggests that he had held the distinguishing idea of Natural Law doctrine all his life. For example, it can be objected that his commitment to the superiority of spontaneous over artificial order was a consequence of, and therefore did not precede, his work on information and coordination as well as his theory of group selection. It could also be objected that his commitment to the superiority of spontaneous over artificial order was a consequence of his (pretransformation) technical economics. It should be noted that I have no problem acknowledging that much of Hayek’s work in these areas, at least insofar as it entails the idea of the superiority of spontaneous over artificial order, might have strengthened Hayek’s commitment to that idea. Hence, if the objection is to have any force, it needs to deny that Hayek had any commitment to the superiority of spontaneous over artificial order before his work on technical economics, information and coordination, and group selection. The main consideration undermining the objection, and supporting my account, is the extraordinary explanatory power and parsimony of the hypothesis that Hayek was committed to the distinguishing idea as a result of his early

120

Concluding remarks

exposure to the Natural Law tradition (see the previous section). In the absence of an account with greater explanatory power or parsimony, the present account will retain its appeal. Moreover, I am not aware of any direct evidence that Hayek’s commitment to the superiority of spontaneous over artificial order did not precede his work on technical economics, information and coordination, and group selection. For example, I am not aware of any pre-transformation text in which Hayek denies that he was committed to the superiority of spontaneous order, and I very much doubt that one can be found. In fact, there is more direct evidence that his commitment to the superiority of spontaneous over artificial order did precede his technical economics and later work. Consider his book Prices and Production ([1931] 1935), which consists of four lectures that Hayek was invited to give at the London School of Economics in 1930–31 (Hayek [1931] 1935: vii). In discussing whether an expansion of credit might have the effect of curing depression, Hayek admitted that his theory implies that “an expansion of producers’ credits might have a wholesome effect” (Hayek [1931] 1935: 97). Thus, Hayek admitted that his theory in fact implies that government action can be for the better. Nevertheless, Hayek added that this could only happen if the quantities can be kept within very precise limits, and that “I do not see how the banks can ever be in a position to keep credit within these limits” (Hayek [1931] 1935: 97–8; cf. Hawtrey 1932: 125). Hence: The only way permanently to “mobilise” all available resources is, therefore, not to use artificial stimulants – whether during a crisis or thereafter-but to leave it to time to effect a permanent cure by the slow process of adapting the structure of production to the means available for capital purposes. (Hayek [1931] 1935: 99) The passages just quoted are interesting for a variety of reasons. First, they show decisively that Hayek’s theory in itself implied that government action could be for the better, and that he was clearly aware of this fact. Consequently, Hayek’s theory in itself did not imply that spontaneous order is necessarily superior to artificial order. It did not even imply that the spontaneous order of the market is necessarily superior to artificial order. Moreover, these passages show that Hayek nevertheless rejected “artificial stimulants” and instead recommended that we rely on spontaneous processes. He gets this result only by invoking extra-theoretical considerations – such as what banks can and cannot do – to support his case. The point is that these considerations – whatever they were – were in place already at the time that he presented his theory. In brief, Hayek’s commitment to the superiority of spontaneous over artificial economics was not a consequence of his technical economics, and it in fact preceded it. It can still be maintained that if Hayek in fact held the distinguishing idea of Natural Law doctrine throughout, then he would have expressed it in his early writings too. However, as we just saw, Hayek does emphasize the superiority of spontaneous over artificial order in several of his earlier publications too. The frequent superiority of spontaneous over artificial order is a theme, for example,

Concluding remarks 121 in Hayek’s 1937 paper (as we saw in Chapter 2). Moreover, the point of Chapter 6 is that Hayek did not articulate or defend the distinguishing idea of Natural Law doctrine until his desire to oppose socialism had grown strong enough. During the very early part of his career, for instance, when he was working for Mises, he was in an environment in which most people already agreed with him about the benefits of the spontaneous order of the market. During the 1930s, however, as we have seen earlier, several factors conspired to generate this desire in Hayek. This explains why the distinguishing idea of Natural Law doctrine was not more explicit in Hayek’s earlier work.

