===== PAGE 1 =====

Vol /0 v9 3

Subjective Value Theory
and Government Intervention

in the Labor Market
by Don Bellante

Whatever the costs to society associated with the
‘massive federal government deficits of the 1980s, they
have brought a minor benefit. It is probably true that
the presence of those deficits has slightly moderated
the tendency of public office holders and seekers to
propose massive new spending 1 programs. In the recent
federal election, both ‘major parties proposed a variety
of new spending programs, but their approach was
more incremental than grand. We should have no illu-
sion that the share of government spending will as a
| result shrink or even remain stable as a percentage of

& total G.N.P. At best, we may for the time being return
to the “creeping socialism” of earlier decades, rather

than a rebirth of massive social « engineering projects of

z the “Great Society” type. Of course, the basic incentives

: of office seekers have not changed: spending programs g

~ buy votes, explicit tax increases cost votes. Before in-

Proper Don Pelle

dexation of tax brackets economic growth, and even child care, etc. In shart, we. may experience the death
more so inflation, brought enormous revenue growthto and reversal of the deregulation movement, tentative
the federal government without Congress having to “as it was. Yet the reasoning behind the mandating of
- explicitly raise tax rates. Even with indexation, recent benefits i 18 badly flawed. Such reasoning is most basi-
| economic growth has increased tax revenues by sub- ‘cally flawed in its failure to recognize the subjective
stantial amounts: about $60 billion annually during ~~ natureof value and its implications for the functioning
the 1980s and a projected $74 billion annually over the of labor markets in a free society. Free market econo-
next five years.! Given the. tendency of the Federal mists of all schools can recognize some of the fallacy in
Government to spend an additional $1.58 for every $1 © the welfare state mentality, but the subjective value
it receives in additional ry the best that can be theory of Austrian economics best highlights the broad-
hoped for is moderation i in the tendencies of Congress _ eet consequences of such misconceptions. |
and the Administration toward s social engineering with ~~ The Austrian approach i is most distinct from main-
tax dollars. | i SEE stream economics in its thorough emphasis on the
We should therefore expect the unchanged i incen- gh individual decision ‘maker as the focus of scientific

tives of politicians to manifest themselves in an in-
creased tendency to seek votes through additional
regulations and the mandating of benefits to voting
blocks where the costs of these programs are ‘borne
directly by the private sector. The “taxes” to pay for | What Does the ECU Portend? rset eens 4
| these programs are very real, but are largely in the a by Leland. Yeager .
~ form of higher costs of production passed on to consum-

fers, losses of job opportunities to the working public, ~ | Free Banking, Part 11, by George Selgin mm
and reduced economic. growth. ‘We ‘have already seen : Se 5 Austrian. Economics Society Founded ................. 10
some of this redirection of governmental effort in pro- | = Conference Reports ........c..ccocovverrsssscoeersssisennsss 10
posed or passed legislation in the form of plant closing | Book Review: The F 2 tal Co nceit 13

laws, compulsory provision for maternal leave and for



===== PAGE 2 =====

oting its effects on the 1
Ff an entrepreneur in -

14 Fk, of workers oo
tics may prevent the scien- @
alid Es ‘about. the i a oo

agents, and th
ap view com)

ti rventions by the lining |
rinimum ‘wage Legislation The 1



===== PAGE 3 =====

constraint of the minimum wage and will be second ~~ occupatior ustry. and employer. Thus.  unemploy-
best to a less constrained optim rer, it is ti |
~likely that on-the-job training prov
the more: important. margins of stm
present gains of job retainers come at t
thei own future i income. 2 Ee

nal i in patire or partic. bo

. The tax affects I

5 across ‘occupations a.
iy 4 that distorts the 1

oy prices. of goods {-
| ble and seasonal Se 3



===== PAGE 4 =====

| a ogtition 0
| neous preferen

European | ;
mi by eB

The Buropeats ;
ty than its de- |

ii in \ both bo s
though | payments and |



===== PAGE 5 =====

repayments take place in equivalent a amounts of na- Sn
tional currencies). The ecu has won more private mar-
ket acceptance than the i rent reason is

im issued ecu boride and
scheduled dismantling of exchan
‘deprives the ecu o ; !
 cumventing the con

