My Pilgrimage to F.A. Hayek’s Grave: An introduction to his ideas and thus how the world works
This essay is divided into two parts, part 1 provides a brief overview of how the world works based on 1974 Nobel Laureate in Economics F.A. Hayek and like-minded people’s ideas, and part 2 describes my actual pilgrimage to his grave and other ‘Holy Sites’ for fans of freedom and “Austrian Economics” located in Vienna.
On Jan. 29th, 2018 I got a chance to make my second pilgrimage to the grave of one of the greatest intellectuals of all time, that of 1974 Noble Laureate in Economics, F.A. Hayek. Why such praise? Easy, F.A. Hayek provided a complete evolutionary framework explaining how the entire world works. Hayek summarizes:
“We understand now that all enduring structures above the level of the simplest atoms, and up to the brain and society, are the results of, and can be explained only in terms of, processes of selective evolution…”
About 100 years earlier British philosopher Herbert Spencer, who Darwin once referred to as “twenty times my superior” had also provided a profound evolutionary explanation of the world:
“We have to deal with man as a product of evolution, with society as a product of evolution, and with moral phenomena as products of evolution.”
Others before Spencer had tried, but as Spencer points out:
“Lacking the great generalizations of biology, it was…impossible to trace out the real relations of social organizations to organizations of another order.”
Simply put, without the microscope and numerous biology-related breakthroughs that were occurring in the 1800s which Spencer was able to incorporate into his thinking, it was just “impossible” for prior synthesizers to do a good job. Spencer was at the right time and place and ran with it leaving behind even today’s leading intellectuals. His profound understanding of the world made him one of the most eloquent voices against the growing threat of Socialism, of which his 1884 essay “The Coming Slavery”, which economics giant Henry Hazlitt praised as “One of the most powerful and influential arguments for limited government, laissez faire and individualism ever written”, is but one example. Fully seeing the growth in monopolistic/tribalistic/socialistic nationalism and the inevitable socioeconomic decline and conflicts it would lead to, Spencer died a depressed man in late 1903. Just ten years later in 1914 his worst fears came true via WWI, Lenin’s Communist revolution and all the Government/Socialist/Communist created misery that followed. As truly astounding as Spencer’s insights were, many of his insights were clever and eloquent analogies, and not necessarily precise explanations. The writings of Carl Menger (who was himself influenced by Spencer), and more importantly Ludwig von Mises (another Spencer fan), would provide key insights which could be pieced together to create a truly complete evolutionary explanation of the world, which eventually coalesced in the mind of Hayek. One of the things that allowed Hayek to make numerous insights was his focus on the role that knowledge or information plays in the creation and maintenance of order. Let us very briefly try to understand how the world works using Hayek’s insights.
“Enduring structures” like living things and society are self-perpetuating orders that are in a continuous cycle of wealth production and consumption. Production involves the transformation of matter to create wealth. And consumption transforms wealth in a way that sustains or expands living things and their internal parts/orders. For example, paramecium are single-celled life-forms that produce food by swimming around and swallowing small bacteria which they then consume by digesting and transforming them into the various nutrients needed to maintain and expand the paramecium’s internal order and thus life. A more complex multi-cellular animal like a human being is simply a collection of cells (which are themselves orders) which must be productive as a whole in order to consume the necessary wealth needed to nourish itself and the sub-orders/cells it is made out of. Today we not only have biological order, we have social order, what Herbert Spencer referred to as the “Social Organism”. The ‘Social Organism’ is rapidly growing and increasing the rate at which it transforms the earth’s matter into human usable wealth. Every year, highly automated building-sized machinery in the mining industries scrape/mine less than 5 cubic miles of matter from the earth’s massive volume of 260 billion cubic miles. This matter is ‘collaboratively transformed’ or relocated by millions of people as trillions of dollars worth of wealth in terms of cars/computers/buildings/refrigerators/products/etc. are produced thus increasing the word’s economic pie of wealth and social order. This continuous cycle of production and consumption requires precise knowledge/information. By focusing on how information arises, spreads, and guides these cycles of production and consumption which lead to order/life/society we can have a simple yet profound understanding of how the entire world works.
