The Fatal Conceit: The Errors of Socialism (The Collected Works of F. A. Hayek Book 1)

by Friedrich A. Hayek

INTRODUCTION WAS SOCIALISM A MISTAKE? The idea of Socialism is at once grandiose and simple. . . . We may say, in fact, that it is one of the most ambitious creations of the human spirit, . . . so magnificent, so daring, that it has rightly aroused the greatest admiration. If we wish to save the world from barbarism we have to refute Socialism, but we cannot thrust it carelessly aside. Ludwig von Mises This book argues that our civilisation depends, not only for its origin but also for its preservation, on what can be precisely described only as the extended order of human cooperation, an order more commonly, if somewhat misleadingly, known as capitalism. To understand our civilisation, one must appreciate that the extended order resulted not from human design or intention but spontaneously: it arose from unintentionally conforming to certain traditional and largely moral practices, many of which men tend to dislike, whose significance they usually fail to understand, whose validity they cannot prove, and which have nonetheless fairly rapidly spread by means of an evolutionary selection – the comparative increase of population and wealth – of those groups that happened to follow them.

As a question of fact, this conflict must be settled by scientific study. Such study shows that, by following the spontaneously generated moral traditions underlying the competitive market order (traditions which do not satisfy the canons or norms of rationality embraced by most socialists), we generate and garner greater knowledge and wealth than could ever be obtained or utilised in a centrally-directed economy whose adherents claim to proceed strictly in accordance with ‘reason’. Thus socialist aims and programmes are factually impossible to achieve or execute; and they also happen, into the bargain as it were, to be logically impossible.

The demands of socialism are not moral conclusions derived from the traditions that formed the extended order that made civilisation possible. Rather, they endeavour to overthrow these traditions by a rationally designed moral system whose appeal depends on the instinctual appeal of its promised consequences. They assume that, since people had been able to generate some system of rules coordinating their efforts, they must also be able to design an even better and more gratifying system. But if humankind owes its very existence to one particular rule-guided form of conduct of proven effectiveness, it simply does not have the option of choosing another merely for the sake of the apparent pleasantness of its immediately visible effects. The dispute between the market order and socialism is no less than a matter of survival. To follow socialist morality would destroy much of present humankind and impoverish much of the rest.

Thus I wish neither to deny reason the power to improve norms and institutions nor even to insist that it is incapable of recasting the whole of our moral system in the direction now commonly conceived as ‘social justice’. We can do so, however, only by probing every part of a system of morals. If such a morality pretends to be able to do something that it cannot possibly do, e.g., to fulfill a knowledge-generating and organisational function that is impossible under its own rules and norms, then this impossibility itself provides a decisive rational criticism of that moral system. It is important to confront these consequences, for the notion that, in the last resort, the whole debate is a matter of value judgements and not of facts has prevented professional students of the market order from stressing forcibly enough that socialism cannot possibly do what it promises.

Although longer experience may have lent some older members of these bands some authority, it was mainly shared aims and perceptions that coordinated the activities of their members. These modes of coordination depended decisively on instincts of solidarity and altruism – instincts applying to the members of one’s own group but not to others. The members of these small groups could thus exist only as such: an isolated man would soon have been a dead man. The primitive individualism described by Thomas Hobbes is hence a myth. The savage is not solitary, and his instinct is collectivist. There was never a ‘war of all against all’.

Mankind achieved civilisation by developing and learning to follow rules (first in territorial tribes and then over broader reaches) that often forbade him to do what his instincts demanded, and no longer depended on a common perception of events. These rules, in effect constituting a new and different morality, and to which I would indeed prefer to confine the term ‘morality’, suppress or restrain the ‘natural morality’, i.e., those instincts that welded together the small group and secured cooperation within it at the cost of hindering or blocking its expansion.

Once we view morals not as innate instincts but as learnt traditions, their relation to what we ordinarily call feelings, emotions or sentiments raises various interesting questions. For instance, although learnt, morals do not necessarily always operate as explicit rules, but may manifest themselves, as do true instincts, as vague disinclinations to, or distastes for, certain kinds of action. Often they tell us how to choose among, or to avoid, inborn instinctual drives.

