Chapter 21 – Friedrich August von Hayek's Model of Society and His Theory of Cultural
Evolution In the Road to Serfdom, written in England
during the Second World War, Friedrich August von Hayek outlined those fundamental ideas
which would later become typical of him.
He believed the development of our Western civilization was only possible because people
submitted to impersonal market forces.
No one consciously planned and organized this development. It came about spontaneously in
the course of increasingly more complex exchange relationships on the path to a cultural evolution.
The intent to change this structure in future and shape it with the help of ideas could
be the only outcome of incomplete and therefore erroneous rationalism.
No individual or government agency has anything approaching a complete overview. Authority
over all of our lives cannot be assigned to anyone. Political planning and regulation
would necessarily lead to a worsening of conditions and destroy personal freedom in the end. This
fundamental notion, which became the leading idea of evolutionary economics, can be traced
back directly to Carl Menger. In his Principles of Economics, he describes the nature and
origin of money as the result of human actions but not of human design. In his Investigations
Once into the methods of the social sciences, he expanded the application of this basic
idea to a series of other social structures, which he understood to be law, language, the
state, money, markets, prices of goods, interest rates, ground rents, wages, and a thousand
other phenomena of social life in general, and of economy in particular. These were,
to no small extent, the unintended result of social development.
The road to serve them, probably Hayek's most popular work, was dedicated to the socialists
of all parties. In other words, to everyone who was hoping that economic planning would
lead to a new Jerusalem. Hayek demonstrated meticulously that socialism, in whatever form
it manifests itself, is incompatible with the idea of freedom, and that the rise of
national socialism was not a reaction to the socialist spirit of the times, but had instead
in its inevitable consequence. Whether National Socialism or Soviet Communism, a controlled
economy will always end in despotism. In contrast, a free society does not need first to be artificially
constructed through violent revolution and subsequent re-education, but is attained in
an evolutionary way through consistent adherence to market economy principles. Because these
These principles had been progressively destroyed by socialist ideas. It is vital to restate
them so as to clearly and tangibly instil the idea of freedom in people's consciousness.
Individualism, based on traditions and conventions, which in principle affirms family values,
cooperation between small communities and groups, and local self-government, is the
foundation of a free society.
Such individualism, wrote Hayek in Individualism and Economic Order, has the advantage of establishing flexible but normally observed rules that make the behaviour of other people predictable in a high degree.
In contrast to this is a socialist-inspired false individualism which wants to dissolve all these smaller groups into atoms which have no cohesion other than the coercive rules imposed by the State and which tries to make all social ties prescriptive.
Genuine individualism is characterized by all forms of planning being carried out by
a large number of individuals instead of centrally by a government agency. Only a plurality of
individuals can make the best use of the entirety of possible knowledge. Practically every individual
has some advantages over all others because he possesses unique information of which beneficial
use might be made. Economic research claiming that an unequivocal solution comes about if
all facts are known to an individual as nothing to do with reality. Instead, research needs
to show how a solution is produced by the interaction of people, each of whom possesses
only partial knowledge. To assume all the knowledge to be given to a single mind is
to assume the problem away and to disregard everything that is important and significant
in the real world. That economic research could become so blind can be explained by
by its increasing orientation toward the natural sciences. Little by little, empirical methods
conventionally used in the natural sciences had been formally imposed upon the social
sciences which led finally to fiasco. To start here at the wrong end, to seek for regularities
of complex phenomena which could never be observed twice under identical conditions
could not but lead to the conclusion that there were no general laws, no inherent necessities,
It was only with this abandonment of the appropriate methods of procedure that it began to be thought
that there were no laws of social life other than those made by men and that all observed
phenomena were all only the product of social or legal institutions.
As we might observe that parts of biological organisms move in a manner suggesting that
Their purpose is the preservation of the whole, Hayek wrote in the Counter-Revolution of Science
Studies on the Abuse of Reason, 1952, that we can observe how the independent actions
of individuals in spontaneous social circles will produce an order which is no part of
their intentions. The way in which footpaths are formed in a wild broken country is such
an instance. Certainly there exist social structures that have neither been consciously
be planned by anyone in particular, nor whose functions are consciously maintained by anyone,
but are nevertheless vastly beneficial for the attainment of human goals. According to
Hayek, many of the greatest achievements are not the result of consciously directed thought,
and still less the product of a deliberately coordinated effort of many individuals, but
of a process in which the individual plays a part which he can never fully understand.
They are greater than any individual precisely because they result from the combination of
A collectivist who wants to understand social institutions objectively, said Hayek, will
necessarily fail in his attempts to accurately define their nature and how they function.
He will be driven to imagine these to be the creation of one ingenious mind, and will finally
make the political demand that all forces of society be made subject to the direction
of a single mastermind.
It is the individualist who recognizes limitations of the powers of individual reason, and consequently
advocates freedom as a means for the fullest development of the powers of the inter-individual
process.
Collectivist thinking opens the gates to despotism. Based on misunderstood rationalism, it paves
the way for dangerous irrationalism. This can only be prevented to the extent that conscious
reason acknowledges the limits of its own capabilities. As individuals, we should bow
allow to forces and obey principles which we cannot hope fully to understand, yet on
which the advance and even the preservation of civilization depends.
Historically, this has been achieved by the influence of the various religious creeds
and by traditions and superstitions which made men submit to those forces by an appeal to
his emotions rather than to his reason.
The most dangerous stage in the growth of civilization may well be that in which man
Hayek has come to regard all these beliefs as superstitions and refuses to accept or
to submit to anything which he does not rationally understand. The rationalist, whose reason
is not sufficient to teach him those limitations of the powers of conscious reason, and who
despises all the institutions and customs which have not been consciously designed,
would thus become the destroyer of the civilisation built upon them.