Natural Selection can be said to have created two mechanisms for creating the two types of orders/‘enduring structures’ that matter to us, biological and social. The biological order is created via the well-known mechanism of biological evolution with genes being like the sentences which store the information necessary to create/coordinate life/order. If we remember from biology class, mutations cause new genes and thus new information to arise which lead to a different life-form which is then ‘naturally selected’ as it inadvertently competes with others, with the winner reproducing more and thus passing on more copies of the better-adapted/“fitter” genes/information on to latter generations while the less-adapted genes/information disappear or play an increasingly less significant role (see junk DNA). At its core we have competing information which survives by leading to the “fittest” “enduring structure” or order. This mechanism of biological evolution and genetics is well understood and there is little doubt that even though a person is the result of the actions of its trillions of cells, it is definitely NOT the result of any conscious planning or design on their part. We clearly know that natural selection has been the sort of “designer” of the biological order and the numerous “systems” like the respiratory and nervous ones which help sustain and coordinate the entire cellular enterprise.
Let us next discuss the “system” or “process” which coordinates Spencer’s “Social Organism”. The global socioeconomic order is coordinated by what economists refer to as “The Market Process” and its various “parts” or institutions like trade, money, economic competition, the banking/finance industry, interest rates, governments and more. In the social order new knowledge arises in the minds of people/entrepreneurs/companies/orders and spreads via economic competition. Automotive air conditioning, power windows, and rear view cameras, were all good ideas/information/knowledge that originally emerged in the minds of a few individuals/companies/orders. Their success motivated, and inevitably forced, other auto-manufacturers (competitors) to copy the new ideas/knowledge, and it is for this reason, thanks to economic competition, that all auto-manufacturers provide them and use the latest and greatest production techniques. As cost-cutting ideas emerge leading prices to continuously fall, new profitable ideas 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.
Economic freedom and decentralization is vital for competition to work and thus generate the information which helps create/coordinate/expand the social order. Why do BMW, Ford, Toyota and other auto-manufacturers “compete” and thus constantly innovate and copy each other’s innovations thus spreading superior knowledge and subsequent social order? Because social orders (individuals/companies) are FREE TO CHOOSE. It is our freedom as consumers to trade our life/order-sustaining wealth for what we calculate to be best, which motivates and forces all of us in our role as producers to do our best. And we can only do our best by innovating and/or copying existing innovations, in other words, competing.
The wealth that life/order needs can be attained by either force/theft/violence which diminishes the wealth/life of others and leads to life/order destroying retaliation, or by production and trade, which leads to the mutual benefit of both orders. Peace, in other words, the absence of force and violence as a means to acquire wealth, is what motivates and forces every mind/order to think about the needs of others in order to produce something of value and successfully engage in trade. As the great Ludwig von Mises reminds us: “Society has arisen out of the works of peace; the essence of society is peacemaking. Peace and not war is the father of all things.” As should become increasingly clear, peace and the freedom from coercion/violence it implies is what “turns on” economic competition which in turn leads to socioeconomic order. Most living things are not smart enough to engage in trade so they are left with the much simpler strategy of violence/predation. A strategy which was increasingly important the farther back we go in our evolution which helps further explain why the potential for violence and war is still so prevalent among us.
Since predation/theft is generally outlawed and peace encouraged, social orders (individuals or companies) are in cycles of production, trade, and consumption. If you are a freelancer you produce a product/service and trade it directly with society (customers) for money, and then trade the money back with society for the wealth you consume. If you work for a company, you produce your labor and trade it for money with your “employer” who combines it with the labor of others to produce a product/service which is then traded with society for the money from which your paycheck comes. Whether you are a freelancer, employee, or company, what is commonly referred to as sales revenue (your paycheck), is an estimate of the total amount of wealth produced. Costs, like employee wages which will be used by them to consume wealth, are an estimate of how much wealth is consumed from the economic pie. And profits, which are the difference between sales revenue (production) and costs (consumption) are an estimate of by how much additional wealth the economic pie has grown. A profitable order is an order (cell/person/company) that produces more than it consumes and is therefore self-sustaining/alive. The global economy or ‘Social Organism’ is really a vast collection of orders that are constantly trading with each other, each trade, like any action, taking each participant/order from an inferior to a superior state of well-being from its perspective, otherwise the trade would not occur. When Carl trades a dollar for a hamburger he values the hamburger more than the dollar and the restaurant values the dollar more than the hamburger so the action of trading takes place, which like all action which is not coerced, takes each participant from an inferior to superior state of well-being.