Constraints on the practices of the small group, it must be emphasised and repeated, are hated. For, as we shall see, the individual following them, even though he depend on them for life, does not and usually cannot understand how they function or how they benefit him. He knows so many objects that seem desirable but for which he is not permitted to grasp, and he cannot see how other beneficial features of his environment depend on the discipline to which he is forced to submit – a discipline forbidding him to reach out for these same appealing objects. Disliking these constraints so much, we hardly can be said to have selected them; rather, these constraints selected us: they enabled us to survive.

The extended order did not of course arise all at once; the process lasted longer and produced a greater variety of forms than its eventual development into a world-wide civilisation might suggest (taking perhaps hundreds of thousands of years rather than five or six thousand); and the market order is comparatively late. The various structures, traditions, institutions and other components of this order arose gradually as variations of habitual modes of conduct were selected. Such new rules would spread not because men understood that they were more effective, or could calculate that they would lead to expansion, but simply because they enabled those groups practising them to procreate more successfully and to include outsiders.

Whilst learnt rules, which the individual came to obey habitually and almost as unconsciously as inherited instincts, increasingly replaced the latter, we cannot precisely distinguish between these two determinants of conduct because they interact in complicated ways. Practices learnt as infants have become as much part of our personalities as what governed us already when we began to learn. Even some structural changes in the human body have occurred because they helped man to take fuller advantage of opportunities provided by cultural developments. Neither is it important for our present purposes how much of the abstract structure that we call mind is transmitted genetically and embodied in the physical structure of our central nervous system, or how far it serves only as a receptacle enabling us to absorb cultural tradition. The results of genetic and cultural transmission may both be called traditions. What is important is that the two often conflict in the ways mentioned.

Although cultural evolution, and the civilisation that it created, brought differentiation, individualisation, increasing wealth, and great expansion to mankind, its gradual advent has been far from smooth. We have not shed our heritage from the face-to-face troop, nor have these instincts either ‘adjusted’ fully to our relatively new extended order or been rendered harmless by it. Yet the lasting benefits of some instincts should not be overlooked, including the particular endowment that enabled some other instinctual modes to be at least partly displaced.

Part of our present difficulty is that we must constantly adjust our lives, our thoughts and our emotions, in order to live simultaneously within different kinds of orders according to different rules. If we were to apply the unmodified, uncurbed, rules of the micro-cosmos (i.e., of the small band or troop, or of, say, our families) to the macro-cosmos (our wider civilisation), as our instincts and sentimental yearnings often make us wish to do, we would destroy it. Yet if we were always to apply the rules of the extended order to our more intimate groupings, we would crush them. So we must learn to live in two sorts of world at once.

The topic of this book thus resembles, in a way, that of Civilisation and Its Discontents (1930), except that my conclusions differ greatly from Freud’s. Indeed, the conflict between what men instinctively like and the learnt rules of conduct that enabled them to expand – a conflict fired by the discipline of ‘repressive or inhibitory moral traditions’, as D. T. Campbell calls it – is perhaps the major theme of the history of civilisation. It seems that Columbus recognised at once that the life of the ‘savages’ whom he encountered was more gratifying to innate human instincts. And as I shall argue later, I believe that an atavistic longing after the life of the noble savage is the main source of the collectivist tradition.

The evolution of rules was far from unhindered, since the powers enforcing the rules generally resisted rather than assisted changes conflicting with traditional views about what was right or just. In turn, enforcement of newly learnt rules that had fought their way to acceptance sometimes blocked the next step of evolution, or restricted a further extension of the coordination of individual efforts. Coercive authority has rarely initiated such extensions of coordination, though it has from time to time spread a morality that had already gained acceptance within a ruling group. All this confirms that the feelings that press against the restraints of civilisation are anachronistic, adapted to the size and conditions of groups in the distant past. Moreover, if civilisation has resulted from unwanted gradual changes in morality, then, reluctant as we may be to accept this, no universally valid system of ethics can ever be known to us.

