Edited and written by David Gordon, senior fellow of the Mises Institute and author of four books and thousands of essays.

The Hayekian Cul-de-sac

Summer 1997

Jeremy Shearmur
Routledge, 1996, x + 257 pgs.

In this outstanding book, Jeremy Shearmur approaches the thought of Friedrich Hayek from an original angle. Debates in political theory often bog down because of incompatible assumptions. If you do not find plausible the egalitarian premises of John Rawls's A Theory of Justice, you are liable to think the book a failure. Similarly, many reject libertarian arguments because they find unacceptable the initial axiom of self-ownership. Can this impasse be escaped?

Shearmur suggests a way out. For many years, our author served as a research assistant to the philosopher of science Karl Popper, and he has studied closely the "methodology of scientific research programs" developed by Popper's onetime colleague (and later antagonist) Imre Lakatos.

From these thinkers, Shearmur has learned a historical method of evaluating a theorist's work. One starts by depicting the problem that the theorist faced. How well did he solve the difficulties he set himself? Do his theories generate new problems that in turn are dealt with fruitfully? If so, the research program is progressive; if not, it must be judged a failure.

"Progress" and "regress" are hardly neutral terms, so the approach sketched does not altogether avoid the problem of conflict among value judgments. But, judged on its own terms, Shearmur's program seems promising; and he applies it to Hayek with illuminating results.

What then, is the fundamental task Hayek set himself as a political theorist? According to Shearmur, Hayek began as a socialist, and throughout his life retained much sympathy for socialist values. His dedication of The Road to Serfdom to "the socialists of all parties" by no means was insincere. But he came to believe that the ends of socialism could not be realized by socialist means, and he deemed it his duty to convey this view to a wide public.

Why does socialism inevitably fail to achieve the ends of prosperity, justice, and happiness it professes? One answer will come as no surprise to readers of The Mises Review: calculation is not possible in a socialist economy. Ludwig von Mises's argument to this effect overthrew Hayek's own commitment to socialism; and Hayek developed the argument in his own work. After he became aware of Mises's argument, Hayek saw "market prices, and decisions taken upon them" as "an essential rather than an accidental feature of societies such as those in which we live" (p. 34).

Hayek saw that an analogous argument could be extended to the political sphere. Just as the socialist planner has no means to measure economic projects on a common monetary scale to judge their efficiency, the planner cannot combine the conflicting preferences of individuals into a coherent set of goals. "Hayek argued that a planning authority will need to make decisions among various alternative ways in which resources could be utilized, and he claims that 'there are within wide limits no grounds on which one person could convince another that one decision is more reasonable than the other'" (p. 61).

What then can the planner do? He can of course attempt to impose his own set of priorities on society; but is this not a very good brief characterization of tyranny? But what is his alternative? Should he shrink from dictatorship, he is left with a riot of clashing values. "Black spirits and white/Blue spirits and grey/Mingle, mingle/mingle."

The bulk of The Road to Serfdom consists of an account of how Nazism arose from ideas common in the German socialist movement; in it Hayek shows in careful detail that the attempt to plan society negates freedom.

Hayek's analysis rests on a controversial premise. For his argument to work, it must not be the case that reason dictates a common set of values that most people readily grasp. If it does, then the planner may avoid the dilemma in which Hayek endeavors to place him. Since almost everyone will, if reasonable, agree on values, the planner need not impose his own preferences on an unwilling populace.

By the way, Hayek's argument, contrary to my mistaken belief for many years, does not depend on the assumption that there are no objective values. These can coexist on entirely good terms with his argument so long as people cannot readily grasp them. Failing this, preferences will still conflict without hope of resolution. (I forego discussion of the bizarre possibility that people universally come to agree on values that are not objectively true: this of course also suffices to avoid Hayek's dilemma.)

To discuss ethical objectivity would of course take us far afield: readers may now breathe a sigh of relief that I won't do so. Rather, I mention the premise for another reason. Shearmur himself argues that there are objectively true values on which people can rationally come to agree. Does not the position land him in difficulty? How can he at the same time accept this position and also endorse Hayek's argument, which appears to rest on its denial?

I do not suggest that Shearmur lacks the resources to respond. He might, for example, contend that just what can be established as objectively valuable is that people be free, in a wide variety of circumstances, to exercise their subjective preferences. Indeed, it is clear from his discussion that he would indeed say this. But he ought I think to have addressed explicitly the apparent contradiction in his position.

Let us now return from Shearmur to Hayek. If our author's account of Hayek's argument in The Road to Serfdom is correct, Hayek seems to have fulfilled the task he set himself. He aimed to show that socialism subverts the values at which it ostensibly aims, and he appears to have done so. Should we then declare the Hayekian research program a success?

