How ‘Competitive Knowledge Discovery’ And Civilization Emerges From The Tradition Of Private Property
Your life, the wealth you consume, the entire global socioeconomic order, or what the great British 19th century thinker Herbert Spencer referred to as “The Social Organism”, inadvertently emerges from the tradition of private property. In this article we’d like to show how this happens, and just as importantly, how the economic processes that create civilization are, to borrow Adam Fergusson’s phrase, “indeed the result of human action, but not the execution of any human design”, and how this vital fact is needed to understand why even though we have so much technological progress we remain surrounded by economic ignorance and resulting disastrous central economic planning.
THE EMERGENCE OF COMETITIVE KNOWLEDGE DISCOVERY
Private property means that matter is under the exclusive control of a single person/mind/CPU. Each person is motivated to discover the best information with which to transform or reorder their private property in a way that increases its value or utility. Most of us transform our bodies in a manner that maximizes the value/utility of the labor we produce and then trade with other people/companies. Some transform bread and beef to increase their value as hamburgers which are then traded with others, etc. From our freedom to use/transform our private property emerges the ‘freedom to trade’ it with anyone in the entire planet which inadvertently transforms mankind into a global supercomputer where people/companies are motivated to innovate and learn from each other(competitors) thus inadvertently cooperate to discover and spread superior information and subsequent order. It is our freedom as consumers to trade our life/order-sustaining wealth for the best cars, and as producers to go into the auto-manufacturing business, which motivates existing auto manufacturers(competitors) to innovate/compete/copy/learn to produce the best cars. Companies that don’t successfully compete/innovate/copy/learn to be as productive as others won’t get enough life/order-sustaining wealth/revenue from customers to pay a competitive wage, motivating employees to once again use their freedom to trade their labor to quit and join/trade-with the increasingly better informed and thus more productive and thus higher paying companies. A mind/CPU anywhere in the planet that comes up with an improvement will benefit everyone in the world if they are ‘free to trade’ for its products/services which will also motivate all competitors in the world to likewise improve their actions/order. Just like in the Olympics we can discover the best athletes in the world due to global competition, so does having the ‘freedom to trade’ with everyone in the world allows the best ideas to compete/spread globally thus ensuring the best possible global order. Via advertising, competitors are motivated to spread the potential usefulness and superiority of their products/ideas as well as the defects/inferiority of their competitors thus accelerating the need to compete/copy/spread superior information and subsequent order. As cost-cutting ideas emerge and inevitably spread via competition leading relative prices to continuously fall, new profitable ideas easily arise and once again spread via competition in an endless cycle of knowledge generation/innovation. For example, computers were once very expensive, but once the price of making them came down enough, people easily realized that every home could have them, which gave birth to our computerized world and the Internet and all the great things that flow from it.
REGULATORY PARALYSIS
In the free/private/competitive sector information moves from the bottom (individual minds/entrepreneurs/innovators) to others/influencers/many/top as it is ‘tested’/refined/preferred by the comparisons to other information by billions of minds thus ensuring superior information spreads and is ideally adapted to each specific time and place. This mechanism is bypassed by government regulations which are top-down/coercive/competitionless/monopoly information/action which is not subject to continuous improvement/replacement via competition so they paralyze entire industries slowing down ‘competitive knowledge discovery’, driving up costs (more lawyers/regulators/bureaucrats), and potentially making criminals out of people who harm nobody but just prefer to do things differently. As 1974 Nobel Laureate in Economics F.A. Hayek reminds us:
“The argument for liberty is not an argument against organization, which is one of the most powerful tools human reason can employ, but an argument against all exclusive, privileged, monopolistic organization, against the use of coercion to prevent others from doing better.”
Compare the increasingly regulated/paralyzed healthcare sector which has grown from consuming less than 5% of the economic pie in 1960 to over 20% today, to the free/competitive IT sector where even the poorest of Americans can afford rapidly improving amazing cell phones and technology. What a person must learn in order to legally offer medical advice via licensing of doctors, where he must learn it via licensing of medical schools, what chemical compounds can be legally consumed, how to test drugs, how the medical insurance industry should work, and countless other gigantic bodies of knowledge/information are dictated by monopolistic competition-less bureaucracies like the American Medical Association (AMA), the Food And Drug Administration (FDA), CDC and numerous others. By comparison, the Information Technology sector has very few government regulations so competition motivates the discovery and spread of superior information at breakneck speed and is obviously transforming the world right before our eyes. Teenagers can work at Google/Microsoft/Amazon and write the software that keeps planes in the sky or people alive via software in medical equipment, yet there is no American Association of Computer Programmers dictating what or where such knowledge can be obtained. There is no government monopolistic bureaucracy ensuring the proper functioning of the software that runs PCs, smart-phones, the Internet, or ensuring the lack of malware or viruses in software. Thanks to this lack of monopolistic centralized decision making/regulating/paralyzing, education in the Software Development/IT world is astounding. At places like www.freecodecamp.org thousands of people are going from 0 experience to highly-paid computer programmers in just a few months for free. Economic ignorance leads many to believe that since one has to be seemingly more careful with medicine, such monopolistic regulatory oversight is somehow necessary. This is irrelevant, if it is superior knowledge that is needed, which includes figuring out how careful to be, freedom and competition is the best way to discover it, period. Nobody knows who the greatest programmers in the world are, there is rightly no Nobel prize for them, the nearly 30 million lines of complex computer code that make up the Linux Operating System that runs most of the world’s computers and is now an integral part of the ‘Social Organism’ were created not so much by ‘smart’ people, but by pure competition. In graph below one can see how the more regulated a sector is (Hospital Services) the more expensive/paralyzed/consumptive it becomes.