Mind Is Not a Guide but a Product of Cultural Evolution, and Is Based More on Imitation than on Insight or Reason We have mentioned the capacity to learn by imitation as one of the prime benefits conferred during our long instinctual development. Indeed, perhaps the most important capacity with which the human individual is genetically endowed, beyond innate responses, is his ability to acquire skills by largely imitative learning. In view of this, it is important to avoid, right from the start, a notion that stems from what I call the ‘fatal conceit’: the idea that the ability to acquire skills stems from reason. For it is the other way around: our reason is as much the result of an evolutionary selection process as is our morality.

Thus I confess that I always have to smile when books on evolution, even ones written by great scientists, end, as they often do, with exhortations which, while conceding that everything has hitherto developed by a process of spontaneous order, call on human reason – now that things have become so complex – to seize the reins and control future development. Such wishful thinking is encouraged by what I have elsewhere called the ‘constructivist rationalism’ (1973) that affects much scientific thinking, and which was made quite explict in the title of a highly successful book by a well-known socialist anthropologist, Man Makes Himself (V. Gordon Childe, 1936), a title that was adopted by many socialists as a sort of watchword (Heilbroner, 1970:106).

Not only is the idea of evolution older in the humanities and social sciences than in the natural sciences, I would even be prepared to argue that Darwin got the basic ideas of evolution from economics. As we learn from his notebooks, Darwin was reading Adam Smith just when, in 1838, he was formulating his own theory (see Appendix A below).1 In any case, Darwin’s work was preceded by decades, indeed by a century, of research concerning the rise of highly complex spontaneous orders through a process of evolution.

Having mentioned several differences between cultural and biological evolution, I should stress that in one important respect they are at one: neither biological nor cultural evolution knows anything like ‘laws of evolution’ or ‘inevitable laws of historical development’ in the sense of laws governing necessary stages or phases through which the products of evolution must pass, and enabling the prediction of future developments. Cultural evolution is determined neither genetically nor otherwise, and its results are diversity, not uniformity. Those philosophers like Marx and Auguste Comte who have contended that our studies can lead to laws of evolution enabling the prediction of inevitable future developments are mistaken.

While facts alone can never determine what is right, ill-considered notions of what is reasonable, right and good may change the facts and the circumstances in which we live; they may destroy, perhaps forever, not only developed individuals and buildings and art and cities (which we have long known to be vulnerable to the destructive powers of moralities and ideologies of various sorts), but also traditions, institutions, and interrelations without which such creations could hardly have come into being or ever be recreated.

In Greece it was of course chiefly the Spartans, the people who resisted the commercial revolution most strongly, who did not recognise individual property but allowed and even encouraged theft. To our time they have remained the prototype of savages who rejected civilisation (for representative 18th-century views on them compare Dr. Samuel Johnson in Boswell’s Life or Friedrich Schiller’s essay Über die Gesetzgebung des Lykurgos und Solon). Yet already in Plato and Aristotle, however, we find a nostalgic longing for return to Spartan practice, and this longing persists to the present. It is a craving for a micro-order determined by the overview of omniscient authority.

But during the last years of the Republic and the first centuries of the Empire, governed by a senate whose members were deeply involved in commercial interests, Rome gave the world the prototype of private law based on the most absolute conception of several property. The decline and final collapse of this first extended order came only after central administration in Rome increasingly displaced free endeavour. This sequence has been repeated again and again: civilisation might spread, but is not likely to advance much further, under a government that takes over the direction of daily affairs from its citizens.

Later, in the Enquiry, he remarked: ‘Fanatics may suppose, that domination is founded on grace, and that saints alone inherit the earth; but the civil magistrate very justly puts these sublime theorists on the same footing with the common robbers, and teaches them by severe discipline, that a rule, which, in speculation, may seem the most advantageous to society, may yet be found, in practice, totally pernicious and destructive’ (1777/1886:IV, 187).