The reception of Hayek’s work One curious fact about Hayek is that he inspires so much emotion in his audience: extreme admiration in his followers, and intense disdain in his opponents. The level of emotion flavoring the debate is typically (and rather obviously) explained by saying that some people agree, and some people disagree, with Hayek’s classical liberal conclusions about limited government and extensive reliance on competitive markets in the production and distribution of goods and services. In these final reflections, I want to maintain that the reception – both when positive and when negative – of Hayek’s later work mirrors perfectly the response to Natural Law doctrine in general. Perhaps paradoxically, therefore, his Natural Law heritage can serve to explain both why Hayek’s work should exert such tremendous appeal on readers across the Western world and across generations, and why others reject his work so summarily. (Incidentally, this fact offers independent support to the idea that Hayek should be seen as a Natural Law philosopher.) The fact that Hayek’s work incorporates the distinguishing idea of Natural Law doctrine has contributed to the appeal of his thought, and continues to do so. Talk about what is natural, the natural order, and the natural development of things, is – and has been for the entire modern era – deeply ingrained in our mode of thought. Our deep familiarity with such talk makes it appear eminently reasonable to us, at least at first blush. As Richard Wollheim wrote: the remarkable persistence of a teleological mode of thinking can be accounted for only by the fact that it does in many respects accord with the ways in which we think and speak about the natural world. We talk of the natural functions or the proper development of man, of the needs that it is right to satisfy, or of how certain privations stunt or damage the personality. (Wollheim 1967: 452) The fact that Hayek’s theory relies on a conception of natural development likely helped increase the prima facie plausibility of his system. This contention is supported by the fact that relying on the theory of natural selection in order to argue for the superiority of spontaneous orders also had clear rhetorical benefits. As I argued earlier, Hayek took advantage of the possibility to argue that his views – including his policy prescriptions – could be based on solid

122 Concluding remarks science rather than shaky ideology. Around the time when Hayek developed his evolutionary argument, in the 1950s, 1960s, and 1970s, evolutionary biology enjoyed a particularly strong position. Although Menger continued to be a highly respected figure in economics, during this stage of his career Hayek wanted to reach a broader audience. He may very well have assumed (correctly, no doubt) that a defense based on Darwin’s theory would have more cachet than would a defense based on Menger’s. It is quite possible that this aspect of Hayek’s rhetoric has helped him achieve the standing that he currently enjoys. At the same time, however, Hayek’s reliance on the distinguishing idea of Natural Law undermines the plausibility of his argument in the eyes of many observers. Natural Law theories have been largely out of fashion (at least in the English-speaking world) for a long time, and they are commonly seen as afflicted with a number of serious problems. Perhaps the most central one relates to the question of how to determine whether a given empirically observable feature of the world is “natural” or not. Assuming that we would want to articulate guides of proper conduct, there is no way to do so on the basis of our knowledge of empirical regularities alone. As Wollheim put it: it is idle to pretend that we can extract a uniform message from nature. Are we, for instance, to model ourselves upon the peaceful habits of sheep or upon the internecine conflicts of ants? Is the egalitarianism of the beaver or the hierarchical life of the bee the proper exemplar for human society? Should we imitate the widespread polygamy of the animal kingdom, or is there some higher regularity of which this is no more than a misleading instance? In the light of these and similar questions, it becomes impossible to regard the maxim “Follow nature” as a substantive guide to conduct. (Wollheim 1967: 451) If we were to take all these generalizations to serve as a basis for human conduct, we would fall into inconsistency. Thus, we need some principled manner to identify those generalizations that are natural and therefore can serve as a guide for behavior. Short of postulating a benevolent divine will to clarify matters, it is difficult to see how this problem can be solved in a satisfactory way. Even if it could, it is not clear how one should go about justifying the claim that natural tendencies are conducive to the common good (Angner 2004: 360). As James Bonar wrote around the time that Carr-Saunders’ book was published: There is no pretense made by Darwinians that survival means fitness in any moral sense; the morally worse men may only be the more fit to survive in the sense that they are best able to suck advantage from their surroundings; and that is all that is claimed by the theorists. (Bonar 1922: 359) Bonar recognized (as Hayek did too) that fitness in the Darwinian sense does not by itself imply value in a moral sense: the fact that something evolved does