There is only one alternative to control by arbitrary rule, wrote Hayek in the Constitution
of Liberty, 1960, universal submission to formal laws. This means that individuals,
because of deeply rooted moral convictions, voluntarily comply with certain guidelines.
Freedom therefore requires responsibility, but it must be clear that the responsibility
of the individual extends only to what he can be presumed to judge, that his actions
The Theory of Money and Credit
Freedom has economic significance for the reason that it allows room for the unforeseeable and unpredictable.
Since one cannot know which experiments with procedures, products or services will prove to be successful,
maximum freedom to develop is most expedient.
It is because every individual knows so little and, in particular, because we rarely know which of us knows best,
In his Fieburger Studien, Hayek writes that coercive government measures should be limited
to the enforcement of universal rules of conduct exclusively. Government should not have specific
objectives. This is because a market-based system is not based on some common objective
but instead on reciprocity, that is, on the balance of different interests to the mutual
In a free society, terms such as the common good or public interest should only be understood
in abstraction. This alone offers any randomly singled out individual the best chances to
successfully employ his skills for his personal objective. Government measures ostensibly
serving the common good, such as progressive taxation, for example, wherein the majority
burdens a minority against a minority will, are nothing but cases of arbitrary discrimination
that destroy personal freedom. Governments should therefore refrain from influencing
income distribution in favour of social equity. A person can only develop in an optimal way
within the framework of a regulatory system based on law and tradition and largely removed
from the grasp of rulers. Constant competition in such a system would always favour behaviours
that had proven successful. It is impossible to predict where competition which can be
will ultimately lead. Yet it is plain that those societies which draw on competition for this purpose know more, and thus ultimately generate more wealth for everyone.
Such a regulatory system which one could also call spontaneous order, and which has always, wherever it appeared, made use of the market and of private property, always leads to a great or open society on an advanced civilization.
In the original German, Offene or Große Gesellschaft in italics was obviously borrowed from Karl Popper, The Open Society and Its Enemies, 1945.
In English, the term appears for the first time in Hayek's Law, Legislation and Liberty, 1981.
The Greeks called an order created by humans taxes and a spontaneously created order cosmos.
According to Hayek, cosmos comes into being from regularity in the behavior of the elements of which it is made up
and therefore has no particular objective or purpose. It is an endogenous system, growing
from the inside, or, as the cyberneticists say, a self-regulatory or self-organising
system. On the other hand, taxis, as a decree or an organisation, is determined by an efficacy
outside the system and is therefore exogenous or imposed. Since in a taxis all knowledge
at individual's disposal has to be first channeled to a central organiser, that knowledge
will always be more limited compared to that at the disposal of individuals within a cosmos.
Rules and norms created within the framework of the cosmos are to be called nomoi, the
meaning of nomos being a universal rule of just behaviour which applies equally to all
people for an unknown number of future cases to which the objective circumstances described
in the rule pertain regardless of the consequences brought on in a specific situation by adhering
to the rules.
These rules limit protected individual spheres by letting every person or organized group
know which means they may employ in pursuit of their goals without the actions of the
various people coming into conflict with each other. By contrast, the rules and norms created
within the framework of a taxis are to be called theses, the meaning of thesis being
such a rule which is only applicable to certain persons or which serves the aim of rulers.
The distinction between nomoi, the universal rules of behaviour, and theses, the rules
of organisation, is comparable to the classical distinction between civil law, including penal
law, and public law, constitutional and administrative law.
It is instructive to remember that the idea of law in the sense of nomos, that is, an
abstract rule independent of any concrete individual will, applicable regardless of consequences
to Individual Cases, a law that could be found and was not created for particular foreseeable
purposes, together with the idea of personal freedom existed and continue to exist only
in countries such as ancient Rome and modern England, where the advancement of civil law
was based on precedent and not on written law, where it lay in the hands of judges and
jurists and not in the hands of legislators. In addition to the closely linked concept
of Cosmos, Taxes and Nomos, Theses, Hayek distinguished between values and goals. Values
originate in cultural tradition and are what guide human action for a lifetime, whereas
goals determine human action only in particular instances. An open and free society is based
on its members sharing common values. Conversely, the possibility of freedom disappears when
When we insist there should be a united will issuing orders that direct members to its
certain goals, those values or rules of just behaviour that have decisively contributed
to the emergence of an open and liberal society, had already, Hayek wrote in Law, Legislation
and Liberty, the mirage of social justice, been formulated by the Scottish philosopher
and economist David Hume, 1711, 1776. Hume called them the three fundamental laws of
of Nature, that of stability of possession, of its transference by consent and of the
performance of promises. In civil law systems these principles were later summarized as
freedom of contract, the inviolability of property and the duty to compensate another
for damage due to his fault. Historically abstract rules and spontaneous order developed
in mutual dependency. For just as the mind can only exist as part of a system which exists
independently of it, a system can likewise only develop because millions of minds constantly
absorb and modify parts of it. According to Hayek, man did not adopt new rules of conduct
because he was intelligent, he became intelligent by submitting to new rules of conduct. What
ultimately made humans good was neither nature nor reason but tradition. There is not much
common humanity in the biological endowment of the species, nor did human beings develop
in the context of freedom at all. As members of small hordes, which they had to cling to
if they wanted to survive, they were anything but free. Freedom is an artifact of civilization
which liberated humans from the shackles of the small group. It became possible by the
gradual evolution of the discipline of civilization which is, at the same time, the discipline
of freedom. Ultimately, we have to admit that modern civilization is possible by and large
only by ignoring indignant moralists. This fact, Hayek points out, was formulated by
the French historian and sociologist Jean Bechler, 1905-1983, as follows. The expansion
of capitalism owes its origins and raison d'être to political anarchy.