Some problems with spontaneous order.(Critical essay)

F. A. Hayek's famous observations about the nature of social order are a cornerstone of much conservative and libertarian thought. Hayek's arguments are frequently cited not only as a useful description of how social orders evolve, but also to support normative positions about the relationship between the state and society, specifically the argument that the social order ought to change as the result of decentralized, or "bottom-up," actions on the part of individuals--that is, "spontaneous order"--as opposed to the centralized, "top-down" planning implemented by bureaucracies, socialist central planners, or the post-New Deal administrative state, which yields "constructed order" or "constructivist rationalism."

The problem is that the distinction between spontaneous and constructed orders, though useful descriptively, cannot bear much normative weight because the difference between spontaneous and constructed orders collapses on close examination. Although Hayek's observation that social orders emerge from an aggregate of individual choices is indisputable, it is not possible to distinguish in principle, either descriptively or normatively, between spontaneous and constructed orders. Instead, the difference depends entirely on the observer's frame of reference. This difficulty explains why Hayek fails to provide a convincing account of the process of conscious social change or the elimination of unjust institutions. The distinction between spontaneous order and planned order may be useful in an explanatory model at a certain level of generality, but it cannot serve as a normative guide in a particular policy dispute (Ogus 1989, 393; Wax 2005).

The Distinction Between Spontaneous Order and Constructivist Rationalism

Hayek's most enduring contribution to political economy is probably his explanation of how social orders emerge through a decentralized process of choices by an indefinitely large number of actors: such orders are the product "of human action, but not of human design" (Hayek 1967); they evolve much as animals do. Genes evolve by a nonrandom selection process applied to random mutations, and the selection pressure is provided by the environment; human social institutions evolve through nonrandom selection among different courses of action, with selection pressure being provided by competition between individuals and groups, and the proposed actions in question being undertaken by individuals. Social institutions such as language are therefore not invented "by" anyone, but emerge out of each person's choices and pursuits. They are grown rather than made. Because social institutions serve people's subjectively perceived needs, the result is that they evolve so that those that obstruct human needs are discarded and those that serve these needs are retained (CL, 63). (1)

We should appreciate the audacity of this seemingly simple observation. At the time Hayek was formulating this theory, virtually every respectable intellectual had concluded that free markets ought to be eliminated in favor of an economy organized by allegedly rational central planners, experts who could direct resources to their most efficient uses. Opposing the ambitions of New Dealers, socialists, and other central planners was a small coterie of dissenters with very little intellectual ammunition. Liberals had largely concluded that limiting government was not sufficient for providing the grounds of human flourishing and that planned economies could do better (Dewey 1935). Against their accusation that free markets waste resources by rewarding the trivial and ignoring the impoverished, conservatives of the period had not yet formulated an effective response, and as a consequence many liberals came to believe that the only decision left was between romantic nationalist traditionalism (represented in its most extreme form by the Nazis) and modernist centralized planning (whose most extreme form was communism) that would eliminate individual choice and achieve an allegedly objective historical "progress."

Hayek, however, appealed to the traditionally liberal concerns for individual choice and flourishing, but used them to advocate limited government and individual freedom. He formulated an explanation of economic choice that responded to the argument that markets were inherently wasteful and irrational, showing that, on the contrary, social and economic institutions can originate, change, and disappear without the intervention of an omniscient planner. He was therefore among the pioneers in modernizing classical liberalism, and his contribution was a major accomplishment (Doherty 2007, 98-111).

On top of his observations about the nature of social order, Hayek built a normative argument: not only did social institutions evolve without planning, but they often evolved so that their utility could not be assessed in isolation from a particular transaction in a particular case. Certain traditional practices might have nonobvious utility, which a planner would overlook and might damage beyond repair when, regarding it as irrational, he took steps to eliminate it. The unanticipated consequences might then be much worse than the supposed irrationality of the now destroyed institution. Because a central planner cannot possibly have the knowledge necessary to evaluate an evolved social institution fully or to anticipate the consequences of altering it, decentralized spontaneous order is preferable to centralized bureaucratic planning.