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

Volume 12, Number 3
Fall 2006

The Real Meaning of Hayek

The Political Sociology of Freedom: Adam Ferguson and F.A. Hayek. By Ronald Hamowy. Edward Elgar, 2005. Xviii + 265 pgs.

Ronald Hamowy combines extraordinary critical powers with painstaking historical research. His skills are much in evidence in this collection of his essays, but I have an additional reason to call this book to my readers' attention. On a few occasions, people have complained that my reviews are too negative.

Now, I can answer, "If you think I'm bad, look at Hamowy!" Here he is on a book by Christina Petsoulas:

"Nor does Petsoulas grasp the nature of ordered arrangements in the context of market forces. . .she is oblivious to the origin of these 'price signals' to which individuals react. . .It is difficult to know what to make of Petsoulas's book. It was written as a dissertation at Nuffield College, Oxford, and has appeared under the imprimatur of a reputable academic press, yet it falls so far short of what would ordinarily be expected of a serious exploration of the topic that the reader is at a loss to know why it ever saw print." (pp.xvii-xviii)

What has aroused Hamowy's ire are the hapless author's mistakes about spontaneous order, and the exploration of this theory is the principal theme of this book.  He carefully delimits what he means: "It is important to underscore that this theory of spontaneous order. . . does not simply contend that certain purposive social actions have unintended consequences. . .The theory of spontaneous order, on the other hand, refers only to those acts the unanticipated results of which issue in complex social patterns." (pp.39-40)

I should like to suggest one modification of Hamowy's definition. Suppose that people in a market economy anticipate, based on past experience, that their buying and selling will result in a coordinated economy. Is this not still an example of spontaneous order? It would be better to speak of acts that result in complex social patterns, where intending to produce those patterns plays no causal role in their genesis.

Hamowy maintains that spontaneous order is "perhaps the single most significant sociological contribution made by that group of writers whom we today regard as constituting the Scottish Enlightenment."(p.39). He discusses the theory of spontaneous order in Mandeville, Hume, Smith, and Ferguson, among others. Hume, e.g., argued that "the rules that give shape to property, right, and obligation" arose spontaneously. People in the "circumstances of justice" must deal with scarcity: goods are not superabundant Each person naturally wants as much as possible for himself; but this desire, Hume holds, leads to the rules of justice: "'Tis self-love which is their[the rules of justice's] real origin; and as the self-love of one person is naturally contrary to that of another, these various several interested passions are oblig'd to adjust themselves after such a manner as to concur in some system of conduct and behaviour. This system, therefore, comprehending the interest of each individual, is of course advantageous to the public; tho' it be not intended for that purpose by the inventors." (p.47, quoting Hume, A Treatise of Human Nature)

Hamowy finds Hume's account plausible; but one adopts it, I think that its merits need to be weighed against the view that we directly grasp what is right. Richard Price, whose views on the American Revolution are the topic of another essay, held exactly this view. Price thought that "our intellectual perceptions of right and wrong, our notions of moral rightness, follow immediately from our understanding and, once having been intuited, are appealable to nothing more fundamental."(p.165)

The most famous example of the theory of spontaneous order is of course Adam Smith's "invisible hand." Hamowy notes that Smith's use of the concept did not imply that he fully accepted laissez-faire. Although the "overall thrust" of Smith's argument favored laissez-faire, "Smith supported a number of specific governmental intrusions into the market, among them the regulation of paper money banking, the compulsory regulation of mortgages, government participation in education, control of the coinage, taxes on the sale of liquor, the granting of temporary monopolies to merchants engaged in enterprises of great risk aimed at establishing new branches of trade, patents, copyrights, government stamps of quality on plate and on linen and woolen cloth, and the establishment of a maximum rate of interest."(p.57)

I hope that Hamowy's careful scholarship on this issue does not result in an accusation of dishonesty from any overwrought Smith partisans.

In his discussion of spontaneous order, Hamowy continues and extends the work of his teacher, F.A. Hayek. In another area, though, he and Hayek differ strongly. Hayek contrasted centrally directed societies, in which the state directly tells particular people what to do, with societies governed by the rule of law. In the latter, the laws are general and abstract: they make no reference to particular people. Because of these features of the law, people can plan their future actions to avoid legal trouble. Hayek saw in the rule of law the key to a free society.

Hamowy rejects Hayek's thesis. He denies that the rule of law by itself offers significantly more scope to freedom than the discretionary law that Hayek opposes. He does not argue that discretion by government tribunals helps to secure freedom: that would be an implausible and unlibertarian view. Rather, he denies that the general and abstract rules that Hayek favors suffice to restrict the government's discretionary power.