Each entrepreneur/businessman/order is like a computer that is constantly using prices to acquire wealth or ‘factors of production’ and calculating how to reorder/transform them in the most profitable/wealth-increasing way. For example, a restaurant owner in Miami Beach(MB) on Nov. 13th 2016 sells a traditional Cuban dish called Picadillo consisting of ground beef, rice, plantains and black beans for $8. The very existence of this business/order and the $8/meal price gives us a tremendous amount of information. We know that the costs per meal, in other words, the total amount of consumptionof wealth needed to produce each meal has to be at most $8/meal, otherwise the business would be losing money and eventually cease to exist. Some of the $8/meal, perhaps $1, might be profit, and $7 will be spent on costs or ‘factors of production’ like labor, real estate, equipment, energy, food, etc. We also know that there are enough customers nearby willing to trade with and thus sustain the restaurant at the $8/meal price. If the businessman sets prices too high, customers will choose other options, if prices are set too low, they might not cover costs and cause the business to consume more than it produces and thus go out of business.
Let’s assume there is another restaurant that sells a similar Picadillo dish in Corpus Christi, Texas for $6.50 and also makes a $1/meal profit. How could this be? The most likely reason is due to the crucial fact that costs are highly time and place specific, and in this particular scenario such costs in Corpus Christi are lower than in MB. Perhaps the proximity with Mexico means that many Mexican immigrants who might be willing to work for less, and thus consume less, can be employed. Rent/real estate is also cheaper in Corpus Christi than in trendy MB. Texas also has many oil refineries and the price/cost of energy might be lower than in MB where gasoline has to be transported hundreds of miles by truckers whose consumption must be taken into account. The bottom line is that it is vitally important to realize that the knowledge and costs associated with creating a profitable order, things like real estate, labor, energy, trust relationships and countless other factors, are highly time and place specific, and only those minds managing their respective businesses/orders in their corner of the world at a particular time are in a position to acquire such knowledge and properly set prices that will lead to a profitable order. Would it make sense to copy the $6.50/meal price that can sustain the business in Corpus Christy and make it the price of meals in MB? Of course not. We already know that given the abilities and knowledge of the businessman in MB, his costs were $7/meal, so setting the price to $6.50 would simply lead to loses, in other words, more wealth consumption than production to the tune of 50 cents per meal sold. This unavoidable time and place specificity of knowledge, and the fact that only the businessmen running their respective enterprises are in a position to acquire such knowledge is one of the main reasons why economic planning MUST BE DECENTRALIZED, thus rendering central planning ideologies like Socialism/Communism completely unworkable. No central planning bureaucracy could possibly acquire all the time and place specific knowledge needed to properly organize a business/order and set prices which properly account for local costs and customer desires and lead to a profitable and thus sustainable order. Nikita Khrushchev, who followed Stalin as head of the centrally planned (Socialist/Communist) Soviet Union, is credited with saying “When all the world is socialist, Switzerland will have to remain capitalist, so that it can tell us the price of everything”. The same point was made by the great economist Murray N. Rothbard in a talk[i] where he mentioned that “A noted British economist visited Poland in the 1950s …and the Polish communist economist admitted that they refer to the world market [for prices]” And according to Murray the British mentioned to the Pole “If socialism takes over the whole world which you are presumably in favor of, what would you do then? [to look for prices]” and the Pole replies “We’ll have to cross that bridge when we come to it” Unfortunately for Khrushchev and the billions who suffered economic chaos and an inevitable decline in production under Socialist/Communist regimes all over the world, prices in Switzerland (or anywhere else) embody information about the costs of those particular places at specific times and are no good elsewhere. This would be like setting the MB price of Picadillo dishes be the Corpus Christy price. Governments can always attempt to tax more or redistribute wealth to keep unprofitable enterprises/orders going, but this only leads to a continued shrinking of the economic pie and lower standards of living for all which is the inevitable hallmark of all centrally planned Socialist/Communist economies.