For example, the shippers of the rising Greek cities who took pottery jugs filled with oil or wine to the Black Sea, Egypt or Sicily to exchange them for grain, in the process took away, to people of whom their neighbours knew virtually nothing, goods which those neighbours themselves much desired. By allowing this to happen, members of the small group must have lost their very bearings and begun to reorient to a new comprehension of the world, one in which the importance of the small group itself was much reduced. As Piggott explains in Ancient Europe, ‘Prospectors and miners, traders and middlemen, the organisation of shipments and caravans, concessions and treaties, the concept of alien peoples and customs in distant lands – all these are involved in the enlargement of social comprehension demanded by the technological step of entering . . . a bronze age’

The Density of Occupation of the World Made Possible by Trade This ‘chain reaction’ sparked by new settlement and trade may be studied more closely. While some animals are adapted to particular and rather limited environmental ‘niches’ outside of which they can hardly exist, men and a few other animals such as rats have been able to adapt themselves almost everywhere on the surface of the earth. This is hardly due merely to adaptations by individuals. Only a few and relatively small localities would have provided small bands of hunters and gatherers all that even the most primitive tool-using groups need for a settled existence, and still less all they needed to till the earth. Without support from fellows elsewhere, most humans would find the places they wish to occupy either uninhabitable or able to be settled only very thinly.

In any case, in early Greek history we do find the important institution of the xenos, the guest-friend, who assured individual admission and protection within an alien territory. Indeed, trade must have developed very much as a matter of personal relations, even if the warrior aristocracy disguised it as being no more than mutual exchange of gifts. And it was not only those who were already wealthy who could afford hospitality to members of particular families in other regions: such relations also would have made people rich by providing channels through which important needs of their community could be satisfied. The xenos at Pylos and Sparta to whom Telemachos goes to get news of his ‘much travelled father Odysseus’ (Odyssey: III) was probably such a trading partner who by his wealth had risen to become king.

The role played by governments is greatly exaggerated in historical accounts because we necessarily know so much more about what organised government did than about what the spontaneous coordination of individual efforts accomplished. This deception, which stems from the nature of those things preserved, such as documents and monuments, is exemplified by the story (which I hope is apocryphal) about the archaeologist who concluded from the fact that the earliest reports of particular prices were inscribed on a stone pillar that prices had always been set by governments. Yet this is hardly worse than finding, in a well-known work, the argument that, since no suitable open spaces were found in the excavation of Babylonian cities, no regular markets could as yet have existed there – as if in a hot climate such markets would have been held in the open!

And the history of China provides many instances of government attempts to enforce so perfect an order that innovation became impossible (Needham, 1954). This country, technologically and scientifically developed so far ahead of Europe that, to give only one illustration, it had ten oil wells operating on one stretch of the river Po already in the twelfth century, certainly owed its later stagnation, but not its early progress, to the manipulatory power of its governments. What led the greatly advanced civilisation of China to fall behind Europe was its governments’ clamping down so tightly as to leave no room for new developments, while, as remarked in the last chapter, Europe probably owes its extraordinary expansion in the Middle Ages to its political anarchy

Although he is sometimes cited as the first economist, what he discussed as oikonomia was exclusively the running of a household or at most of an individual enterprise such as a farm. For the acquisitive efforts of the market, the study of which he called chrematistika, he had only scorn. Although the lives of the Athenians of his day depended on grain trade with distant countries, his ideal order remained one that was autarkos, self-sufficient. Although also acclaimed as a biologist, Aristotle lacked any perception of two crucial aspects of the formation of any complex structure, namely, evolution and the self-formation of order. As Ernst Mayr (1982:306) puts it: ‘The idea that the universe could have developed from an original chaos, or that higher organisms could have evolved from lower ones, was totally alien to Aristotle’s thought. To repeat, Aristotle was opposed to evolution of any kind.’

THE REVOLT OF INSTINCT AND REASON It is necessary to guard ourselves from thinking that the practice of the scientific method enlarges the powers of the human mind. Nothing is more flatly contradicted by experience than the belief that a man distinguished in one or even more departments of science, is more likely to think sensibly about ordinary affairs than anyone else. Wilfred Trotter

This particular form of rationalism has been the point of departure of investigations that I have conducted over the past sixty years, investigations in which I tried to show that it is particularly ill-considered, embedding a false theory of science and of rationality in which reason is abused, and which, most important here, leads invariably to an erroneous interpretation of the nature and coming into being of human institutions. That interpretation is one by which, in the name of reason and the highest values of civilisation, moralists end up flattering the relatively unsuccessful and inciting people to satisfy their primitive desires.