Concluding remarks 123 not imply that it is valuable. When he says that everything it means is that the organism in question can “suck advantage” from its surroundings, Bonar also appears to have recognized that fitness in the Darwinian sense does not constitute any evidence for the claim that it is morally valuable. Equivalently, saying that something has evolved does not constitute a reason to think that it is valuable. Insofar as Hayek’s readers share Bonar’s skepticism, they might hesitate to accept Hayek’s ideas about spontaneous order. Precisely these problems have, indeed, been raised in commentaries on Hayek. As an example, consider Joseph Stiglitz’s discussion of the topic in his book Whither Socialism? (1994). Stiglitz wrote: It seems nonsensical to suggest that we should simply accept the natural outcome of the evolutionary process. What does “natural” mean? How do we know whether or not any particular perturbation that we might propose, such as more or less government, is or is not part of the “natural” evolutionary process? . . . The evolutionary process has involved enormous changes over the past centuries, so we cannot simply reject all change. (Stiglitz 1994: 275) Similarly, Stiglitz argued that there is no “well-articulated normative basis for the widespread belief in the ‘desirability’ of evolutionary forces – or the oftendrawn policy conclusion that government intervention in the evolutionary process would either be futile or, worse, be a retrograde step” (Stiglitz 1994: 274–5). Similarly, after discussing the view that evolved rules are “morally proper because they are the result of undesigned evolutionary processes,” Gordon (1981) added: “The weaknesses of such a view are so great and so well known that one hesitates to conclude that Hayek embraces it, but hesitation is overwhelmed by his repeated iteration in Law, Legislation and Liberty” (Gordon 1981: 479). Indeed, because of the persistent problems associated with theories of Natural Law, modern observers often find all such theories unconvincing. In concluding his historical exposé of Natural Law in the Law Quarterly Review, John W. Salmond claimed: “As far as secular science is concerned, the history of the doctrine of natural law is for the most part but a chapter in the history of human error” (Salmond 1895: 142). It may be that a theory of Natural Law only appears convincing so long as its fundamental assumptions remain implicit. Insofar as his audience understand the fundamental assumptions Hayek borrowed from the Natural Law tradition, they may hesitate to accept his case in favor of cultural evolution, group selection, and the superiority of a society based on free enterprise and competitive markets. To put it differently, given many modern readers’ distaste for ideas of Natural Law, Hayek’s incorporation of elements from the this tradition is likely to limit the rhetorical appeal of his ideas. As Hayek was fond of pointing out, human action typically has unintended, unanticipated, and unwelcome consequences. By adopting a Natural Law outlook, in spite of all its appeal, Hayek may have undermined the long-term credibility of his argument.

124

Concluding remarks

In closing, I should note that nothing that has been said so far is intended as criticism of Hayek’s work. Here, I have merely pointed out that Hayek’s theory relies crucially on elements borrowed from doctrines of Natural Law, and that this feature of the system – given current intellectual predispositions – limits its rhetorical appeal. Neither of these claims implies that Hayek was wrong. I do think, however, that we can develop a deeper understanding of an intellectual endeavor by tracing its historical roots, and that such understanding should inform our assessment of its content and significance. As I have argued, I believe that seeing Hayek’s Natural Law heritage and its expressions in his work more clearly helps us better understand the nature and origin of his project. Among other things, Hayek’s Natural Law heritage allows us to see more clearly what assumptions go into Hayek’s argument. As a result, I hope that the historical account defended here can point the way toward a more accurate assessment of his project.

Notes

1 Introduction 1 An excellent short introduction to Hayek’s life and work is Samuel Brittan’s “Hayek’s Contribution,” originally published in Oxford Dictionary of National Biography and reprinted in Brittan (2005: 300–15). 2 In fact, the concept had been in use at least since Auguste Comte (1798–1857) (see Klein 1997). 3 These are some of the sources that were most important for my own thought on the Natural Law tradition and Hayek’s place in it. The 1929 article by O. H. Taylor was singled out for praise in Schumpeter’s magisterial treatment of Natural Law in economics; Schumpeter called Taylor’s essay “[the] only study I can commend for correct appraisal of the work done under the auspices of the natural-law idea” (Schumpeter 1954: 107). Schumpeter also mentioned Pollock (1922) and Struve (1921). 4 A note about sources: Whenever possible, I have used published translations of foreign language sources. Unfortunately, such translations are not always available. When this is the case, I have used my own, but I have retained the original text in an endnote. Regarding Gunnar Myrdal’s Vetenskap och Politik i Nationalekonomien (1930), there is in fact an English edition, which appeared as The Political Element in the Development of Economic Theory ([1930] 1954). This edition, however, is an English translation of a German translation of the Swedish original, and therefore of doubtful quality. As a result, I have used my own translations. In all cases, italics in quotes are reproduced as in the original, except where otherwise noted. 2 Hayek and the distinguishing idea of Natural Law 1 This idea is sometimes described as Hayek’s distinctive contribution. Though I will argue that the idea is clearly present in Hayek’s work, I will claim that it was not original with him. 2 The quote is from the English summary (Blomgren 1997: 224–36). 3 Paul B. Cliteur (2000) may appear to contradict my thesis. In a discussion about Hayek’s legal philosophy (rather than his economics or political philosophy), Cliteur wrote that Hayek “is not an adherent of either natural law or legal positivism”; however, he then quickly added that Hayek’s conception of law can be characterized as “a kind of modest natural law theory” (Cliteur 2000: 14; cf. pp. 26–7). As a result, Cliteur’s position is not entirely transparent. See also Covell (1992: x). 4 Cf. O’Brien (1975: 22). 5 In this section, dates of birth and deaths are taken from Audi (1995). 6 For convenience, I will occasionally omit the qualifiers “frequently,” etc., when talking about the distinguishing idea of Natural Law doctrine. I trust that this will not cause confusion.

