Interpreting Hayek

Hayek's Social and Economic Philosophy, by Norman P. Barry, London: Macmillan, 1979, 228 pp., £12.00, New York: Humanities Press, 1980, 228 pp., $30.00.

It is fortunate that F.A. Hayek began his scholarly life as an economist. In the past four decades he has most fruitfully cultivated fields—the fundamentals of legal, political, and social theory—that few modern economists dare to approach with more than occasional and glancing observations. Yet it was economics that first and most surely gave him the insights leading to his exposition, almost unique in its coherence and consistency, of the ideas, true and false, that shape our legal, political, and social institutions.

From the catallaxy (that is, the market), his perceptive eye moved to the society as a whole and found the same truths and errors at work, but it was easier to understand them first in the catallaxy. Smith's invisible hand (the coordination by the market of discrete pieces of knowledge dispersed among innumerable individuals) displayed both the vital fact of the limited character of each person's knowledge and the possibility of the emergence of an order without central direction. Ferguson's illumination of the development of institutions from human action without design stretched the view from the catallaxy to custom and law in society and exposed the fundamental difference between evolutionary and constructivist rationalism, as Hayek calls them. The best work of the classical and Austrian economists showed that the essence of a catallaxy, and hence of the Great Society arising from the catallaxy, was a system of rules, not orders. Once grasped, the principle of a society of rules, as distinct from orders, liberated the mind from the superstitions of scientism, which led men to apply the methods of the natural sciences to the phenomena of society and to attempt to measure the unmeasurable. All this has given Hayek's work, stretching from the 1920s to the present time, a breadth and depth surely unmatched in this century.

Hence it was time for an attempt at an overview and critique of the whole of Hayek's work, the coherence of which lends itself to such an exercise. Norman Barry's attempt is in my opinion a conspicuous success. It is careful and thorough to a degree, comprehensive (except that it was written before the publication of the third volume in the Law, Legislation and Liberty trilogy), and for the most part notably fair and perceptive in its judgments. It is informed by a wide reading of the relevant literature. In short, it is an admirable contribution to what we may expect to become known as Hayekian scholarship.

If there are blemishes and misunderstandings in Barry's essay, perhaps the following is a fair catalog of them:

• Contrary to Barry, Hayek's thesis of our ignorance does not prove too much (p. 11). Limits on individual knowledge do not make planning by the rule-enforcing body of enforcement measures irrational, as long as it is truly restricted to this function and eschews attempts to plan the economy. To plan the police force, for example, is then no more or no less difficult, and no less rational, than the planning by a company of its business affairs.

• Suppose that property were dispersed among a number of public authorities and subject to strict rules of transmission and management. Barry opines that this would satisfy Hayek's criteria for freedom and yet exclude private ownership (p. 63). Surely not. For if the rules proscribed private ownership, they would ipso facto impinge upon freedom. The mistake here arises from an incorrect deduction from Hayek's correct statement that in a free society even the propertyless have freedom.

• Hayek knows very well that Bentham and Rousseau differed sharply from each other in certain respects and that much of Bentham's influence could accord with the needs of a free society (pp. 63-64). He puts them in the same column because they were both constructivist rationalists and to that extent both authors and generators of grave errors.

• It is true that many libertarians would not object to a closed shop, if it is freely agreed to by the employer (p. 74-75). But this does not necessarily undermine the logic of Hayek's objection to the legal enforceablilty of such agreements. There are not a few agreements that on grounds of public policy are unenforceable, though not unlawful. To assail Hayek on this point needs further and deeper analysis. In practice, closed-shop agreements reached without a trace of a fear or threat of union violence hardly exist, but admittedly this is not the substance of Hayek's argument.

• Contrary to Barry, socialism and central planning would inevitably run counter to the Rule of Law even if the authorities attempted to subordinate all other considerations to a system of general rules (p. 110).

• It is a superstitious, though widespread, belief that "tax concessions" to owner-occupiers are real concessions and therefore comparable to subsidies to tenants, and Hayek ought not to be criticized on this point (p. 118). They only look like concessions because in an age of inflation the owner-occupier can charge mortgage interest against tax (which in principle is no concession but an entirely proper element in the computation of taxable income), while his mortgaged asset is rising in value.

• It is surely stretching the truth to say that a Hayekian society and a Rawlsian society would in practice resemble each other (p. 143-147). Barry correctly notes that Rawls's principles would in essence run directly counter to Hayek's. He sees a resemblance in their end-state because in Hayek's free society the poor—indeed, especially the poor—are uplifted, though not by design. However, not all the poor, which is why Hayek admits the debatable necessity of State aid to the poor (as long as it is free from any general aim to redistribute incomes or wealth in the interest of equality).

• It is a pity that Barry describes Hayek's Road to Serfdom as his notorious book. Famous would be better chosen.

Nevertheless there are no doubt dubious features of the Hayekian system that Barry does well to expose. Witness the test of survival and increase of population for the purpose of judgment on the development of custom, law, and other social institutions. Witness the surely too rough-and-ready test of price discrimination to distinguish between the sheep and the goats among monopolies. Witness the blessing, though qualified, given to State subsidies to the arts (see here Ludwig von Mises's famous—or notorious—exception in favor of the Vienna Opera!).

But at 81, Hayek is still writing. His next book is not yet before us. His last word has not yet been uttered.

Arthur Shenfield is an economist and barrister at law. He has served as president of the Mont Pelerin Society, 1972-74.