Hayek’s Error 1: The Unprovable Rules of Society

Hayek persuasively communicated to a wide audience several essential truths about the modern economy and society that had long been neglected or denied. In the late twentieth century we had Hayek more than any other thinker to thank for the taking hold of sound beliefs about the benefits to society of competitive processes, the impersonal nature of the market economy, and the desirability of reducing the range and quantity of services that states are called upon to provide. 

Hayek had a tremendous influence on the West’s dominant ideologies in the 1980s. If we now enquire why these ideas no longer exert much influence, should we include a consideration of the methodological quality of the Hayekian thesis? For example, did Hayek integrate a simple clearly-understood contradiction in his central hypothesis about the evolution of modern liberal society? Was his hypothesis found to be ill-defined and unprovable? 

I, for one, am not convinced by Hayek’s explanation of the locus and propellant of political evolution on which depend all of the changes required for a more competitive, impersonal, and self-reliant market society. I will explain.

The error Hayek made is of enormous significance, but can be briefly stated, since it is confined to a single aspect — his conceptualisation of rules of society as distinct from rules of government and organisation. Hayek repeatedly claimed in the three volumes of his ‘Law, Legislation and Liberty’ that there is a great difference between the rules of government and the rules of society. They may reach an accommodation with each other, but they emerge separately and evolve differently under forces that are opposed one to the other. 

Hayek regarded government as the conceptual counterpoint to society. Government, he said, is a “special” organisation characterised by organisational rules. Its internal rules are not like the rules of the spontaneous order of society. The two tasks of government are to enforce the rules that emerged spontaneously in society, and to provide certain specified services to society. 

In the following passage Hayek allows us a glimpse of the battle of ideals with reality that forms in the mind of any libertarian and classical liberal who juxtaposes government and society as separate concepts; one concrete, the other abstract. 

Hayek:  “What in fact we find in all free societies is that, although groups of men will join in organizations for the achievement of some particular ends, the co-ordination of the activities of all these separate organizations, as well as of the separate individuals, is brought about by the forces making for a spontaneous order … Of the organizations existing within the Great Society one which regularly occupies a very special position will be that which we call government. Although it is conceivable that the spontaneous order which we call society may exist without government, if the minimum of rules required for the formation of such an order is observed without an organised apparatus for their enforcement, in most circumstances the organization which we call government becomes indispensable in order to assure that those rules are obeyed.”

The rules of government-as-organisation are full of purpose, deliberately designed for command functions and the completion of specific mandated operations that are oriented to performing the two functions. 

Hayek frequently provides detailed definitions of the very concrete rules of government. 

Hayek:  “What distinguishes the rules which will govern action within an organization is that they must be rules for the performance of assigned tasks. They presuppose that the place of each individual in a fixed structure is determined by command and that the rules each individual must obey depend on the place which he has been assigned and on the particular ends which have been indicated for him by the commanding authority.”

Hayek:  “As the organization which a ruler builds up to preserve peace and to keep out external enemies, and gradually to provide an increasing number of other services, becomes more and more distinct from the comprehensive society comprising all the private activities of the citizens, it will require distinct rules of its own which determine its structure, aims, and functions. Yet these rules governing the apparatus of government will necessarily possess a character different from that of the universal rules of just conduct which form the basis of the spontaneous order of society at large. They will be rules of organization designed to achieve particular ends, to supplement positive orders that something should be done or that particular results should be achieved, and to set up for these purposes the various agencies through which government operates. They will be subsidiary to particular commands that indicate the ends to be pursued and the tasks of the different agencies. Their application to a particular case will depend on the particular task assigned to the particular agency and on the momentary ends of government. And they will have to establish a hierarchy of command determining the responsibilities and the range of discretion of the different agents.”

In short, according to Hayek all rules of government-as-organisation are intended to achieve particular ends by the assignation of particular tasks with the corresponding particular discretionary commands. There is even the implication that circumstances can arise, in theory, when government enforcement of the rules becomes an expendable or incidental variable. 