126 Notes 7 If these quotes are interpreted as saying that spontaneous order cannot be improved even in principle, they may be hard to reconcile with other passages (to be explored later in the chapter) in which Hayek denied that spontaneous order must always be perfect. However, if these quotes are interpreted as saying that spontaneous order cannot be improved in practice (for reasons that will be discussed), these passages are easy to reconcile. 8 I am deliberately skirting many interesting issues about Hayek’s conception of justice. See Eric Mack (2006) for an enlightening discussion of this topic. 9 See Chapter 5 for further discussion of these topics. 10 A reference has been omitted. 11 The original reads: “la science de l’économie politique se caractérise tout entière dans son développement, par une tendance à éclairer toute la variété complexe des phénomènes économiques par la conception de la loi naturelle” (Struve 1921: 294). 12 The original reads: “[Det vetenskapliga lagbegreppet har] hämtats från naturrättsfilosofien. Så länge nu ‘naturlig lag’ hade den dubbelmening, som sedan gammalt ligger i ordet naturlig, kunde de båda föreställningarna om den sociala verkligheten såsom lagbunden och om den ekonomiska vetenskapens uppgift att på teoretisk väg konstruera ‘samhällsnyttan’ rymmas under samma tak” (Myrdal 1930: 93). 3 Hayek’s Natural Law heritage 1 Angner (2002b: 383) raised some of these questions. 2 I will argue later in the chapter that Hayek did not borrow his theory of cultural evolution from these thinkers, but I do not deny that they were in other ways significant sources of inspiration for Hayek. 3 All figures in this paragraph derive from Ebenstein (2001: 187). 4 For additional evidence, see the discussion of the historical roots of Hayek’s work on information and socialism, and on cultural evolution, in Chapters 4 and 5 below. 5 The original reads: “Lorsque les économistes du XVIIIe siècle, lorsque des penseurs tels que François Quesnay et Adam Smith recherchaient les lois naturelles de la vie économique, ils continuaient et développaient l’œuvre d’une vielle tradition philosophique, celle qui considérait que l’idée d’ordre naturel se trouvait à la base de tout l’édifice mondial” (Struve 1921: 295). 6 I could have begun this discussion by exploring the work of Aristotle – Lionel Robbins, for instance, wrote that in Aristotle’s work “you’ll notice the word natural creeping into economics at a very, very early stage” (Robbins 1998: 19) – but I will start with the Physiocrats, as they are more immediately relevant to the story at hand. 7 See also O’Brien (1975: 22–5). 8 Because of his singular importance in the development of Austrian economic thought in general and Hayek’s in particular, I give pride of place to the work of Menger. 9 A footnote has been omitted. 10 The original entry reads “Natürliche Ordnung eine d. Grundbegriffe d. physiocratischen Lehre. Es ist hierbei d. ungestörte Grundzusammenhang d. Gesellsch.-beziehungen, uzw. in erster Reihe d. Wirtsch.-beziehungen gemeint” (Heller 1926: 121). 4 Hayek on information and coordination 1 In the context of his work on information and coordination, Hayek used the terms “information” and “knowledge” as largely interchangeable. 2 References have been omitted. 3 See for instance Madsen Pirie’s article “Why F. A. Hayek is a Conservative” (1987). 4 In the next section, I will discuss the classical liberal economists’ views about the role of government in greater detail.