The rise of the Internet and supercomputers is causing the economically ignorant to believe that now central economic planning will work and perhaps some bureaucrats will fall for it and propose government force to get people to go along with yet another disastrous socialist experiment. For example, with the Internet local pricing information all over the world can perhaps be processed by central computers. Although this can help some entrepreneurs in numerous ways it will not out-compete freedom and decentralization as far as economy-wide planning because no computer/system can get in the brains of entrepreneurs to predict what products/businesses they will create and thus alter society, and similarly no computer can get in the mind of consumers and predict how they will choose to spend their money thus once again altering the social order’s numerous cycles of production and consumption. For example, Dave in Seattle invents a drug that cures cancer which causes him to borrow billions to bring it to market and then causes billions of people to sustain his business/order at the expense of others. How can a central planning computer get in Dave’s head to come up with or predict such and invention and also predict people’s desire for the drug at the expense of other alternatives? Again, impossible. Yes, Artificial Intelligence and countless other innovations will greatly help mankind, but not bring about Socialism in the foreseeable future.
Having discussed various aspects of the market process like profit/loss economic calculation and competition we can begin to get a feel for how the world really works, with its billions of minds acting as computers, each using monetary profit/loss calculation in its own local section of the world to manage the never-ending cycle of production and consumption which happens at the cellular, individual, household, corporate, and global level. If one looks at the Social Organism from high above it looks like a human ant-farm made up of mini social orders which are constantly producing, trading with other orders, consuming, learning from each other via competition, coming together and apart as businesses emerge and dissolve in ever-changing conditions. Entire cities morph themselves in specialized ways as complementary pieces of knowledge and orders/businesses segregate themselves in distinct geographical locations like the software industry in Silicon Valley, California, manufacturing in Guangdong, southern China, and finance in New York City and London. The market process is inadvertently uniting mankind as it evolves the Social Organism. Just like in the Olympics we can discover the best athletes in the entire world due to global competition, so does free-trade among all nations/peoples/orders allows the best ideas to compete and thus spread globally thus ensuring the best possible global order. We should also quickly add that morals are simply ways of acting, they are knowledge, which like most knowledge, is discovered and spread via economic competition. Companies/orders that hire lazy, disrespectful, or corrupt people will be less competitive and inevitably pressured to hire (or trade with) people with better morals which in turn forces everyone to be respectful and hardworking regardless of race, sex, etc. Similarly, it is hard-working, tolerant, courteous people who thanks to competition inevitably force everyone else to be likewise. As F.A. Hayek tells us:
“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.”
Anything that slows down the freedom to choose or compete slows down the workings of the ‘market process’ and very progress of mankind. Basically, no/less freedom = no/less competition = no/less creation/spread of superior knowledge = economic stagnation and decline. Freedom, as opposed to leading to chaos, is what “turns on” economic competition which in turn leads to socioeconomic order.
We are now in a position to easily understand the inevitable inefficiency of Socialist/Communist regimes and governments or the ‘public sector’ in general. Private sector orders are “competitive orders” that are constantly restructuring themselves in the most productive way as the public’s freedom to choose motivates them to copy the best knowledge/morals. Regardless of whether innovations occur in brain/company A or B or C, economic competition will motivate their spread and subsequent restructuring of society as quickly as people’s desire to make a profit and/or remain in business/employed allows, in other words, ASAP! They use profit and loss calculation to ensure that the business/order they manage is as profitable and thus pie increasing as possible, and since the gains/losses directly affect the livelihood of the business owners, the incentives are ideal for maximizing efficiency/profitability. The more wealth is created, the more wealth will be offered in exchange for labor as businesses/orders compete with each other for the labor they need so the economic pie grows for everyone. Since the government/‘public sector’ is a tax-funded monopoly, it means that by law, government bureaucracies/monopolies are immune to the market process’ social-order-shaping-knowledge-sharing mechanisms like competition, causing government created social orders/bureaucracies to be inefficiently ordered/backward and produce little wealth compared to how much they consume from the economic pie, eventually leading to chaos, famine and death as the public sector gets too large as happens in all Communist/Socialist countries who attempt to outlaw/abolish “competitive orders”/businesses.