=, Dr. Karl Socher, from the University of Innsbruck, spoke recently to

+ the Austrian Economics Collogiuium at Auburn University on the

integration of the economic commustity. He is pictured here with
Professor Leland d Venger. gr

urostable would thus have a
r 8 power over the goods ¢ and

ingle currency, fotucd by a onde centrs
most of Western Europe. How one views th
depends on what policies

in the hath

| international
: ing monetary Integration, is proba

| a laissez-faire basis than on the basis
: dination of national contr :

ds of ¢ Sovernmonts and
competitien: would end

d other publications)
i Jines like these, and

of us may have i into.
ation as timid yet possibly
V work, rather, to. cultivate



===== PAGE 6 =====

1988, p. 85.

“FA, Hao. Denationalis
cial 70, 2nd od. {onde

r than anything the
achieve i in the way of

| 0 legislatures.

The first: thing to note about true free. banking i is " i
5 that it os require any special law: or legislation; it

m on Br a



===== PAGE 7 =====

In fact the U.S. has never had true free banking, excessive note issues in other countries had not been

though it came close with the Suffolk system. As bank- lost. on the Swedish government. Consequently,” he
ing historian Bray Hammond has observed, the choice ~~ continues, “the sole right of issue was vested in the
of state and territorial governments early in this central bank [the Riksbank] and enskilda banks were
country’s banking history was always between monop- given until 1904 to withdraw their own notes from
oly and prohibition—with no thought of laissez faire. ~~ circulation.” (In R. S. Sayers, ed., Banking in Western
The “free banking” laws were an improvement upon Europe [Oxford: Clarendon Press, 1962], p. 60.)
that early state of affairs in so far as they allowed for ~~ Not a whisper about the fact that the Swedish
free entry into the banking business. But entry was all ~~ government stood to gain several million kroner of
~ that was free, or nearly so. The same laws encumbered interest-free loans from doing this. Nor does Clayton
the new banks with bond-collateral requirements for attempt to explain why private banks did not overissue
note issue. These requirements were responsible forall if they were able to do so. As for the “excessive issues”
of the worst banking done during the free banking era, ~~ of notes in other countries, Clayton does not say which
though failure of the courts in certain places to enforce other countries, although his argument implies that
the convertibility of bank notes was also to blame. Nor they must also have had competing banks of issue for
did the evil effects of bond-collateral requirements end its conclusion to be valid. My guess is that Clayton is
during the Civil War, when state banks were forced out ~~ thinking about the phoney “free banking” episode in
of the note issue business. For the same requirements © the U.S. But that his argument rests upon a misinter-
were included in the National Bank Act, and weretobe pretation of history by other persons is no excuse: he is
responsible for the disastrous currency shortages and still in the position of someone who, having just seen a
financial panics of the late. nineteenth century. black swan, still insists that all swans are white be-
- Modern day writers repeat the myth that the Na- cause someone has reported a white swan.
tional Banking System was set. up “to unify the cur- A  ————————————

who looks closely can discover. Had Salmon Chase, the

then Secretary of the Treasury, desired only to unify Free banking does not require any

the currency, he could have created a national version ~~ special law or legislation; it is what
of the Suffolk System, which everyone at the timeknew ~~~ happens spontaneously when money
was the best banking system around. But Chase was ~~ = 3nd banks are allowed to evolve free

not merely interested in “unity”: his job was to raise
money to pay for the war. That was why the National -
; Banks were created, and it is why they were required
(as a condition for note issue) to buy the government’s
debt. It is also why a law was passed to snuff-out the nl HE 5 :

