Individualism and Economic Order

F. A. Hayek

• Publisher: University of Chicago Press
• Year: 2012
• ISBN:
  9780226321219
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

In this collection of writings, Nobel laureate Friedrich A. Hayek discusses topics from moral philosophy and the methods of the social sciences to economic theory as different aspects of the same central issue: free markets versus socialist planned economies. First published in the 1930s and 40s, these essays continue to illuminate the problems faced by developing and formerly socialist countries.F. A. Hayek, recipient of the Medal of Freedom in 1991 and winner of the Nobel Memorial Prize in Economics in 1974, taught at the University of Chicago, the University of London, and the University of Freiburg. Among his other works published by the University of Chicago Press is The Road to Serfdom, now available in a special fiftieth anniversary edition.

Notes

I. Individualism: True and False

* The twelfth Finlay Lecture, delivered at University College, Dublin, on December 17, 1945. Published by Hodges, Figgis & Co., Ltd., Dublin, and B. H. Blackwell, Ltd., Oxford, 1946.

1. Both the term “individualism” and the term “socialism” are originally the creation of the Saint-Simonians, the founders of modern socialism. They first coined the term “individualism” to describe the competitive society to which they were opposed and then invented the word “socialism” to describe the centrally planned society in which all activity was directed on the same principle that applied within a single factory. See on the origin of these terms the present author’s article on “The Counter-Revolution of Science,” Economica, VIII (new ser., 1941), 146.

2. R. Bisset, Life of Edmund Burke (2d ed., 1800), II, 429. Cf. also W. C. Dunn, “Adam Smith and Edmund Burke: Complimentary Contemporaries,” Southern Economic Journal (University of North Carolina), Vol. VII, No. 3 (January, 1941).

3. Carl Menger, who was among the first in modern times consciously to revive the methodical individualism of Adam Smith and his school, was probably also the first to point out the connection between the design theory of social institutions and socialism. See his Untersuchungen über die Methode der Sozialwissenschaften (1883), esp. Book IV, chap. 2, toward the end of which (p. 208) he speaks of “a pragmatism which, against the intention of its representatives, leads inevitably to socialism.”

It is significant that the physiocrats already were led from the rationalistic individualism from which they started, not only close to socialism (fully developed in their contemporary Morelly’s Le Code de la nature [1755], but to advocate the worst depotism. “L’État fait des hommes tout ce qu’il veut,” wrote Bodeau.

4. Edmund Burke, Reflections on the Revolution in France (1790), in Works (World’s Classics ed.), IV, 105: “Thus the commonwealth itself would, in a few generations, be disconnected into the dust and powder of individuality, and at length dispersed to all winds of heaven.” That Burke (as A. M. Osborn points out in her book on Rousseau and Burke [Oxford, 1940], p. 23), after he had first attacked Rousseau for his extreme “individualism,” later attacked him for his extreme collectivism was far from inconsistent but merely the result of the fact that in the case of Rousseau, as in that of all others, the rationalistic individualism which they preached inevitably led to collectivism.

5. Alexis de Tocqueville, Democracy in America, trans. Henry Reeve (London, 1864), Vol. II, Book II, chap. 2, where De Tocqueville defines individualism as “a mature and calm feeling, which disposes each member of the community to sever himself from the mass of his fellows, and to draw apart with his family and friends; so that, after he has thus formed a little circle of his own, he willingly leaves society at large to itself.” The translator in a note to this passage apologizes for introducing the French term “individualism” into English and explains that he knows “no English word exactly equivalent to the expression.” As Albert Schatz pointed out in the book mentioned below, De Tocqueville’s use of the well-established French term in this peculiar sense is entirely arbitrary and leads to serious confusion with the established meaning.

6. In his excellent survey of the history of individualist theories the late Albert Schatz rightly concludes that “nous voyons tout d’abord avec évidence ce que l’individualisme n’est pas. C’est précisément ce qu’on croit communément qu’il est: un système d’isolèment dans l’existence et une apologie de l’égoisme” (L’Individualisme économique et social [Paris, 1907], p. 558). This book, to which I am much indebted, deserves to be much more widely known as a contribution not only to the subject indicated by its title but to the history of economic theory in general.

7. In this respect, as Karl Pribram has made clear, individualism is a necessary result of philosophical nominalism, while the collectivist theories have their roots in the “realist” or (as K. R. Popper now more appropriately calls it) “essentialist” tradition (Pribram, Die Entstehung der individualistischen Sozialphilosophie [Leipzig, 1912]). But this “nominalist” approach is characteristic only of true individualism, while the false individualism of Rousseau and the physiocrats, in accordance with the Cartesian origin, is strongly “realist” or “essentialist.”

