Jorge Besada email -
Looking forward to this. I believe that Hayek's ideas are the key to understanding the world and it is great to see the word getting out. This one page overview of Hayek's ideas is great.
Fabio Franco email -
Professor,
How much is the present economics profession dominated by those who Hayek would have labelled as "fatal conceiters"? Isn't the mere fact that "history of economic thought" classes are dying out an example of a fatal conceit? Does Bernanke suffer from this ailment? Was Hayek naive in thinking that it was just a "fatal conceit"? Are the "unintended consequences" which naturally result from this fatal conceit really intended consequences? (Let me explain: Government knows that intervening in the market will have only one possible outcome: more intervention in the future, to try to correct for the previous mistake cause by ... intervention! This will, in turn, result in bigger, more powerful government, which is what really was intended in the first place.)
Jonathan Fortier Says:
Dear Fabio Franco,
Thanks for your interesting comments. I think you are right to suggest that many economists could be labelled as "fatal conceiters" to use your term. A good example might be Jeffrey Sachs, who may claim to support free markets, but also argues for more government involvement, and greater centralized organization, to solve the problem of third world poverty. Yes, ignoring the history of economics is just one example of how we can easily forget the lessons of the past and commit the error of the fatal conceit. But you raise another interesting point and that is, perhaps people understand the "fatal conceit" and understand that meddling in the economy will ultimately create more government intervention. The key, as you point out, is that these people may have vested interests in bringing about the growth of government, so don't really care about committing the error in the first place. This touches on "public choice economics" which we may discuss in the future.
David Kolby email -
I agree completely with the contentions Von Hayek presents. Specifically I agree that in a vast number of instances the attempts by the so-called enlightened few to decide on behalf of the many has, as history has demonstrated repeatedly, failed miserably. The "small order" and "extended order" distinction that he identifies, I think today exists at the heart of such hot button issues as the off-shoring of jobs and free trade. The stalemate between the union-busting free market zealots (The Larry Kudlow's) who see the "extended order" or as I would say use the macro perspective to identify the inefficiencies and disincentives created by unionized labour and the tree hugging, close-the-borders protectionists (Lou Dobbs perhaps?) that see the real on-the-ground effects of such policies on families, lives and the "small order" as Hayek would put it. The Micro Perspective. Now all my stereotyping aside, I think one cannot argue that even with the most stringent protectionism and union bargaining power, the forces of technological change and globalization will undoubtedly lead to (or continue) the infiltration, corrosion and eventually dismantling of many industries that people viewed as economic "bases" simply because of progression. Rather than the standard view that it is simply based on greed. Although profit-seeking is one of the individual motivating forces, the source of profit, as any economics 101 C student can attest, is the maximizing of producer AND consumer surplus, as this leads to maximum output and societal benefit in the long run. Now as great as this view looks on paper, the only question that continues to scratch my brain from the inside, that Von Hayek's words again evoke, is that if free markets are the product of the long term evolution of socio-economic traditions that date back millennia and the argument is that the expressions and institutions of human interactions over such a vast time-frame must be the optimal, how can one then argue that the protectionist institutions themselves are not the
Jonathan Fortier email -
Dear David Kolby,
I think I agree with almost everything you say in your response. I believe that the tail end of your comment was cut off, so I will try to briefly respond to your closing thoughts. I don't think that Hayek would maintain that all evolved systems (like markets or languages) are necessarily optimal, but simply that we have to appreciate that they have many strengths, and that we cannot radically change them, or overthrow these systems and replace them with rational designs without creating significant additional problems. I believe that Hayek would also distinguish between things like common law (that evolved over hundreds and hundreds of years) and institutional structures that, while they have been with us for some time, are not nearly as old, nor have they arisen in quite the slow, deliberative and organic fashion that, say, the Department of Education has emerged. I hope that is something of a response to your thoughts.