Suffolk System one year later, because the currency ~~ Now that economists like Clayton have gone to

Li of legislative interference.

issued by banks in that system was too uniform and too work reinterpreting the past, it is no longer true that
well liked by the public, which meant that no one in° = central banks are established solely for reasons of gov-
New England wanted to get a National Bank charter to ernment finance. Since the World War II, for example,
help the government sell its bonds. ~~ ST newly independent countries set out at once to create
i GEES their own central banks of issue. But by then they were
2. If free banking can work, why have SO 0 many influenced just-as much by “expert” opinion, which held

tary policy without having a central bank, as by finan-
This one is fairly easy. Their reasons fie: often cial considerations, which led to many of the new
been the same as Salmon Chase’s reason for settingup ~~

institutions being involved in runaway inflation

the National Banking system: those responsible shortly after they were established.
wanted to allow their governments to escape from the oo

confines of private, competitive finance. Look at the ~~ 3. Surely, if this is true, economists would have
history of monopoly banks of issue, and you will see ~ defended free banking. So why didn’t they?
that they were established in many countries years ~ Some did. Adam Smith is routinely criticized for not
before Walter Bagehot or anyone else came up withany ~~ ‘having said more about the need to regulate money and
broad public service for them to perform. It was up to po” But why should he have said more? After all,
later generations of economists. to re-interpret the Smith lived in Scotland, and Scotland’s banking sys-
founding of these monopolies. as 2 public-spirited effort ‘tem, which was free from most of the restrictions that
to improve monetary stability. The economists even are now held to be essential, worked well. What is
manage to do this in cases where they know that prior really curious, then, is not that Smith did not call for

experience with competitive. note 1 issue was not at all regulation of banks, but that he did call for some

| @® unfavorable. | EE - regulation, including the prohibition of small notes and
F George Clayton, inan artiden on banking i in 2 Sweden, -of the option clause. Smith was wrong on both counts;
notes that it had 28 note-issuing private banks in 1880. - but his error is understandable since he happened to

- He then observes that “although this power to issue = write the Wealth of Nations just as Scotland was having
notes was used with such discretion that there wereno its only really serious banking crisis. Perhaps if Smith

instances of default, the unfortunate consequences of “had waited a few years he would have eased off a bit.



===== PAGE 8 =====



===== PAGE 9 =====

ni he frow banks did precisely this on
whi oked an “option clause” |
wed the banks to delay |
»to six months, provided | |
olders of the notes
which the clause was

: ng Tess than. coipetitive ol
uspended notes Sgn male > Ri

of enconfuny di ‘Tmag- it
ould have been had a

It 0 start wut ak as- |
ys ; those ay.

Ly in timer -



===== PAGE 10 =====



===== PAGE 11 =====

Ca evils of our “condition by rensoned: experiment within
the framework of the existing social system,” Keynes
said. “If you succeed, new and bolder methods will be
tried everyw and we may date the first chapter of |
a new economic era from your accession to office.”
J Rockwell commented, “Sadly, Keynes was right.”

~ Today, conventional wisdom says that Kegnesintic eco-
nomics. is no longer threatening. ‘This is only partially.
f true intellectually and is wholly false politically. Macro-

Know: about Menger?” by. Ma : t ~ i ulation is still the governing ideol-
: pleted dissertation on Menger will be S © 0 , We ny other capitals around the

century German © economics. In “Car
nomic Potter: The Lectures to Crown

Smith of the University of Mane
the methodological apriorism of :

and “Austrian Capital Theory: fan Earl
by Roger. Garrison of Auburn University

viduals are definitive and where human action. economic .

_ Blaug of the Universities 0 i ; calculation, and social cooperation: create abalance easily :

Jeremy Shearmur of the In ti ‘H Studi a
- and Eve Menger, Vice Provos U Ct | a machi c operated and manipulated
~ ginia, the granddaughter by planne er to be fully defeated, it will have
of the Menger papers. Ther 1 to come through adopting a new economic “world view'—

‘by Don L Lavoie, also of yan Mason. Axe
“of UCLA ; gave the e closing 1 remarks.