8. Adam Ferguson, An Essay on the History of Civil Society (1st ed., 1767), p. 187. Cf. also ibid.: “The forms of society are derived from an obscure and distant origin; they arise, long before the date of philosophy, from the instincts, not from the speculations of man. . . . We ascribe to a previous design, what came to be known only by experience, what no human wisdom could foresee, and what, without the concurring humour and disposition of his age, no authority could enable an individual to execute” (pp. 187 and 188).

It may be of interest to compare these passages with the similar statements in which Ferguson’s contemporaries expressed the same basic idea of the eighteenth-century British economists:

Josiah Tucker, Elements of Commerce (1756), reprinted in Josiah Tucker: A Selection from His Economic and Political Writings, ed. R. L. Schuyler (New York, 1931), pp. 31 and 92: “The main point is neither to extinguish nor to enfeeble self-love, but to give it such a direction that it may promote the public interest by promoting its own. . . . The proper design of this chapter is to show that the universal mover in human nature, self-love, may receive such a direction in this case (as in all others) as to promote the public interest by those efforts it shall make towards pursuing its own.”

Adam Smith, Wealth of Nations (1776), ed. Cannan, I, 421: “By directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.” Cf. also The Theory of Moral Sentiments (1759), Part IV (9th ed., 1801), chap. i, p. 386.

Edmund Burke, Thoughts and Details on Scarcity (1795), in Works (World’s Classics ed.), VI, 9: “The benign and wise disposer of all things, who obliges men, whether they will or not, in pursuing their own selfish interests, to connect the general good with their own individual success.”

After these statements have been held up for scorn and ridicule by the majority of writers for the last hundred years (C. E. Raven not long ago called the last-quoted statement by Burke a “sinister sentence”—see his Christian Socialism [1920], p. 34), it is interesting now to find one of the leading theorists of modern socialism adopting Adam Smith’s conclusions. According to A. P. Lerner (The Economics of Control [New York, 1944], p. 67), the essential social utility of the price mechanism is that “if it is appropriately used it induces each member of society, while seeking his own benefit, to do that which is in the general social interest. Fundamentally this is the great discovery of Adam Smith and the Physiocrats.”

9. Cf. Schatz, op. cit., pp. 41–42, 81, 378, 568–69, esp. the passage quoted by him (p. 41, n. 1) from an article by Albert Sorel (“Comment j’ai lu la ‘Réforme sociale,’” in Réforme sociale, November 1, 1906, p. 614): “Quel que fut mon respect, assez commandé et indirect encore pour le Discours de la méthode, je savais déja que de ce fameux discours il était sorti autant de déraison sociale et d’aberrations métaphysiques, d’abstractions et d’utopies, que de données positives, que s’il menait à Comte il avait aussie mené à Rousseau.” On the influence of Descartes on Rousseau see further P. Janet, Histoire de la science politique (3d ed., 1887), p. 423; F. Bouillier, Histoire de la philosophie cartésienne (3d ed., 1868), p. 643; and H. Michel, L’Idée de l’état (3d ed., 1898), p. 68.

10. The decisive importance of Mandeville in the history of economics, long overlooked or appreciated only by a few authors (particularly Edwin Cannan and Albert Schatz), is now beginning to be recognized, thanks mainly to the magnificent edition of the Fable of the Bees which we owe to the late F. B. Kaye. Although the fundamental ideas of Mandeville’s work are already implied in the original poem of 1705, the decisive elaboration and especially his full account of the origin of the division of labor, of money, and of language occur only in Part II of the Fable which was published in 1728 (see Bernard Mandeville, The Fable of the Bees, ed. F. B. Kaye [Oxford, 1924], II, 142, 287–88, 349–50). There is space here to quote only the crucial passage from his account of the development of the division of labor where he observes that “we often ascribe to the excellency of man’s genius, and the depth of his penetration, what is in reality owing to the length of time, and the experience of many generations, all of them very little differing from one another in natural parts and sagacity” (ibid., p. 142).

It has become usual to describe Giambattista Vico and his (usually wrongly quoted) formula, homo non intelligendo fit omnia (Opere, ed. G. Ferrari [2d ed.; Milan, 1854], V, 183), as the beginning of the antirationalistic theory of social phenomena, but it would appear that he has been both preceded and surpassed by Mandeville.,

Perhaps it also deserves mention that not only Mandeville but also Adam Smith occupy honorable places in the development of the theory of language which in so many ways raises problems of a nature kindred to those of the other social sciences.

11. Réné Descartes, A Discourse on Method (Everyman’s ed.), pp. 10–11.

12. On the characteristic approach of the engineer type of mind to economic phenomena compare the present author’s study on “Scientism and the Study of Society,” Economica, Vols. IX–XI (new ser., 1942–44), esp. XI, 34 ff.

13. Since this lecture was first pu...