Notes 127 5 The original reads: “l’idée de la ‘loi naturelle’ n’a pas pu et ne peut pas disparaître de l’économie politique. Dans toute une série de travaux récents, cette idée reparaît constamment” (Struve 1921: 308). 5 Hayek on cultural evolution 1 A reference has been omitted. 2 A footnote has been omitted. 3 See Angner (2004: 359) for a schematic representation of the argument as I understand it. 4 Caldwell (2004a: 357–8) and Caldwell and Julian Reiss (2006) strongly disagreed with my reading. Angner (2006) argued that their criticism misses the mark. 5 References have been omitted. 6 The interests of both August and Friedrich Hayek are likely to have been shaped in part by the influence of Hayek’s paternal grandfather – Gustav Edler von Hayek – who was a teacher of natural science at the Gymnasium in Vienna. Ebenstein wrote: “He wrote systematic works in biology, some of which became relatively well known” (Ebenstein 2001: 8). 7 The argument in this section is the same as that in Angner (2002a). 8 For example, in Hayek (1967: 67; 1973: 148–9; 1978: 292; 1979: 154, 197; 1988: 16, 156). Unsurprisingly, most of these citations refer to the passage in which Carr-Saunders outlined his theory of group selection. 9 In particular, Hayek’s claim makes it unlikely that he learned about selection for acquired characteristics directly from Menger, the British moral philosophers, or the Social Darwinists. 10 See the Friedrich A. von Hayek papers, Box 13, Folder 1; Box 14, Folder 11; Box 35, Folder 13, Hoover Institution Archives. 11 Unfortunately, there is no known collection of Carr-Saunders’ papers. For this reason, Hayek’s letters to Carr-Saunders are, at least for the time being, unavailable. 12 Medawar is quoted, for example, in Hayek (1960: 440; 1979: 207). 13 Tinbergen appears, for example, in Hayek (1967: 46, 65; 1973: 164; 1979: 153, 197). 14 Huxley is cited, for example, in Hayek (1967: 12; 1973: 153; 1978: 293; 1979: 153–4, 197; 1988: 25, 121). 15 The Hayek papers contain the minutes from at least some of these meetings (Box 66, Folder 1, Hoover Institution Archives). 16 See, for example, Hayek (1978: 292; 1979: 199; 1988: 25). 17 For instance, in Hayek (1967: 70, 77; 1973: 164; 1979: 202). 18 Also Elton emphasized the importance of behavior for evolution (Elton 1930; cf. Hardy 1965: 154). 19 So his son reports, according to Ralf Dahrendorf (1995: 336). 20 Caldwell (2004a: 355) strongly rejected the claim that Hayek was inspired by CarrSaunders. Caldwell did not say, however, whether he thinks Hayek generated the theory of group selection ex nihilo, or whether he borrowed it from somebody else, and if so from whom. 21 See also the Epilogue to the third volume of Law, Legislation and Liberty (Hayek 1979: 153–76). 6 Hayek’s transformation 1 In this context, Caldwell wrote: “Though I will not claim that his participation in the debate caused Hayek’s transformation, a knowledge of his role will be helpful in understanding why events unfolded as they did” (Caldwell 1988: 516). It is not clear to me why Caldwell hesitates to make the causal claim.

128 Notes 2 In his article “More on ‘Hayek’s Transformation’ ” Nicolai Juul Foss (1995) aspired to extend Caldwell’s analysis. He discussed evidence from the early 1930s and argued that Hayek’s transformation was driven also by issues in technical economics. 3 A reference has been omitted. 4 Very likely, Hayek had other misgivings about the use of models inspired by physics too. As suggested earlier, for instance, he may have thought that models borrowed from physics in general (as well as equilibrium models in particular) tended to promote the misconception that we are capable of predicting the exact development of the economy. 5 This paragraph draws on Robert D. Warth (1984).