.

1. Erich Sis “To Wha

1): standing, Don Bellante, Jeffrey
e 5a kousen, David Gordon, and Murray
ted, Hans Hoppe. and f Roger. Garrison.

| stated. His heralds
economy destroyed ©



===== PAGE 12 =====

the Phillips Curve. Professor Joseph Salerno of Pace
~ University connected poor monetary theories and
‘world policy trends in “Keynesianism and World Infla-
i tion.” Professor Hans-Hermann Hoppe of the Univer-
sity of Nevada, Las Vegas, engaged Keynesian
macroeconomics in a battle with the Misesian theoret-
ical framework in “Keynes vs. Mises.” Dr. David Gor-
don of the Ludwig von Mises Institute presented, “The
Philosophical Foundations of Keynesianism,” ‘showing i
that much of the Keynesian system flows from Keynes's
own philosophical premises, based on the thought of his
mentor G. E. Moore. The final paper was by Professor
Murray Rothbard, “Keynes the Man: Hero or Villain?”
| Keynes's followers revered him as an almost godlike
figure; Rothbard examined Keynes’ Ss life. and found
something quite different.

Within the academy, there still remains a multitude ; : :
of Keynesian-oriented issues to discuss and m} ths to “Mises s erst students began their week of classes with
clarify from an Austrian perspective. ‘The Mises sn TEL Four Rothbard's lecture on praxeology.

~ Institute’s conference on Keynes and Keynesianism SER
made significant progress toward that end. fe

y dei the origins of the Federal Reserve System, |
the “mystery of banking,” and the history of thought
from Aristotle to Arrow. Before his final speech on “The

« » ~~~ Future of Austrian Economics,” the students spontane- |}

Mises University” EER ously burst into an extended round of applause. 1
at Stanford University © Robert Batemarco of Marymount College is a new

: by Jeffrey A A Tucker fo ¢ name within Austrian economics and his specialties |

i LAE © include government economic statistics, financial mar- |

kets; including the futures industry, and macroeconom-

| PR was a milestone for Austrian instructional confer- | ics—subjec ts be spoke on during the week.

ences. That was the consensus of those who took part

in the “Mises University,” the week-long teaching sem- “Walter Block, senior economist at the Fraser Insti- ga
inar on the Stanford University campus, July 8-15, = tute and co-editor of the Review of Austrian Economics, \
1989, sponsored by the O.P. Alford Center of the Lud- i is a critic of government intervention in all forms. He
| wig von Mises Institute. In size, scope, and structure, = Spoke on neoclassical economics, interventionism, reg- |
| it went far beyond anything ever atiempled at an ulation, and the prospects for privatization. 3
| Austrian conference. cL : Williamson ‘Evers, a Hoover Institution national | §
i The 125 students hy he conference faculty at fellow, spoke on the origins of classical liberalism and
on the prospects for East Bloc economic reform, and he

their: disposal for the : week. Undergraduates, 8
rs of ies: gave an advanced lecture on ‘the philosophy of history.
~~ Roger Garrison of Auburn University and premier
Austrian business cycle theorist gave a series of lectures
starting from capital and interest and building up to
competing trade cycle theories within neoclassical eco-
nomics. He also shared recent work on an Austrian theory
i of budget deficits and government financing.