In spite of his precise definition of rules of government Hayek offers no definition of the general rules of spontaneously ordered ‘Open’ or ‘Great Society’ beyond the often-repeated assertion that all of society’s rules are the opposite of all of government’s rules. 

A precise and unequivocal definition of “the universal rules of just conduct which form the basis of the spontaneous order of society” is, as far as I know, not to be found in his writings. It is certainly nowhere visible in the relevant corresponding sections of the principal treatise ‘Law, Legislation and Liberty’.

Rather, society’s rules are presented by Hayek as a foil or antithesis, only as something at variance with the empirically detectable formal rules of organisations. This methodological problem is evident in the passages quoted earlier, and again in the one below.

Hayek:  “By contrast, the rules governing a spontaneous order must be independent of purpose and be the same, if not necessarily for all members, at least for whole classes of members not individually designated by name. They must be rules applicable to an unknown and indeterminable number of persons and instances. They will have to be applied by the individuals in the light of their respective knowledge and purposes; and their application will be independent of any common purpose.”

Thanks to Leibniz we know that opposites and contradictions need to be included in the hypothesis for the purpose verifying the truth of a proposition. Yet Hayek does not tell us what the ‘opposite’ is. The statement that a rule of spontaneous order “must be independent of any common purpose” says little. 

Other than the quality of lacking “common purpose”, the words and phrases Hayek usually employs to describe rules of society as distinct from the clearly defined government rules include: ‘abstract’, ‘implicit’, ‘unknowable’ (“without being explicitly known”, “purposes that as a whole are not known to anybody”), ‘inexpressible’ (before such rules could be expressed in words”), and ‘unalterable’ (“subject to general rules which they cannot alter”). It is as though someone is telling a science fiction story about an indescribable thing known to exist in a space that is almost equally beyond description. 

The claims made on this fragile basis are stupendously large, such as that all of the alterable laws of society are “derived” from the circumstances and rules of self-generated order. This could be true, but cannot be proven so if the rules and circumstances are inexpressible and unknowable, and cannot be observed and conceptualised as synthetic compounds.

As I have said, an hypothesis aims to demonstrate that something simple and primitive is also possible, probable, and expressible in both signs and contradictions, with minimal assumptions made. 

Strangely, Hayek was aware of the essential role of the hypothesis in social science, and himself emphasises the necessity of including within it “what is not”, i.e. the contradiction or opposite.

Hayek:  “The fact that an increasing number of social scientists confine themselves to the study of what exists in some part of the social system does not make their results more realistic, but makes them largely irrelevant for most decisions about the future. Fruitful social science must be very largely a study of what is not : a construction of hypothetical models of possible worlds which might exist if some of the alterable conditions were made different. We need a scientific theory chiefly to tell us what would be the effects if some conditions were as they have never been before. All scientific knowledge is knowledge not of particular facts but of hypotheses which have so far withstood systematic attempts at refuting them.”

The feature which Hayek fails to explain is that the “not” should be seen to be possible or probable. In a demonstrable hypothesis the “not” is simultaneously or potentially as true as the “is” in order that the choice between them is present at all times. The point of the contradiction in the hypothesis is that it is a composite or compound construct. Unless both sides of the composite are compatibly real they cannot be resolved into a single concept.

If the opposite that must be contained within the hypothesis is a priori undefinable because unknowable and inexpressible there is no hypothesis to offer. As I have sought to explain, Hayek’s hypothesis relies on (multiple) assumptions about a spontaneous social order that explicitly consign the vast societal half of the government-society reality to a realm of unrecorded history with invisible and purposeless abstractions. For this reason it rests on untestable foundations, though, as I will shortly also explain, the missing elements could easily have been found by Hayek in other observations of his own making. 

Michael G. Heller  ©2021

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