Indeed, the basic point of my argument – that morals, including, especially, our institutions of property, freedom and justice, are not a creation of man’s reason but a distinct second endowment conferred on him by cultural evolution – runs counter to the main intellectual outlook of the twentieth century. The influence of rationalism has indeed been so profound and pervasive that, in general, the more intelligent an educated person is, the more likely he or she now is not only to be a rationalist, but also to hold socialist views (regardless of whether he or she is sufficiently doctrinal to attach to his or her views any label, including ‘socialist’). The higher we climb up the ladder of intelligence, the more we talk with intellectuals, the more likely we are to encounter socialist convictions. Rationalists tend to be intelligent and intellectual; and intelligent intellectuals tend to be socialists.

Of course intellectuals will demand explanations for everything they are expected to do, and will be reluctant to accept practices just because they happen to govern the communities into which they happen to have been born; and this will lead them into conflict with, or at least to a low opinion of, those who quietly accept prevailing rules of conduct. Moreover, they also understandably will want to align themselves with science and reason, and with the extraordinary progress made by the physical sciences during the past several centuries, and since they have been taught that constructivism and scientism are what science and the use of reason are all about, they find it hard to believe that there can exist any useful knowledge that did not originate in deliberate experimentation, or to accept the validity of any tradition apart from their own tradition of reason. Thus a distinguished historian has written in this vein: ‘Tradition is almost by definition reprehensible, something to be mocked and deplored’ (Seton–Watson, 1983:1270). By definition: Barry (1961, mentioned above) wanted to make morality and justice immoral and unjust by ‘analytic definition’; here Seton–Watson would try the same manoeuvre with tradition, making it by definition reprehensible. We shall return to these words, to this ‘Newspeak’, in chapter seven. Meanwhile let us look more closely at the facts.

Those who have really done most to spread these ideas, the real bearers of constructivist rationalism and socialism, are, however, not these distinguished scientists. They rather tend to be the so-called ‘intellectuals’ that I have elsewhere (1949/1967:178–94) unkindly called professional ‘second-hand dealers in ideas’: teachers, journalists and ‘media representatives’ who, having absorbed rumours in the corridors of science, appoint themselves as representatives of modern thought, as persons superior in knowledge and moral virtue to any who retain a high regard for traditional values, as persons whose very duty it is to offer new ideas to the public – and who must, in order to make their wares seem novel, deride whatever is conventional. For such people, due to the positions in which they find themselves, ‘newness’, or ‘news’, and not truth, becomes the main value, although that is hardly their intention – and although what they offer is often no more new than it is true.

Keynes also argued against the moral tradition of the ‘virtue of saving’, refusing, along with thousands of crank economists, to admit that a reduction of the demand for consumers’ goods is generally required to make an increase of the production of capital goods (i.e., investment) possible. And this in turn led him to devote his formidable intellectual powers to develop his ‘general’ theory of economics – to which we owe the unique world-wide inflation of the third quarter of our century and the inevitable consequence of severe unemployment that has followed it (Hayek, 1972/1978). Thus it was not philosophy alone that confused Keynes. It was also economics. Alfred Marshall, who understood the matter, seems to have failed to impress adequately upon Keynes one of the important insights that John Stuart Mill had gained in his youth: namely, that ‘the demand for commodities is not a demand for labour’. Sir Leslie Stephen (the father of Virginia Woolf, another member of the Bloomsbury group) described this doctrine in 1876 as a ‘doctrine so rarely understood, that its complete appreciation is, perhaps, the best test of an economist’ – and was ridiculed for saying so by Keynes.