Gordon, senior fellow of the Ludwig von Mises

ructed the philosophical foundations of
d brought current trends in Philo-

round their own interests. oer in a , part ws
field like philosophy, business: cycle theory, industrial
organization, public policy, ¢ or elagsey taught by parte Fal
ular professors. :

Murray N: Rothbard of the University of Nevada, ln
Las Vegas, and “Dean” of the “Mises University,” deliv- =
~ ered two additional lectures to the entire group. The = = 1
first one elaborated on what he called the “one point” oS :
of Austrianism: praxeology, the methodological basis of ie
3 ‘Austrian economics which serves as the foundation for Le
the rest of the system. Praxeology i is essential, he said,
and it is unwise to remove any particular aspect of =
Austrian thought from this foundation. This point. be- ge x
came an overriding theme for the rest. of the week. djunct scholar of the Mises

Other lectures delivered by Professor Rothbard Institute, provi d a : element to the instructional

. a Co


===== PAGE 13 =====

seminar: two courses on “how to. write clearly. He Well-known i in the. investment 6 world as editor of
- pointed out that the written word is the primary tool  Forencate, and Strategies, Mark Skousen of Rollins Col-
for Austrians, i in the same way ‘mathematics is for lege discussed the structure of production, the subject
~~ neoclassicists. oof his forthcor ng ‘book from New York University

I tured on the gold standard and the
Lr Austrian the ry of economic forecasting.

Finally; Deborah Walker of Loyola University lec-
tured on aspects of industrial organization from an Aus-
trian perspective, including an historical treatment of
i Austrian monopoly theory and the theory of the firm. - |
+ Llewellyn I ‘Rockwell, Jr., president of the Insti- |
Shea tute said in his closing remarks that “this week showed
that despite decades of socialist and Keynesian hege-

Sonian, problem of eco- :
g le is s drawn nbs.

Ll by George Selgin

Lectures gl

§ Kong University, spanned labor economics, ‘monetary i Ee ‘mony, Austrian economics is burgeoning. I am only Co
“theory, and Keynesianism- and his unique theory of sorry. Ludwig von Mises didn’t live enough to see how

| entrepreneurship. and. economic coordination. - Co powerful his ideas have t Become.” re oy []

SEE F A Hayek's I
The Fatal Conceit: The Errors ors Socialism

Thies little book ¢
: argument that F. A

human cooperati
growth of wealth a

BL gon or bad. ‘These state-
Like the Vienna 1

continue to exist il tit. " vil dicate a di ike toward Stalin. In

Any disturbance or dis ; t
order thus means disruption of the wealth-cr :
that supports the curren :



===== PAGE 14 =====

1 traditions and institutions that evolutionary selection wn presents him with a ; problem in his Jovelopmient of a a
has proven to be nurturing. CUTE Cm Ee “social theory. He has very definite opinions on economic
Socialists thus suffer from a “fatal conceit the con ~~ and legal policies. But how can he reconcile his own

ceit “that man is able to shape the world around him advocacy with his views about ethics? =
according to his wishes” (p. 27). In this co socialists There is of course no contradiction in an emotivist |

~ are not alone and they are not merely guilty of misplaced hi 3. good or bad. But why is it a reason for

~ sentiment or of | poor logical development from arguably ~~ an ‘adopt the measures Hayek supports that
demonstrable premises. ‘Hayek believes that they “are ~~ Hayek thi hem good, if all that this ‘means is that
wrong-about the facts” (p. 6) and it is the facts to which ~~ Hor likes them? Estimable man though he is, I

~ he primarily appeals in his own argument. Thus; his cannot think that most of us will wish to accord Hayek's
(1982) label of the socialist argument for economic caleu- Jikes and dislikes a major role i in our own thought.

lation in a socialist society as “a somewhat comic fiction”

finds a more extended explanation i in this present work. = “The usua escape most noncognitivists adopt is to

Sui 0 8 ‘preferences. Once granted that we | |
To those unfamiliar with the Austrian school side want something, reason enters the picture. When, e.g., | |
of the argument for the factual impossibility of asuc- Hayek cogently argues that a socialist economy cannot
cessful socialist economy, ‘Hayek's claim Any. S : seem a calculate, almost everyone will take this point as a 3
fantastic, even ludicrous, one in light o A] t reason against socialism, since few people want an | }
historical survival of socialist economie aye inefficient economy. Whether one can completely solve | §
argument does not concern mere ‘survival; concerns the difficulty posed for noncognitivism in this fashion | §
prosperity and growth. Also, the argument is too briefly. mE is a complex question that will not be dealt with here.