Simple Simon email -
You mention that Hayek believed we mistakenly import "small order" values into the larger "extended order." But wasn't Margaret Thatcher, who we think of as very savvy about the market economy, fond of using small order values to illustrate what she was trying to get people to understand about the larger, extended order? I believe she frequently told the public that if the Chancellor of the Exchequer was as careful with taxpayers' money as the average housewife was with the family budget, the country would have been in a lot better shape than it was. So what is and where is the link between the small order and larger order values?
Jonathan Fortier says: Thanks for the question Simon. I often wonder the same thing. Thatcher, and all politicians for that matter, do a good job of communicating when they can draw examples from our everyday lives to illustrate more complex issues. The value or virtue that Thatcher was illustrating was one of thriftyness. This value, together with virtues like punctuality, honesty, cleanliness and so on, lies somewhat outside the set of values and virtues that Hayek is concerned with, but the example is still forceful. To what extent then, do the values of the small order (altruism, communalism, sharing, cooperation, kindness etc) "map onto"
the extended order? There must be all sorts of contexts where this is the case: Clearly the way that we treat people in the street has some relationship to the values that we learned in our families and our smaller towns and villages. It would seem to me that the value of reciprocity (common in the extended order) is quite close to the value of sharing that we learn with our friends when very young. As I said in my essay on the FC, the small order values are present in the extended order, but they do not "determine" behaviour in the extended order. For example, we do not agree to buy a house because the owner is kind and known to share or do volunteer work. (continued below)
Greg Krewski email -
Hayek's praise of tradition and denigration of reason seems not to allow for action against brutal traditions such as Chinese footbinding, encouraging widows to commit suicide, and craftsmen's guilds interfering with bids on labour. Isn't the corrective to these practices a system of institutionalized rights based on reason?
Jonathan Fortier says:
Dear Greg,
Great question, and this is precisely the charge that political philosophers like Chandran Kukathas have brought against the "Fatal Conceit". Clearly there are good traditions and there are bad traditions. Just as some uses of reason are good and some are bad. So how do we decide amongst them? Hayek wants to draw our attention to some kinds of tradition, not all. He was not a conservative, and did not celebrate tradition per se. What he was most concerned with, as I understand it, was to expose the folly of thinking that we can improve complex systems and traditions through rational central planning. He was not critical of reason, as he makes clear in the FC, but the abuses of reason. With this in mind, and in response to your question about rights, I think that Hayek would say that individual rights are not a rationally designed system, but rather a complex set of institutional norms, like common law, that evolved over time. They provide a framework within which individual rational actors pursue their respective ends, so there is really no top-down rational planning going on. How we implement and enforce this framework of rights to diminish rights abuses, now there is a tough issue.
JF
Keith Godin email -
Great summary. On Hayek's view of altruism: you mentioned that we developed altruistic attitudes over time and that this helps explain our behaviour in the small order. Is it the just the "attitude" in us that exists or does Hayek suggest we actually "act" altruistically? The basis for my question stems from Elinor Ostrom's argument that altruism does not exist, and that in fact it is purely rational and self-interested behaviour characterized by reciprocity, reputation, and trust. Put another way, are we purely acting rationally and in our own self-interest in the small order? If so, is it the case we act differently in the extended order because the costs to not acting altruistically are much lower?
Jonathan Fortier says: Dear Keith,
Great question, and you are right to refer to the work of Ostrom on this subject. This is an incredibly fertile area of new research and something that I am just beginning to learn about. Leda Cosmides, John Tooby, Paul Zak and Robert Kurzban are just some of the other people working in anthropology, cognitive psychology and psychology and economics to better understand what drives our actions. In a sense, Ostrom's argument is not unlike Bernard Mandeville's claim in "Fable of the Bees" -- that is, even when we appear to be acting altruistically, we are really just satisfying selfish interests. Bob's giving to charity really is ultimately about Bob's sense of satisfaction, not about the charity. I think the way of squaring it with Hayek is exactly how you have articulated it...that is, what are the revealed behaviours in different groups? Regardless of what the "true" underlying motivations are in the small order, people share more, they act more communal. As you expand the size of the group out into the extended order, people are less inclined to act communally. To sum up, I would agree with your last sentence, but perhaps also flip in around and say that the benefits to not acting altruistically are exponentially greater in the extended order.