Positive and Negative Liberty Some rationalists would want to advance an additional complaint that we have hardly considered: namely, that the morality and institutions of capitalism not only fail to meet the logical, methodological, and epistemological requirements reviewed already, but also impose a crippling burden on our freedom – as, for example, our freedom to ‘express’ ourselves unrestrainedly. This complaint cannot be met by denying the obvious, a truth with which we opened this book – that moral tradition does seem burdensome to many – but can only be answered by observing again, here and in subsequent chapters, what we derive from bearing this burden, and what the alternative would be. Virtually all the benefits of civilisation, and indeed our very existence, rest, I believe, on our continuing willingness to shoulder the burden of tradition. These benefits in no way ‘justify’ the burden. But the alternative is poverty and famine.

‘Liberation’ and Order On a less sophisticated level than the argument against ‘alienation’ are the demands for ‘liberation’ from the burdens of civilisation – including the burdens of disciplined work, responsibility, risk-taking, saving, honesty, the honouring of promises, as well as the difficulties of curbing by general rules one’s natural reactions of hostility to strangers and solidarity with those who are like oneself – an ever more severe threat to political liberty. Thus the notion of ‘liberation’, although allegedly new, is actually archaic in its demand for release from traditional morals. Those who champion such liberation would destroy the basis of freedom, and permit men to do what would irreparably break down those conditions that make civilisation possible.

Apart from the constructivist contention that an adequate morality can be designed and constructed afresh by reason, there are at least two other possible sources of morality. There is, first, as we saw, the innate morality, so-called, of our instincts (solidarity, altruism, group decision, and such like), the practices flowing from which are not sufficient to sustain our present extended order and its population. Second, there is the evolved morality (savings, several property, honesty, and so on) that created and sustains the extended order. As we have already seen, this morality stands between instinct and reason, a position that has been obscured by the false dichotomy of instinct versus reason.

False assumptions about the possibility of justification, construction or demonstration are perhaps at the root of scientism. But even if they were to understand this, proponents of scientism would undoubtedly want to fall back on the other requirements of their ancient methodology, which are connected to, but are not strictly dependent on, the demand for justification. For example (to hark back to our list of requirements), it would be objected that one cannot fully understand traditional morals and how they work; following them serves no purpose that one can specify fully in advance; following them produces effects that are not immediately observable and hence cannot be determined to be beneficial – and which are in any case not fully known or foreseen.

There is no ready English or even German word that precisely characterises an extended order, or how its way of functioning contrasts with the rationalists’ requirements. The only appropriate word, ‘transcendent’, has been so misused that I hesitate to use it. In its literal meaning, however, it does concern that which far surpasses the reach of our understanding, wishes and purposes, and our sense perceptions, and that which incorporates and generates knowledge which no individual brain, or any single organisation, could possess or invent. This is conspicuously so in its religious meaning, as we see for example in the Lord’s Prayer, where it is asked that ‘Thy will [i.e., not mine] be done in earth as it is in heaven’; or in the Gospel, where it is declared: ‘Ye have not chosen me but I have chosen you, that ye should go and bring forth fruit, and that your fruit should remain’ (St. John, 15:26). But a more purely transcendent ordering, which also happens to be a purely naturalistic ordering (not derived from any supernatural power), as for example in evolution, abandons the animism still present in religion: the idea that a single brain or will (as for example, that of an omniscient God) could control and order.

In an order so extended as to transcend the comprehension and possible guidance of any single mind, a unified will can indeed hardly determine the welfare of its several members in terms of some particular conception of justice, or according to an agreed scale. Nor is this due merely to the problems of anthropomorphism. It is also because ‘welfare . . . has no principle, neither for him who receives it, nor for him who distributes it (one places it here, another there); because it depends on the material content of the will, which is dependent on particular facts and therefore is incapable of a general rule’ (Kant, 1798:II, 6, note 2). The insight that general rules must prevail for spontaneity to flourish, as reaped by Hume and Kant, has never been refuted, merely neglected or forgotten.