put to deal with the ‘question of the degree to which Instead, let us examine another solution to the 14

historical socialist economies have Gependeds on 100N-S0- i noncognitivist’ s problem; one Hayek sets particular |}
~ cialist economies for their survival. .

evolution offers a way to solve the

Hayek's argument proceeds by sim : grand, rion for Social policy. :

| stages, and draws on original and secondary sources i .

across the spectrum of human knowledge. It founds a 2 grogoss] gn oie

theory of social structure on an human phylogeny; it bad, is not this :

AN hid of Sup : ibe oe pind ~~ case of just the sort of appeal to personal preference it §

laws of social evolution. Thus, what Hayek offers i is not. i was his endeavor to avoid? But Hayek's proposal
“scientific capitaliom” an Aus tinh aralomie 10.5 more subtle, ‘and one cannot this quickly dismiss it.

tific socialism—but, rather, a conjectural history of mod: He does not contend that the criterion of ethics is

ern minions that exposes. the E bling circumstances. RI evoletiongy progress. Rather, it is a fact, not a mat-

Yee ter for evaluation, that societies develop over time.

© Unless we cooperate with evolutionary growth, we

will cease to exist. The question is not: do we like |3

evolution, “any more than it is a matter of like or |}

like amping from the top of a high building | {

11 probably be fatal. Our choice then is a simple |

one: * eoaparaie with evolution, or be crushed. _

E : ous n non-start
evolution i is good; and what

i traditions, institutions.
conduct, supplanted th
ism as the ordering princip]

1 and thus pormitied the gow

’

individual ir ini
from of individual 1 decisis

| and to include outsiders” 'G. S

Ings biological evolution has largely |
i, bys social evolution. Here too

Purtirel was the Si Hsin ol
ing process that cra 1 ra
capitalist market

more the source han the resy

understanding” and “itis not o tc; 2 rbitrary prefere Suppos hy Hayes analysis of
our morals; rather, human i inte; ied by our ocial ¢ tion 1 particulars correct. A society

morals make > possible: the grow h ad those that adopted t the’ ‘wror g’ “policies would eventually fall



===== PAGE 15 =====

Bostaph . .. : Gordon . . .

capabilities associated with it” (p. 21). This is what makes before a more populous society, e.g., China or India,
the view that reason can construct social orders a “fatal whose large population manifested their pursuit of the
conceit” as ...custom and tradition stand between instinct correct Hayekian line.
) 9 and reason—logically, psychologically, temporally” (p. 23). But why should this now interest us? Hayek
Socialists, and others desirous of a purely “rational” purports to deal with the long-term trend of evolu-
order, who would discard traditions painfully distilled tion. Except in special cases, e.g., the sudden adop-
through the centuries thus risk discarding the very “tion of “war communism,” he does not contend that
props of the rationality sustaining the extended order the members of society which fail to adopt Hayekian
of four billion people. The alternative they offer to free policies will at once suffer bad consequences. Un-
market capitalism may well be mass extinction and less, then, one values the long-term survival of one’s
impoverishment of those surviving. Chu society, one can ignore Hayek’s view to one’s heart’s

content. Someone might well reply to Hayek, “In the
long run we are all dead.” Hayek’s supposed short
circuiting of ethics fails of its purpose.

Chapter one thus contains the gist of Hayek's argu-
ment, leaving the rest of the book for a slight extension
of each of its major aspects.

Chapter two is a brief argument for the importance -
of private property rights (which Hayek labels “several
property”) and contractual property transfer for the
growth of trading activities, and identifies their origin
and evolution in morals and tradition.