In making this argument, Hamowy ingeniously turns to his own purposes the contentions of a school of legal thought characterized by political opinions sharply at variance with his own. The American legal realists, such as Karl Llewellyn and Jerome Frank, wanted to use law as a tool to achieve the social purposes they favored. Most of them sympathized with the New Deal and opposed as outmoded "formalism" efforts by the Supreme Court to derail the reform measures they supported.

Though Hamowy differs from the realists politically, he agrees with them that laws are indeterminate. Karl Llewellyn, e.g., noted that in almost any contested lawsuit, the law is to some extent in doubt. "Much litigation arises through genuine dispute over whether a particular law is, in fact, applicable to a given situation. . . If decisions of law could be predicted with a good measure of certainty, there would be little disagreement among trained lawyers over such questions. The very existence of appeals courts belies this. Professor Llewellyn remarks. . .that 'the rules of law, do not, because they cannot, decide any appealed case which has been worth an appeal and a response. . .'"(p.227, emphasis removed) Hamowy does not go so far as Jerome Frank, who once said that the decision in a contested case is determined by what the judge had for breakfast that morning.

Hayek's use of the rule of law goes further. He thinks that one can define freedom as a condition in which the legislature is bound by general and abstract rules: "Freedom, for him [Hayek] is a logical consequence of a certain set of formal restrictions on legislative activity. . .The implication is, of course, that these abstract rules, when applied impartially, without regard to person, are non-coercive, despite any substantive qualification." (pp.211-12)

Hamowy makes short work of this view. On it, all sorts of measures, such as taxation, commonly held coercive count as non-coercive so long as they are specified in advance through general laws. But of course it does not follow that if you know the tax table before you decide on employment, taxes leave your freedom unimpaired.

For Hayek, the themes we have so far considered, spontaneous order and the rule of law, are closely linked. The rule of law in Britain, its foremost home, arose through an unplanned process. General rules emerged from the body of decisions built up over time by the common law courts.

Hamowy utterly rejects Hayek's account. The common law courts were bound by "antiquated and sluggish processes"; they could not handle many types of commercial disputes.  The royal courts, under the control of the king, were much more popular. He gives a hilarious example of these antiquated procedures: "The common law courts were further burdened by the fact that pleadings and judgments were made in Norman French, which persisted until the 16th century. Even as late as 1631, the records of Salisbury assizes noted that the Chief Justice of the Court of Common Pleas condemned a prisoner, who 'ject un Brickbat a le dit Justice que narrowly mist,'  for which 'son dexter manue amputee,' and the man himself 'immediatement hange in presence de Court.'"(p.254, emphasis removed) Hamowy concludes: "The early common law cannot be said to be either the product of evolution, any more than any other medieval English institution, nor a workable system of justice." (p.259)

Why is Hamowy so eager to criticize Hayek on legal issues? For him, there is a fundamental issue at stake. Freedom demands that the state's power should be restricted as much as possible. "For at least two hundred years, social philosophers have known that association does not need government, that, indeed, government is destructive of association."(p.236) A libertarian theory must specify the substantive rights that people have, e.g., self-ownership and Lockean property rights. It cannot confine itself to formal requirements on laws.

In a brilliant passage, Hamowy goes further. Is not the whole notion of limited government a dubious one? The highest power in a government arrangement cannot be bound by any other body. "Hayek's whole model of government. . . is conceived in the mistaken notion that the political mechanism in society can itself be made subject to its own orders. However, the fact is that one cannot bind a legislature by a higher legislature and thus compel the lower house to obey rules applicable to everyone else. Legislatures, to the extent they legislate, are not like private citizens, since their instruments of compliance are not suasion and exchange but main force."(p.236) Schemes of constitutional government rely on the futile notion of the supreme power's imposing limits on itself. Defenders of limited government are likely to reply with appeals to judicial review and "checks and balances", but these devices do not solve Hamowy's problem.

I have concentrated on the book's principal topics, spontaneous order and the rule of law; but it contains insights on many other subjects as well. One of these concerns a key concept of Marxism. As everyone knows, Marxists talk constantly about alienation. Workers under capitalism, they claim, do not view their labor as a creative human activity. The division of labor means that workers are confined to performing the same boring operation over and over.

Hamowy contends that Marx took over this view from Adam Ferguson: In his Essay on the History of Civil Society, Ferguson contended that "the result of ever-greater specialization in the economy will lead. . .to a system of social stratification and subordination in which thinking itself will, in time, become the particular province of one class of people only. . . Much of Ferguson's analysis formed the basis of Marx's later discussion of the division of labour and, indeed, Marx explicitly recognized Ferguson as one of the sources of his view."(pp.36-37) Hamowy's book is a contribution of the first rank to the history of ideas.



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