Most knowledge – and I confess it took me some time to recognise this – is obtained not from immediate experience or observation, but in the continuous process of sifting a learnt tradition, which requires individual recognition and following of moral traditions that are not justifiable in terms of the canons of traditional theories of rationality. The tradition is the product of a process of selection from among irrational, or, rather, ‘unjustified’ beliefs which, without anyone’s knowing or intending it, assisted the proliferation of those who followed them (with no necessary relationship to the reasons – as for example religious reasons – for which they were followed). The process of selection that shaped customs and morality could take account of more factual circumstances than individuals could perceive, and in consequence tradition is in some respects superior to, or ‘wiser’ than, human reason (see chapter one above). This decisive insight is one that only a very critical rationalist could recognise.

The knowledge that plays probably the chief role in this differentiation – far from being the knowledge of any one human being, let alone that of a directing superbrain – arises in a process of experimental interaction of widely dispersed, different and even conflicting beliefs of millions of communicating individuals. The increasing intelligence shown by man is, accordingly, due not so much to increases in the several knowledge of individuals but to procedures for combining different and scattered information which, in turn, generate order and enhance productivity. Thus the development of variety is an important part of cultural evolution, and a great part of an individual’s value to others is due to his differences from them.

For mere abstract knowledge of the general structure of such entities is insufficient to enable us literally to ‘build’ them (that is, to put them together from known pieces), or to predict the particular form they will assume. At best, it can indicate under what general conditions many such orders or systems will form themselves, conditions that we may sometimes be able to create. This sort of problem is familiar to the chemist concerned with similarly complex phenomena but usually unfamiliar to the kind of scientist accustomed to explaining everything in terms of simple connections between a few observable events. The result is that such persons are tempted to interpret more complex structures animistically as the result of design, and to suspect some secret and dishonest manipulation – some conspiracy, as of a dominant ‘class’ – behind ‘designs’ whose designers are nowhere to be found. This in turn helps to reinforce their initial reluctance to relinquish control of their own products in a market order. For intellectuals generally, the feeling of being mere tools of concealed, even if impersonal, market forces appears almost as a personal humiliation.

Some persons are so troubled by some effects of the market order that they overlook how unlikely and even wonderful it is to find such an order prevailing in the greater part of the modern world, a world in which we find thousands of millions of people working in a constantly changing environment, providing means of subsistence for others who are mostly unknown to them, and at the same time finding satisfied their own expectations that they themselves will receive goods and services produced by equally unknown people. Even in the worst of times something like nine out of ten of them will find these expectations confirmed.

The point is not that whatever economists determine to be efficient is therefore ‘right’, but that economic analysis can elucidate the usefulness of practices heretofore thought to be right – usefulness from the perspective of any philosophy that looks unfavourably on the human suffering and death that would follow the collapse of our civilisation. It is a betrayal of concern for others, then, to theorise about the ‘just society’ without carefully considering the economic consequences of implementing such views. Yet, after seventy years of experience with socialism, it is safe to say that most intellectuals outside the areas — Eastern Europe and the Third World – where socialism has been tried remain content to brush aside what lessons might lie in economics, unwilling to wonder whether there might not be a reason why socialism, as often as it is attempted, never seems to work out as its intellectual leaders intended. The intellectuals’ vain search for a truly socialist community, which results in the idealisation of, and then disillusionment with, a seemingly endless string of ‘utopias’ – the Soviet Union, then Cuba, China, Yugoslavia, Vietnam, Tanzania, Nicaragua – should suggest that there might be something about socialism that does not conform to certain facts. But such facts, first explained by economists more than a century ago, remain unexamined by those who pride themselves on their rationalistic rejection of the notion that there could be any facts that transcend...

Comprehending the role played by the transmission of information (or of factual knowledge) opens the door to understanding the extended order. Yet these issues are highly abstract, and are particularly hard to grasp for those schooled in the mechanistic, scientistic, constructivist canons of rationality that dominate our educational systems – and who consequently tend to be ignorant of biology, economics, and evolution. I confess that it took me too a long time from my first breakthrough, in my essay on ‘Economics and Knowledge’ (1936/48), through the recognition of ‘Competition as a Discovery Procedure’ (1978:179–190), and my essay on ‘The Pretence of Knowledge’ (1978:23–34), to state my theory of the dispersal of information, from which follows my conclusions about the superiority of spontaneous formations to central direction.