MORALS AS SUPERIOR INFORMATION
Morals are ways of acting, they too are knowledge which also emerges and spreads via economic competition to considerable degrees. It is hard-working, tolerant, courteous people who thanks to competition inevitably motivate everyone else to be likewise. As Hayek writes:
“Competition is, after all, always a process in which a small number makes it necessary for larger numbers to do what they do not like, be it to work harder, to change habits, or to devote a degree of attention, continuous application, or regularity to their work which without competition would not be needed.”
As millions of Britons, Germans and others from all over the world came to America, it was ultimately the competition which grows from ‘private property’ and thus individual liberty/freedom which stripped these people of their otherwise nationalistic/ethnocentric/tribalistic identities and evolved what came to be seen as the classic American character/ethos of wanting to be seen as a reputable/honest businessman/professional who treats everyone with respect and wears a business suit as opposed to older religious/ethnocentric dress.
Given the above we can see how a swarm intelligence emerges as the freedom of consumers to calculate and trade-for what is best nourishes the growth and spread or superior orders/companies/information, inadvertently expanding the worldwide “division of labor and information” as entire neighborhoods/cities morph themselves in specialized ways as complementary pieces of information/orders segregate themselves in distinct geographical locations like the software industry in Silicon Valley, California and manufacturing in Guangdong, southern China. As Hayek’s great mentor Ludwig von Mises reminds us “The division of labour is a fundamental principle of all forms of life.” The division of labor is a pattern/way which natural selection rediscovers to enable smaller units/orders to efficiently compartmentalize labor/information as they contribute-to (and are nourished-by) a larger organism they become parts of(Organelles -> Cells -> Organs -> Humans -> Social Organism). Mises again:
“It is by virtue of the division of labor that man is distinguished from the animals. It is the division of labor that has made feeble man, far inferior to most animals in physical strength, the lord of the earth and the creator of the marvels of technology.”
GOVERNMENTS AS COMPETITIONLESS INEFFICIENT MONOPOLIES
The role of governments and coercion should be minimized because governmental/‘public sector’ bureaucracies, being COERCIVE MONOPOLIES which get their life/order-sustaining wealth through taxes/compulsion are immune to the competitive-information-spreading incentives/pressures which motivate private sector entities to keep up with the competition in terms of information and hustle. Central/government plans can’t work if people are free to not go along with them so they inevitably require compulsion/tyranny. For example, it is a criminal act in Communist countries like North Korea and most of Cuba to start a business because it interferes with the plans of “the experts” who run the government. It is also a criminal act everywhere to not pay taxes that sustain public/monopoly sector bureaucracies like “public education” so there is little incentive or wealth to sustain other, more desirable/superior competitors/ideas. For example, the NYC public(monopolistic) school bureaucracy consumes about $29,000 per year to “educate” a K-12 student. Refusing to pay a single dollar that goes to this bureaucracy is a criminal act. Taxes and all transfers of wealth from the private sector to the government, besides being an obvious coercive burden to the people that had to sacrifice a part of their lives to earn such wealth and now have less wealth to trade for the things they really want, simply destroy the more productive/efficient private sector jobs the taxed-away spending would have sustained and replaces such productive/efficient and pie-increasing jobs for inefficient government/monopoly ones, or worse, like militarism/wars. The image below helps explain the difference between competitive/private/free orders(South Korea) and monopolistic/government/coerced orders (North Korea). Keep your eye on how information arises/spreads via competition and continuously restructures the social order.
Thus private property and emerging ‘competitive knowledge discovery’, as opposed to leading to chaos, 1) is what enables and motivates the discovery and spread of superior information which continuously increases the rate at which mankind reorders a tiny fraction of the earth’s massive volume of 260 billion cubic miles into the wealth that easily feeds/clothes/expands nearly 8 billion people, 2) civilizes us 3) protects us from being coerced into doing things we don’t want to do, or losing the wealth we have traded a part of our very lives to create or acquire, and 4) is also vital for discovering THE TRUTH!