The picture below provides a now-classic comparison of a Communist/Socialist/monopolistic order (North Korea) and a Capitalist/competitive/‘market process coordinated’ order (South Korea). Both orders have the same people in terms of intelligence/genetics yet the market-process-coordinated South Korea has a far more complex/innovative/productive social order.
Once again, with our eye on the vital role that competition plays in the creation and spread of superior information and subsequent social order we can also quickly see the damage that government/monopolistic regulations do to society.
A government regulation is essentially a “way” of doing things, it is knowledge. But unlike knowledge that arises in the private sector and is constantly improving due to economic competition, a government regulation is knowledge that arises out of a few brains in government and is then forced upon the entire social order via the law and can only be changed via a painfully slow monopolistic/bureaucratic apparatus made up of economically ignorant politicians, lawyers, lobbyists and special interest groups who always lack the necessary knowledge and incentives to discover what is the best way to do something. The more the government regulates, the more it paralyzes competitive knowledge discovery. As government regulations have increased in the health care sector, turning it into a sort of island of paralyzed top-down competition-less socialist central planning, so have costs. These increased costs have led the sector to grow from consuming just 1.6% of the American economic pie in 1960 to 4.2% in 1980 to a whopping 16% in 2006 and about 18% by 2017. The image below is yet another powerful “meme” that helps explain the regulatory paralysis and thus growth of the entire medical sector.
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 are dictated by monopolistic competition-less bureaucracies like the American Medical Association and the Food And Drug Administration and numerous others. By comparison, the Information Technology sector has very few government regulations so competition motivates the creation and spread of superior knowledge at breakneck speed and is obviously transforming our world right before our eyes. There is no American Association of Computer Programmers dictating what a computer programmer must learn, or where to learn it. 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. Freedom and competition in the Software Development industry is even quickly evolving culture. It is increasingly seen as uncool and backward to have a traditional degree, where one wastes thousands of dollars and time physically attending gigantic temple-like universities, inefficiently (profs. instead of popular online videos you can pause/rewind) learning things that have nothing (English 101, ‘humanities’, etc.) to do with being a productive software/web professional. 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.
The image below shows the effects of regulation across many sectors of the economy. It should be relatively easy to see how the more regulated the sector is, the more paralyzed, so the more inefficient and expensive/consumptive it gets.
So Hayek’s focus on “The Use of Knowledge in Society” and “Competition as a Discovery Procedure” of the knowledge/information needed to sustain/expand order provides a simple yet profound way of understanding the world and the damage caused by government/monopolistic interventions.
Next we briefly introduce perhaps Hayek’s biggest-yet-relatively-unknown intellectual contribution.
Economic competition and profit/loss calculation can be seen as two parts of the larger “market process” which is also composed of other things like money, prices, banking/finance, interest rates, etc. Just like the nervous/respiratory/circulatory, and other “systems” are the result of the actions of cells yet obviously not the result of any conscious planning by them, the same applies to the fact that the “market process” is the result of human action but not the result of conscious human planning or design. So how did it arise? How did such an amazing mechanism which gives life to Spencer’s “Social Organism” arise? Where did the KNOWLEDGE/INFORMATION to create/design it come from if it did not come from our reason, or from our DNA/instincts? It is here where Hayek made a monumental contribution via his “Cultural Evolution”/“Group Selection” which works as follows.
If we envision mankind 20,000 years ago, we would see a sort of petri dish of competing cultures(languages/concepts/rules/laws) that are being ‘naturally selected’ based on their ability to grow the groups that contain them relative to other groups. Customs/concepts/rules/religions/etc. that inadvertently cause their respective social orders to grow whether it’d be via conquest, successful defense, migration into, imitation, etc., expand their order and the very customs/concepts/ideologies/etc. which helped them thrive.