Corporate Critic email -
Large corporations (that might be just as big as some countries after all) engage in very comprehensive planning. Are they guilty of the "Fatal Conceit"?
Jonathan Fortier says:
Good question. In one sense, yes they are. One reason that IBM was challenged so successfully by small companies operating out of garages and basements was that they had grown too large and were attempting to plan on too large a scale. IBM employed many thousands of people, and provided many hundreds of different products and services. With such a large company, it is very difficult to plan how the organization should operate as a whole. The only way to compete with the smaller and more nimble businesses is to break your own company up into smaller pieces so that it resembles many different companies. This decentralized structure, coupled with improved local decision making the pitfalls of "head office" central planning.
Another good example has to do with large department chain stores that have "planograms" for how to lay out their merchandise. The centrally-designed and centrally- determined planograms dictate exactly where each product is to go on the retail floor. Many employees find this incredibly frustrating, because they see (given their local knowledge of customer preferences) that there would be much better ways to display the merchandise. Successful companies learn how to allow these local workers to make those decisions and rearrange their retail space. Unsuccessful, or moderately successful, companies stick to the "fatal conceit" that head office knows best. If they stick to this principle too tightly, they will go the way of large corporations that are now bankrupt (I am oversimplifying to illustrate some ideas about the "fatal conceit", there are many other reasons that companies go bankrupt!).
Vanessa Schneider email -
Great discussion so far! We still have a half-hour of Jonathan's time, so post your questions and comments now!
Don't forget to refresh your browser to see the current discussion!
Jonathan Fortier email -
(continued reply to Simple Simon)
We might choose a real estate agent because they are kind, but that is not necessarily true either. We might well accept the fact that our real estate agent is cold and unfriendly as long as they are knowledgable about the market and great at negotiating good deals. Despite these extended order behaviours, people generally (especially real estate agents) still try to be kind in their business transactions because that tends to produce better results!
These are simple examples, but may convey a sense of what I mean.
Curious email -
Hayek says that society evolves in a "Lamarckian" fashion. What does he mean by this?
Jonathan Fortier says: Hayek was interested in distinguishing the evolution of societies from the evolution of animals. Darwinian "natural selection" is, I believe, the dominant paradigm for understanding how species evolve. That is, certain genetic differences tend to create species and sub species that have natural advantages allowing them to survive and reproduce more successfully. So following this theory, the giraffe did not grow a long neck to get to the best leaves, but rather natural genetic differences allowed the giraffes with the long necks to survive, creating an abundance of long-necked (and well-fed) giraffes. By contrast, in social, political and economic institutions, Hayek maintained that they simulate Lamarckism, in that they do adapt themselves to different conditions, and the survivors get passed on to successive generations. I think that's what he meant by "Lamarckism".
Modern Roman email -
We have been taught that the great signs of advanced civilizations are their large monuments and impressive buildings. Ancient Rome was, to a certain extent, considered great because of the impressive buildings it constructed. Did this not require incredible central planning? If so, is this an example of cultures overcoming the Fatal Conceit?
Jonathan Fortier says: Hayek actually refers to this very issue in Chapter Two of the Fatal Conceit. What he argues is that the monuments had to be build with certain resources -- human labour and money. It was the (now unknown) business people, financiers, traders, labourers, artisans, craftsmen, mothers, fathers, and farmers (to name a few) that created the society and its wealth. Following Hayek's argument then, these ancient societies were not successful because of central planning, but in spite of some central planning. It was the unknown actors following their own interests that created the wealth that was then appropriated for monumental architecture. Of course, we get into all sorts of historical issues about slavery and coercion and so forth with ancient Rome, but I will avoid that for now!
Vanessa Schneider email -
That's all the time we have for today. See you on May 28th for the second part of the discussion of Hayek's Fatal Conceit.
Thanks to everyone for your great comments and questions, and thanks to Jonathan Fortier for another great chat!