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Index

Ackrill, J. L. 9 Acton, H. B. 33, 34 adaptation 69, 91 Allen, W. R. 110 Angner, E. 101, 122, 126n, 127n Animal Dispersion in Relation to Social Behavior 84, 87 Aristotle 9, 10, 19, 28, 29, 70, 126n artificial law: vs. natural 8, 11, 24–5, 114 artificial order 14; vs. spontaneous order 2–4, 6, 8, 11, 12–18, 20, 47–8, 60, 72, 93, 96, 109, 113, 114–16, 120 Åslund A. 2 Audi, R. 125n Austrian School of Economics 30, 55, 78 Baker, J. R. 85, 87 Barry, N. P. 117 behavior, as selective force 86 Behavior and Evolution 84 Bernatzik, E. 29 Betteridge, H. 30 biology 29, 80, 88, 93, 104, 105–7, 108, 122 Blacker, C. P. 80, 100, 101 Bladel, J. P. 48 Blaug, M. 39 Blomgren, A.-M. 7, 125n Böhm-Bawerk, E. 30, 46 Bonar, J. 122–3 Boston Globe, The 1 botany 80 Bowler, P. J. 88 British eugenics movement 80, 100–1 Brittan, S. 125n Buckle, S. 8, 9, 10 Caldwell, B. J. 1, 2, 3, 7, 23, 24, 71, 92, 97–8, 100, 101, 105–6, 108, 127n, 128n

Carr-Saunders, A. M. 67, 68, 80–90, 91, 93, 94, 95, 99, 100, 108, 116, 122, 127n; and Oxford zoology 80, 84, 88 Cassidy, J. 1 Cicero 10 Clark, C. M. A. 39, 40, 42 classical liberal economics: Hayek’s studies into 48; Natural Law heritage of 34 Cliteur, P. B. 125n common good 38, 41, 45, 63, 64, 122 conservatism 61 Constitution of Liberty, The 19, 26, 31, 69 construction see artificial order coordination 2–4, 60, 90; information and 50–5, 61–6, 96, 98, 111–12, 114, 115, 117–18, 119; in the Natural Law tradition 10; problem 97–8, 101 cosmos 9, 10, 11 Counter-Revolution of Science, The 101, 103 Covell, C. 77, 125n cultural evolution 2–4, 19, 78, 79, 80, 93–4, 108, 114, 117–18, 123; through group selection 70–1, 75, 91; through imitation 71; Natural Law origins of 90–2; through natural selection 68–9, 108; theory of 3, 19, 67–72, 74–5, 96, 107, 111–12, 115–16; see also CarrSaunders, A. M. customs 68, 82; population growth, limiting 81 Denis, A. M. P. 7, 33 Downing Street Years, The 1 van Dun, F. 16 Eatwell, J. 29 Ebenstein, A. 1, 3, 31, 67, 75, 80, 99, 100, 102, 103, 108, 126n, 127n

138 Index economic harmonies, doctrine of 62–5, 66, 90, 109, 115 economics 22, 52, 103, 104, 105, 106, 118 Elton, C. S. 85 Emerson, A. E. 84, 108 endogenous order see spontaneous order equilibrium 77, 96–8, 99, 104–5 Eterovich, F. H. 8, 9, 10 eugenics 89, 100, 102 evolution 21, 93, 107; see also cultural evolution Evolution: The modern synthesis 85 evolutionism 33, 78–9 fascism 100, 102 Fatal Conceit, The 15, 68, 70, 76 Ferguson, A. 30, 31, 77, 78 Fishburn, G. 100 Foss, N. J. 128n Friedman, M. 2, 7 Gamble, A. 30, 83 germinal changes 81, 82 Girard, D. 36 Gissurarson, H. H. 75 Gonce, R. A. 44 Gordon, S. 7, 22, 56, 73, 123 Gordon, W. M. 7, 39, 77 government action 41, 42, 61, 63, 64, 120 Gray, J. 78 Greek philosophy, ancient 7, 32, 33, 44, 118 Grotius 10 group selection 70–1, 75, 91; see also cultural evolution grown order see spontaneous order Gymnasium education 28, 49 Haddon, A. C. 86 Hardy, A. C. 84, 85, 86, 87, 88, 89, 127n harmony 8, 9, 11, 35, 39, 62, 63, 64, 90, 91, 115; see also economic harmonies, doctrine of Hawtrey, R. G. 120 Hayek, F. A.: childhood and youth 27–8; on cultural evolution 67–72, 90–4; debt to Carr-Saunders and Oxford zoology 80–90; debt to classical liberal economists 77–9; and distinguishing idea of Natural Law doctrine 6; economic studies 30–4; evolutionary argument for spontaneous order of