THE EMERGENCE/EXPANSION/SELECTION OF PRIVATE PROPERTY
Knowing that ‘private property’ is the simple concept/institution that leads to a chain-reaction of incentives which creates ‘the market process’/‘competitive knowledge discovery’/civilization, we can easily see that those tribes/orders/cultures whose customs/religions/myths inadvertently became more peaceful and thus less violent, extended peace/friendship/trade to those outside the tribe, etc., in other words, those who tended to respect ‘private property’ and thus individual freedom more and more, would inadvertently gain the benefits of superior ‘competitive knowledge discovery’, become more advanced/powerful, and as they grew, they would inadvertently spread the very customs (increasing respect for private property, tolerance, and commercial culture that emerges from it) and evolving economic system (capitalism) that allowed them to reach such relative heights.
Essentially 50,000 years ago there was a sort of petri dish of cultures/tribes, and ‘natural selection’/competition selected those whose sort of ‘cultural mutations’ led to a more productive/fitter/powerful social order, with “respect for private property” ultimately being the most important tradition given the ‘competitive knowledge discovery’ that inadvertently emerged from it. This ‘cultural evolution’ happened mostly without the design/intention/reason of the slightly smarter apes.
An example of this process was the Protestant Reformation. For centuries the Catholic Church’s traditions held immense coercive/monopoly/competitionless power which prevented/retarded individual freedom and resulting ‘competitive knowledge discovery’. In the early 1500s Martin Luther preached that a person could be saved by believing in Christ without the Catholic Church’s approval, and that the Bible itself, not the Pope/Church’s edicts/interpretations, was what mattered. This helped reduce/eliminate the coercive/monopoly power of the Church and spark a pro-freedom and thus emergent ‘competitive knowledge discovery’ that would lead to skyrocketing rates of innovation/production/prosperity per graph below.
Now, very important! Did Martin Luther reason that his religious interpretations would accelerate ‘competitive knowledge discovery’ leading to our relatively advanced civilization? Of course not. Just like solitary cells billions of years ago inadvertently created the respiratory/circulatory/nervous/etc. “systems” that led to multicellular organisms without ‘designing them’, so is free-market/Capitalism “indeed the result of human action, but not the execution of any human design”. The ‘free-market’/Capitalism is mankind’s greatest invention, yet it was not the result of our reason! As Hayek explains:
“We have never designed our economic system. We were not intelligent enough for that. We have stumbled into it and it has carried us to unforeseen heights and given rise to ambitions which may yet lead us to destroy it.”
And regarding private property:
“…I am quite convinced nobody invented it for a known purpose, and to me the proof of this is that even now hardly anybody yet understands what the advantages of private property and the market society are.” (Hayek essay “Individual and Collective Aims” published in “On Toleration” ISBN 0–19–827529–3)
REASON PROVES TO BE INFERIOR TO TRADITION
By the late 1800s, especially after Darwin, the slightly smarter apes had realized that their moral values and laws had been grounded on religious myths, so they began replacing the evolved wisdom/information/laws espoused by religious mythology (private property, freedom and family) which had tamed/brainwashed the savages into civilization, by the “reason” of “expert/scientist” apes. Not having the slightest clue how the vital information that orders/creates civilization “emerges” from ‘private property’/freedom since this amazing mechanisms/order had been designed, not by clever men, but by an evolutionary process we didn’t even really understand at the time, they understandably fell for all the usual anti-Capitalist and central planning fallacies. They saw economic freedom as a recipe for chaos, exploitation and ‘social injustice’. Some like Hitler (a socialist) erroneously saw many aspects of finance/banking/stock-markets, especially due to the at-times overrepresentation of Jews, as some sinister and malicious way for Jews/Capitalists to enrich themselves at the expense of others. Most ultimately believed that a competitionless coercive tax-funded monopoly of “experts”/ideologues/“great leaders” could better order society, and increasingly saw religion and its traditions of private property and family as something backward, unnatural, and a tool of the growing business/Capitalist/”Bourgeoisie” class, or just selfish people in general that “don’t care about others”. Just like complex environmental factors create selective pressures that favor the spread of certain genes, the environment was ripe for the emergence of a new religion/mythology, Socialism/Communism/Statism. Eventually some slightly smarter arrogant ape would describe these increasingly popular fallacies/myths in a manner that was bound to go viral and that is what happened with Karl Marx and his bite-sized ‘Communist Manifesto’:
“the theory of the Communists may be summed up in the single sentence: Abolition of private property”….”Abolition of the family!”