Every rule/law has an effect in the productivity/growth/fitness/survival of a social order. Given that a society is likely to have hundreds of such rules it is impossible to know the exact impact of any one of them when considering the overall growth/stability/fitness/competitiveness of a society/order. For simplicity’s sake let us focus on just one rule, what is the optimal punishment for theft? Let’s assume that in culture/tribe A when a man steals he is killed which might deter many thefts but decreases the number of people in the group and all the productivity that this person might contribute in the future. In tribe B they cut off a hand, in tribe C they cut off a finger, and in tribe D 10 lashes. Let’s assume that tribe A’s custom/rule of killing the thief actually proved to lead to a “fitter” social order. Perhaps it turns out that cutting off the hand led to an unproductive person that became a big drain on rest of tribe and a weak/useless fighter when it came to offense/defense so it was better if he was dead. And that cutting off a finger and lashes proved to not be enough of a deterrent which led to many thefts and retaliatory violence which turned out to be more costly than losing a member of the tribe. Once again for simplicity’s sake let us assume that this was by far the most important custom/rule affecting the growth/fitness of the social order, and that because of this, tribe/culture A eventually displaced the others so that its kill-thieves rule/custom survived while the other punishments disappeared. The kill-thieves rule, is the result of human action, yet not the result of conscious human planning or design with the reasoned or conscious goal of having a more competitive/fit social order. The real sort of designing of this rule or cultural element was made, not by innate instinct or human reason, but by ‘natural selection’/competition/‘group selection’/‘cultural evolution’.
Omnipresence, the ability to be everywhere at all times is another very useful concept that would provide a great benefit to religions that used it to describe their God (which happens to be yet another culturally evolved concept). Without God’s omnipresence you could get away with breaking the rules that give society order and only have to face the consequences brought upon you by fellow men. But if God is everywhere, watching your every move, you will be much more likely to follow those rules that give your society a productive social order. You might be able to steal and leech off of others and not get caught but God can see everything, not only is he everywhere all the time, he can even read your “impure” thoughts, so the idea of breaking the social rules that give society order are prevented from entering a brain before they can even lead to action. A similar case can be made for the concepts of sin/evil/etc.
So we have very briefly discussed two traditions, one related to the punishment of a behavior (theft) that can weaken an order, and one that helps members adhere to rules which are beneficial to the order (omnipresent God). And we can easily imagine how they could be naturally selected as they help the groups that house them be more competitive relative to others.
This concept of ‘cultural evolution’ or ‘group selection’ allowed Hayek to identify a sort of third dimension or mechanism for discovering knowledge which was neither instinctual (tied to our genetics/biology), nor the result of our reason (‘between instinct and reason’ he liked to call it). We are now in a position to understand F.A. Hayek when he summarizes:
“Culture is neither natural nor artificial, neither genetically transmitted nor rationally designed. It is a tradition of learnt rules of conduct which have never been ‘invented’ and whose functions the acting individuals usually do not understand”
Cultural evolution is the key to understanding the emergence and evolution of various social institutions which have transformed men from the ape-like tribal order to the current world-wide market economy. We can now better understand what Carl Menger referred to as “unintended results of historical development”, Menger writes:
“There exists a certain similarity between natural organisms and a series of structures of social life, both in respect to their function and their origin…Natural organisms almost without exception exhibit, when closely observed, a really admirable functionality of all parts with respect to the whole, a functionality which is not, however, the result of human calculation, but of a natural process. Similarly we can observe in numerous social institutions a strikingly apparent functionality with respect to the whole. But with closer consideration they still do not prove to be the result of an intention aimed at this purpose, i.e., the result of an agreement of members of society or of positive legislation. They, too, present themselves to us rather as “natural” products(in a certain sense), as unintended results of historical development. One needs, e.g., only to think of the phenomenon of money, an institution which to so great a measure serves the welfare of society, and yet in most nations, by far, is by no means the result of an agreement directed at its establishment as a social institution, or of positive legislation, but is the unintended product of historical development. One needs only to think of law, of language, of the origin of markets, the origin of communities and of states, etc.”