market 72–7; on information and coordination 50–66; interest in 1–2; legal studies 28–30; Natural Law heritage 26–7, 47, 117; as Natural Law philosopher 3, 6–7, 18–22, 27, 117–18; notion of equilibrium 96–8; on order 47–8; and physics 103–8; reception of 121–3; and socialist calculation debate 98–9; on technical economics 120; transformation of 96, 109–12; as unicum 3, 4; World War I experiences 102–3; World War II experiences 99 Hayek on Hayek 27 Hayek on Liberty 78 Hegel, G. W. F. 23, 33, 34 Heller, F. 29, 47, 126n Hennecke, H. J. 1 Heraclitus 8 A History of Economic Thought 7 Hodgson, G. M. 68, 77, 79, 107 Hoover, K. R. 1 human action 19, 21, 33, 77, 79, 105 Hume, D. 17, 30, 31, 73, 77, 78, 89, 107 Huxley, J. S. 84, 85, 86, 87, 88, 89, 108, 127n; intergroup selection 85 Idea of Justice 9 ignorance 91; of benefits conferred by spontaneous order 72; inevitable 51, 54, 64, 104 imitation 71 inexorability 11, 19, 20 information 2–4; and coordination 50–5, 61–6, 96, 98, 111–12, 114, 115, 117–18, 119; dispersed 51, 52, 53, 60, 98; Natural Law origin of thought on 61–7; Smith and Menger on 55–61 institutions 17, 19, 32–3, 61, 70–1, 78–9, 89, 91, 92–3, 111; in Menger 44–6, 111; in Quesnay 37–8, 43; in Smith 38, 41–2, 43 intergroup selection 85; see also group selection Johnston, W. M. 26, 28, 29 Jones, D. C. 80, 100, 101 jurisprudence 39 justice 9, 11; natural system of 56–7, 60, 63, 64 Kauder, E. 46, 110, 111 Keynes, J. M. 23, 24, 99, 100 Klein, D. B. 125n

Index 139 knowledge 2–3; division of 2, 50–2, 53; dispersed 53, 58, 98; see also information Koppl, R. 1 Kungliga Vetenskapsakademien 2 Lady Simey 80, 100, 101 laissez-faire 60–1, 110 law see artificial law; Natural Law; moral law; Roman law Law, Legislation and Liberty 7, 14, 15, 16, 20, 22, 31, 33, 68, 76, 107, 123 legislation 16, 37–8, 45–6; see also artificial law Leibhafsky, H. H. 7, 44 Lenin, V. I. 110 Leslie, T. E. C. 38 liberty 2, 41, 42, 53, 57, 59, 78; see also natural liberty, system of Living Stream, The 86 London School of Economics (LSE) 31, 80, 83, 99–102, 120 Macbeath, A. 69 McCann, C. R. 23, 30, 35, 38, 39, 70, 104 Mack, E. 126 man of system, the 58, 59 Mandeville, B. 31, 32 man-made law see artificial law man-made order see artificial order Marietta, M. 7 Marxism 103 mechanics 40, 104–5 Medawar, P. 84 Meek, R. L. 35 Menger, C. 3, 30, 31, 44–7, 48, 50, 55–61, 65, 66, 67, 77–9, 89, 92–3, 94, 102, 107, 110, 111, 112, 115, 116, 122, 126n, 127n mercantilism 110 Milgate, M. 29 Mises, L. 31, 44 money 45, 93 Moore, G. E. 73 moral law 34–5, 37 Morrell, J. 80, 84, 86, 88 Myrdal, G. 5, 22, 23, 125n, 126n Natural Law: in Austrian economics 44–7; in Austrian legal thought 29; in classical liberal economics 34–44; distinguishing idea of 6, 7–8, 12, 90–1; doctrine 3–4, 7–12, 26, 67, 90–4, 109–12; economists and 22–4;

and Hayek’s thought on cultural evolution 90–4; and Hayek’s thought on information and coordination 61–6; and Hayek’s thought on order 47–8; and Hayek’s transformation 109–12; and opposition to socialism 109–11; and the reception of Hayek’s work 121–3; in Roman Catholic thought 28; tradition 3–4, 5, 8–11; varieties of 8–11, 18–20 natural liberty, system of 41, 42, 57, 59, 78 natural order see spontaneous order natural right 35–6, 37 natural selection 3, 21, 68, 69, 71, 79, 81–2, 86, 90–1, 92, 93, 105, 107–8, 121; see also cultural evolution naturalistic fallacy 73–4 nazism 100 New Yorker, The 1 Newman, P. 29 Newton, I. 40 norms see rules O’Brien, D. P. 22, 63, 77, 78, 79, 125n, 126n O’Driscoll, G. P. 7 order 13, 30, 47–8, 49; see also artificial order; social order; spontaneous order Ordnung 29, 30 organic origin: institutions of 44–6, 79; orders of 93, 111 organism 14, 84, 85, 102 organization see artificial order; social organization Oxford zoology 80, 84, 88 Parmenides 8 Perlman, M. 7, 23, 30, 35, 38, 39, 70, 104 physics 34; and philosophy of science 103–8 Physiocrats 34, 35–8, 39, 40, 42–4, 47 Pirie, M. 126n Plato 8, 9, 19 polis 9 Pollock, F. 125n Popper, K. 75–6, 83, 99, 105 Population Problem, The 80, 81, 83, 85, 87, 88 Porter, R. 86 Postrel, V. 1 practices see rules price system 2, 53, 54, 60, 89 Prices and Production 120 psychology 28, 104, 105 Pythagoras 8