The slightly smarter apes via Vladimir Lenin’s Bolshevik revolution in Russia (1918) and other apes throughout the world (Mao/China, Castro/Cuba, Pol Pot/Cambodia, etc.) with the utmost arrogance and cruelty went wild using their “reason”/“the science” and instincts to destroy the ‘competitive knowledge discovery’ the much smarter ‘cultural evolution’ had created and thus their own socioeconomic order.
It is important to keep in mind that Socialism/Communism/Nazism/’viral economic fallacies/myths’ did not spread and destroy much of the 20th century because of a few bad apples or tyrants; they first spread through the minds of well-meaning citizens and intellectuals which then gave the future leaders the moral and intellectual justification for their actions. Hayek writes:
“It is necessary to realize that the sources of many of the most harmful agents in this world are often not evil men but high-minded idealists, and that in particular the foundations of totalitarian barbarism have been laid by honourable and well-meaning scholars who never recognized the offspring they produced.” (Hayek F. A., 1973, p. 70)
“Most people are still unwilling to face the most alarming lesson of modern history: that the greatest crimes of our time have been committed by governments that had the enthusiastic support of millions of people who were guided by moral impulses. It is simply not true that Hitler or Mussolini, Lenin or Stalin, appealed only to the worst instincts of their people: they also appealed to some of the feelings which also dominate contemporary democracies.” (Hayek F. A., 1976, p. 134)
As Mises tells us:
“It is ideas that group men into fighting factions, that press the weapons into their hands, and that determine against whom and for whom the weapons shall be used. It is they alone, and not arms, that, in the last analysis, turn the scales.”
MISES AND HAYEK SAVE CIVILIZATION. WE NEED A REPEAT
Fortunately for mankind Ludwig von Mises nearly single-handedly put the brakes on Socialist intellectual expansion when he showed the impossibility of central planning via his essay “Economic Calculation in the Socialist Commonwealth” and persuaded Austrian politicians away from Communism in the early 1920s when the Bolshevik/Socialist revolution was rapidly expanding thus helping stop the falling dominoes in Europe:
“There were few who recognized the state of affairs clearly. People were so convinced of the inevitability of Bolshevism that their main concern was securing a favorable place for themselves in the new order. The Catholic Church and its followers, the Christian Social Party, were prepared to befriend the Bolshevists with the same eagerness with which the bishops and archbishops would embrace National Socialism 20 years later.…I knew what was at stake. Bolshevism would lead Vienna to starvation and terror within a few days. Plundering hordes would take to the streets and a second blood bath would destroy what was left of Viennese culture.”.. “The most important task I undertook…was the forestalling of a Bolshevist takeover… The fact that events did not lead to such a regime in Vienna was my success and mine alone.” –Mises (Memoirs)
Later Hayek’s classic book “The Road to Serfdom”(1944), but perhaps more importantly, the brilliantly written ‘condensed’ version which “Reader’s Digest” magazine placed in millions of US homes in 1945, would play a vital role in educating future freemarketeers like future British PM Margaret Thatcher, and 3-time presidential candidate Dr. Ron Paul who writes:
“My introduction to Austrian economics came when I was studying medicine at Duke University and came across a copy of Hayek’s The Road to Serfdom. After devouring this, I was determined to read whatever I could find on what I thought was this new school of economic thought — especially the works of Mises”
Thus, Mises:
“Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man’s human existence…All present-day political issues concern problems commonly called economic. All arguments advanced in contemporary discussion of social and public affairs deal with fundamental matters of…economics. Everybody’s mind is preoccupied with economic doctrines…Everybody thinks of economics whether he is aware of it or not. In joining a political party and in casting his ballot, the citizen implicitly takes a stand upon essential economic theories…As conditions are today, nothing can be more important to every intelligent man than economics. His own fate and that of his progeny is at stake…all reasonable men are called upon to familiarize themselves with the teachings of economics. This is, in our age, the primary civic duty. Whether we like it or not, it is a fact that economics cannot remain an esoteric branch of knowledge accessible only to small groups of scholars and specialists. Economics deals with society’s fundamental problems; it concerns everyone and belongs to all. It is the main and proper study of every citizen.”
With the proper understanding of economics/Mises/Hayek it is easy to see that mankind is essentially ‘flying blind’ with the statistical certainly of another massive central planning coercive calamity like the current CovidMania. We must go over the parapet and join Mises in his “intellectual battle” NOW!
“Everyone carries a part of society on his shoulders; no one is relieved of his share of responsibility by others. And no one can find a safe way out for himself if society is sweeping towards destruction. Therefore, everyone, in his own interests, must thrust himself vigorously into the intellectual battle. None can stand aside with unconcern; the interests of everyone hang on the result. Whether he chooses or not, every man is drawn into the great historical struggle, the decisive battle into which our epoch has plunged us.”