Regardless of its bearing on ethics, Hayek’s view
of social evolution possesses considerable interest in
its own right. The problems confronting it have been
addressed in a comprehensive way by David Steele in
a recent article in the Journal of Libertarian Studies,
Chapter three argues that trade expansion wag but I venture to add to Steele’s masterly treatment a
enabled by the evolution of customs and rules and this few poms from a slightly different angle.
encouraged division of labor, population increase, more Let us consider for a moment the analogy on

division of labor, etc.—the whole process supported by which Hayek’s view of social evolution rests, the
trade in commodities and information. process of biological change through Darwinian nat-

ural selection. The extent to which this ingenious
fied as the progenitors of the belief that pure reason a Jouk and soo. Ao A rior car

pi Tr low a ¢ conjure up an analogous process for “social evolution”

J liberty as the freedom to be guided by animal instinct in “Simply postulates but nowhere
(etion alized as 1s Will of the people’) go ar. shows that social change proceeds in a similar man-
will” unite “ .to lead us back to a paradise wherein our ner to biological change.

In chapter four, Aristotle and Descartes are identi-

natural instincts rather than learnt restraints upon Further, growth of population in absolute numbers
them will enable us to subdue the world...” (p. 99). is not the essence of biological evolution. Differential
Private property becomes suspect as divisive under: reproduction is the key to the theory: animals whose
such a conception, although it was property rights that traits enable them to pass on proportionately more of
made possible the extended order. their genes than other members of their species are by

definition successful from the evolutionary point of
view. The total number of a given population in the
‘absence of comparison with rates of growth among
“evolutionary competitors tells us nothing.

In chapter five, Hayek argues that neither traditional
morals nor any conceivable rationalist morality are ra-

~ tionally justifiable; however, traditional morality can be
“rationally” reconstructed through the kind of conjectural

history he has provided in previous chapters. Traditional Further, the Darwinist view does not contend that
morality is thus justifiable by its fruits (functional- selective advantage is the only reason for population
ism)“modern civilization—and by no other criterion. It - growth. It is one factor among others: given suffi-
sustains the extended order of human cooperation asno ‘cient time, evolutionists believe its effect will have
“rationally” constructed morality could because it is con- ~~ major importance. There is nothing in the evolution-
sensual and successful, whereas the morality demanded ary analogy that warrants one in identifying large
by rationalist scientism suffers from “a naive anthropo- populations among human beings as harbingers of
morphism” in its desire to impose a “just” and simple evolutionary advance.
order on mankind. As Hayek puts it, “such demands for "Hayek also wrongly takes for granted that if a society
justice are simply inappropriate to a naturalist evolution- replaces another group, the “winner” did so because it
ary process” (p. 74), where the unintended consequences was more socially advanced. No doubt superior technology
of humanaction require a trial- -and-error process of indi- often does prove the decisive factor in social conflict; but
4 vidual adaptation through markets. this by no means is always the case. In the fashion of the
oT ‘Hayek argued, in chapter four, that intellectuals are Assyrian that came down like the wolf on the fold, one
seduced by rationalism to be socialists because ratio- society may overcome another simply by being more
nalism (and socialism) overvalues intelligence and reason. ruthless. Hayek would have a difficult time peddling his
Their demand for freedom in the rationalist/Rousseauian theory theory of social evolution to the citizens of Rome

sense is really a demand to destroy the traditions that create in 476 A.D. or the inhabitants of Byzantium in 1453.

15


===== PAGE 16 =====

Bostaph . . oo ~~ Gordon.

and maintain civilization. In this chapter he opines that RE After looking at the charivari Hayek has offered us in
intellectuals are attracted to central planning because the guise of a theory of social evolution, one cannot help
they resent being part of an impersonal process whoseends ~~ ‘but recall Morris Cohen’s remark to a student: “In the -
are several, as well as unidentifiable to them personally. ~~ first place, you're wrong; and in the second place, even ifg
They refuse to concede the impossibility of a “Just society” gts you were right, so what?” =~ =

in their fatal conceit.