140 Index Quesnay, F. 35, 36, 37, 38, 43, 44 race 82 Reason 8, 9, 10 Reiss, J. 127n Road to Serfdom, The 31, 61, 99, 100, 101 Robbins, L. 126n Roe, A. 84 Roll, E. 5, 7, 8, 12, 13, 38, 39 Roman Catholic Church 27, 28, 115 Roman law 10, 29, 32, 38, 39 Ross, I. S. 59, 78 Rothbard, M. N. 10, 11 rules 6, 10, 13–18, 20, 21, 24, 25, 30, 33, 61, 82–3, 114, 123; and cultural evolution 68–73; in Menger 45; in Quesnay 36–8 St Augustine 10 St Thomas Aquinas 10 Salmond, J. W. 10, 123 Schumpeter, J. A. 5, 9, 10, 11, 12, 22, 33, 110, 111, 125n self-generating order see spontaneous order Sensory Order, The 84, 105, 108 Sigmund, P. E. 8, 9 Simpson, G. G. 84 Smith, A. 3, 17, 30, 31, 34, 35, 38, 39, 40–4, 46, 47, 48, 50, 55–61, 63, 64, 65, 66, 67, 77–9, 89, 93, 102, 107, 110, 112, 115 Social Darwinism 92–3 social order 17, 32, 37, 69, 78, 96, 102–3, 105, 109, 111–12, 113 social organization 6, 7, 8, 11, 17, 18, 24, 25, 102, 114, 118 social science 45, 52, 79, 102, 107; vs. physical science 103, 104, 105 socialism 14, 17, 18, 89, 103; opposition to 3, 4, 96, 99, 101, 103, 107, 109, 111 socialist calculation debate 98–9, 100, 101 Sophists 9 spontaneous order 14, 19, 35, 98, 99, 101, 107, 117, 121, 123; vs. artificial order 2–4, 6, 8, 11, 12–18, 20, 47–8, 60, 72, 74, 93, 96, 109, 113, 114–16, 120; superiority of 12–18, 91 Stamp, L. D. 80, 83

Stiglitz, J. 123 Stoic ideas 9, 10 Stone, R. 42 Streissler, E. 2, 14, 46, 47, 55, 56, 57, 58, 111 Struve, P. 5, 9, 10, 22, 34, 65, 109, 110, 125n, 126n, 127n Studies in Philosophy, Politics and Economics 68, 105 Taylor, O. H. 5, 6, 11, 12, 20, 22, 34, 35, 37, 38, 40, 42, 43, 62, 63, 64, 65, 90–1, 92, 109, 125n technical economics 2, 96, 98–9, 100–2, 111, 112, 120 Thatcher, M. 1, 2 Theory of Moral Sentiments, The 58 Thoben, H. 104 Tinbergen, N. 84 Tomlinson, J. 71 A Treatise on Human Nature 73 Tullock, G. 56 Universe 9, 11, 12 University of Chicago 108 University of Vienna 28, 30, 48, 49, 115, Vanberg, V. J. 1, 68, 71, 87, 88 Vienna Zoologic and Botanical Society 80 de Vlieghere, M. 73, 90 Walras, L. 104–5 Warth, R. D. 110, 128n Watkins, J. 83, 100 We Europeans 85 Wealth of Nations, The 40, 57, 110 Whither Socialism? 123 Whittaker, E. 40 Wieser, F. 30, 46, 111 Windelband, W. 9 Wollheim, R. 10, 121, 122 World War I 102–3 World War II 83, 99–100 Wynne-Edwards, V. C. 84, 85, 87, 88, 89 Young, J. T. 37, 42, 43 Zuckerman, S. 84, 85