Not so fast, our author says. Hayek has not shown that the unhampered free market is required by sound political theory. Socialism, we have seen, is out; but what about the welfare state? Is it not possible, for all Hayek's argument has shown, to proceed with Social Security, Medicare, antitrust, safety regulation, and the whole paraphernalia of interventionism? Do these measures demand the unified scale of values that Hayek maintains leads to serfdom? Why do they require more than the concurrence of a democratic majority to institute?

If Hayek's program is to be declared a success, then, he needs to finish the job. He must extend his argument so that it applies to welfarism, in addition to full-scale socialism. Or must he? As Shearmur recognizes, a problem confronts his analysis. He thinks that Hayek's argument is incomplete because it does not by itself lead to support for the free market. But this assumes that Hayek was trying to defend an unhampered market: otherwise, his argument does not fail on his own terms.

As Shearmur acknowledges, Hayek did not in fact support the free market to the extent that Mises did. "Hayek is not an advocate of laissez-faire; he is not averse to government playing a considerable role; for example, in the area of the provision of public goods, in assisting with the smooth running of the market order, and also in meeting welfare needs." "In the light of the active role that he gives to government in The Road to Serfdom, one might wonder about the extent to which he can be described as a classical liberal there" (p. 63).

Shearmur's query should occasion little shock for any reader of The Constitution of Liberty, where Hayek's program for interventionism is presented in detail. One little-noticed passage there merits particular attention. Although Hayek thinks that the Supreme Court probably averted economic disaster by ruling unconstitutional the National Industrial Recovery Act, he also maintains that the Court acted on "more questionable" grounds in overturning other New Deal measures (The Constitution of Liberty, Chicago, 1960, p. 190). Hayek as moderate New Dealer?

Is, then, Shearmur's claim misplaced? Is he wrong to contend that Hayek's argument is incomplete, since Hayek does not claim to advocate the unhampered market? Shearmur refuses to concede defeat. In spite of his early sympathy for socialist values, Hayek became considerably more classical liberal later in his life; were a "rule of law" of the type he founded put into effect, much of the contemporary welfare state would have to be dismantled. And in any case, those of us, like Shearmur, more sympathetic to laissez-faire than Hayek may wonder whether Hayek's research program can be extended along the suggested lines.

Before turning to Shearmur's analysis of the attempt to extend Hayek's argument, we must confront a surprising omission. Shearmur seeks an argument against interventionism; but has not the mission already been accomplished? Mises famously contended that all interventionist measures fail of their purpose.

Confronted with failure, the government must either retreat to the free market or proceed apace with more intervention. If it chooses the latter path, the same options will confront it again. Eventually, should it continue to elect intervention, the result will be full-scale socialism. But socialism has already been rejected. Since intervention, consistently carried through, leads to this unacceptable result, it too stands refuted.

Shearmur makes no mention of Mises's argument, or of the brilliant extension of that argument in Murray Rothbard's Power and Market. From conversations with the author some years ago, I suspect that he rejects the Mises-Rothbard analysis and for this reason does not bring it up. But it would have been interesting to see his objections: absent this, I fear that we must declare Shearmur's own research program too incomplete fully to evaluate.

Once more back to Hayek. In his effort to defend a more-or- less classical liberal society, Hayek increasingly turned to evolutionary considerations. Spontaneous orders, not governed by a conscious plan, can support larger populations than alternative forms of social organization. They will thus tend to supplant their more interventionist rivals and they fully deserve to do so.

Shearmur has little patience for Hayek's variety of Social Darwinism. Shearmur, heavily influenced by Popper, places much greater weight on conscious planning than does Hayek. Though the social policies Shearmur supports differ greatly from Popper's "piecemeal social engineering," Shearmur and his mentor share a rationalist cast of mind.

In his analysis of Hayek's evolutionist thought, Shearmur makes some very useful points. Hayek rightly calls the free market a spontaneous order, in the sense that no central plan controls its operation. But it does not follow that the market has to be established by a process of evolution, or that it is somehow better if it is. "At a theoretical level, it is also clear that Hayek's conservative enthusiasm for things evolved cannot be sustained" (p. 108). The products of evolution may be either good or bad, a commonplace Hayek often overlooked.

Furthermore, Hayek's method of judging societies has little to recommend it. Why should the society that can support the most people be held the most valuable? Shearmur amusingly terms this criterion "Hayek's revision of Bentham (from the Greatest Happiness of the Greatest Number to The Greatest Number)" (p. 174). Shearmur in conclusion finds the main lines of Hayek's later work mistaken. Though he finds much of value in Hayek, his program cannot be developed along the lines Hayek himself set out.


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