He goes on to argue in chapter six that intellectuals :
especially disdain and suspect commercial and finan-
cial institutions in a market system because they in-
volve physical processes and common knowledge in
only minor respects. Their major contributions of in-
creasing value and organizing dispersed knowledge are
both difficult to understand and seemingly ‘unfair.”

Chapter seven contains remarks on how inappro- :
priate language contributes to anti-capitalism; chapter
~ eight argues the reciprocity of extension of the market
and population growth; while chapter nine provides
observations on the key historical role. of certain reli-
gions as “guardians of tradition” beneficial to the ex-
* tension of the market order—especially the traditions
of family and several property.

~ For me, the book suffers from two flaws. The first a
is that it is far too brief for such a grand: project. The . :
editor characterizes it as “a manifesto” and promisesa
glimpse of fragments of the longer work, of which this
is a condensation, in volume X of the Collected Works.
Whether this occurs or not, the manifesto itself rides
on the ocean of all Hayek's lifework. Those who find the
book appealing will follow the references and thereby
- complete the treatise it should have been. :

The second flaw is less easily disposed of, but, 1
believe, less consequential to the main thrust of the
‘argument. This is Hayek’s view of the relation of
tradition, or morality, and rationalit As Gra (1986, es Cn Torin
ch. 2) realizes, Hayek's view Spal | a conflict be- Se Friedrich A. Hayek
tween man as a “rule-following animal” and man as
purposeful in any but the most trivial sense. If man Bostaph ..

is only a rule-following’ animal, “then traditions only

change as a result of conflict produced by the inc om- : _ general life “enhancement which i is. good. ‘Stability of

patibility of some rules with others or with goals they the framework is desirable for it enhances calculation, |
coordination, and social cooperation—which all indi-

set for man. Rules that survive are, presumably, g

rules adopted in expanding and prosperous societies rectly enhance the ability of the individual to engage |

that do not hinder, or, even aid that expansion. This in life-sustaining and -promoting activities. But the
life-enhancing characteristics of the rules framework

allows Hayek to deny any claim of “goodness” for
“surviving rules and to say that he claims that merely are its key aspects and the key determinants of long-
: run change. Such a view grafted to the corpus of

t d h follow the di d of ticu-
poverty and death may follow the discard. o por Jeu Hayek's manifesto allows the conclusion that the

lar long-followed traditions. (p. 27%. vo customs and traditions that promote free-market cap-
For those disdaining Hayek's evolutionary episte- ~~ italism are not only necessary to support modern civi-
mology and ethics, the whole argument need not be  lzation they are also good -
thrown out as well. Gray suggests the “economic ap- ~~ 7 7 70
proach to social behavior” of Gary Becker as one alter-

native to Hayek’s particular natural selection ie bs References

explanation of rules evolution. There are others, e. g, |

individual Yife-onhunicitig actions gain general accep- well, 1986). -

tance for that reason, lead to alternations in therules ~~ F A. Hayek, “Two Pages of Fiction: The Impossibility of
framework, and A more esusgssiully promote EL Socialist Caleulation,” Economic Affairs (April 1982). 3

©Copyright 1989 by the Ludwig vi von Mises Institute, Auburn University; Auburn, Alabama 36849, (205) 8 844-2500. Volume 10, Number 3. Editor:
Mark Thornton (Auburn University). Assistant Editor: Parth Shah (Auburn University). Correspondents: Richard R. Hite (Virginia Polytechnic

Institute); Peter G. Klein (University of California, Berkeley); Amy Marie Marshall (University of Nevada, Las Vegas); Sven Thommesen (UCLA);
Jeffrey A. Tucker (George Mason University) additional contributor, Graeme B. Littler. Managing Editor: Judith F. Thommesen.

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