This is the most important point: As social orders/groups inadvertently stumbled upon customs which granted individuals more freedom, this would inadvertently lead to more economic competition and the aforementioned benefits that grow from it, thus leading to a relatively “fitter” social order which would continue to expand and thus spread its rules/laws/customs/systems. With this understanding we can look at history and see times where governments have inadvertently both helped and hindered their respective social orders by promoting/protecting or curtailing the economic freedom necessary for economic competition to function. Below Hayek summarizes the role of governments in commerce and provides an important history lesson:
Governments have more often hindered than initiated the development of long-distance trade. Those that gave greater independence and security to individuals engaged in trading benefited from the increased information and larger population that resulted. Yet, when governments became aware how dependent their people had become on the importation of certain essential foodstuffs and materials, they themselves often endeavoured to secure these supplies in one way or another. Some early governments, for instance, after first learning from individual trade of the very existence of desirable resources, tried to obtain these resources by organising military or colonising expeditions…
Rather, it would seem as if, over and over again, powerful governments so badly damaged spontaneous improvement that the process of cultural evolution was brought to an early demise. The Byzantine government of the East Roman Empire may be one instance of this. And the history of China provides many instances of government attempts to enforce so perfect an order that innovation became impossible. 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.
“political anarchy” Just means that there is no overseeing government monopolizing legal/moral/ethical knowledge and thus preventing the superior knowledge-discovery that cultural evolution/competition brings about.
These temporary leads when it comes to civilization and the relative quick advantage that Europeans have recently enjoyed has little if anything to do with biological differences. The cultural (NOT biological) evolutionary process which has created “the market process” and its various components like trade, money, economic competition, banking/finance, and interest rate coordination… is much, much faster than the slow genetic biological evolution thus rendering slight genetic differences between races largely irrelevant. As Hayek tells us:
“With respect to what we mean by cultural evolution in a narrower sense, that is, the fast and accelerating development of civilization…Since it differs from genetic evolution by relying on the transmission of acquired properties, it is very fast, and once it dominates, it swamps genetic evolution” (Hayek F. A., 1981, p. 156)
Also:
…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. This evolution came about, then, through the spreading of new practices by a process of transmission of acquired habits analogous to, but also in important respects different from, biological evolution…biological evolution would have been far too slow to alter or replace man’s innate responses in the course of the ten or twenty thousand years during which civilisation has developed — not to speak of being too slow to have influenced the far greater numbers whose ancestors joined the process only a few hundred years ago…Thus it hardly seems possible that civilisation and culture are genetically determined and transmitted. They have to be learnt by all alike through tradition. (Hayek’s ‘The Fatal Conceit’ page 16)
Given the lack of familiarity with the aforementioned concepts, it is quite understandable how various “race-realist” fallacies which equate civilization with “white people”/Europeans are re-emerging (obviously Hitler/Churchill/ ‘British Empire’ made this error too). Although it is certainly true that there must be differences in mental ability just like there are differences in physical ones (blacks from Western Africa have on average bigger dicks), these differences are largely irrelevant when it comes to socioeconomic progress compared to the rapid evolution of the market process and the global world-wide division of labor/knowledge. The last 100 years have brought about a more than four-fold increase in human population and an obvious explosion in innovation and technological progress, a time which is obviously too short for any genetic variations to play a significant or even negligible role.
Some people might quickly reach the conclusion that people who are in tribal stages of social development must be dumber in some way, but this does not have to be true at all. For example, Jared Diamond in his bestselling book “Guns, Germs, and Steel” shows how Australian aboriginals were bound to be stuck in a tribal world because there simply weren’t any animals suitable for domestication that might have been as useful as things like cattle, and that the soil and plants in their environment were not conducive to farming. Moreover, the selective pressures that really shape our intelligence have come about by competing with fellow big-brained humans. People in a tribe have to learn language, communicate and compete with the selfish interests of all the other members in the tribe: lie here, join an alliance there, remember favors, plan some clever scheme to manipulate others to get what you want, etc. These sorts of calculations are the ones that really shaped our intelligence. One can actually make the case that people who live in tribes might even be smarter. People who live in modern market oriented societies can have very little social skills, learn how to do just a few things, and thanks to the tremendous productivity of the entire social order via the market process they can easily feed themselves, clothe themselves, reproduce and feed their offspring. A waitress can perform the same job for a lifetime, trade her labor for money, and the money for a computer with Internet access, use Google to figure out how to solve all kinds of problems. She can afford a car, modern medicine, all things that can greatly help her survive and reproduce. The modern social order/organism can be seen as a robot or a tool that gets better with time and a larger population. An average person 100 years from now will be able to achieve a lot more than a genius today just like an average person today can easily produce/achieve much more than a genius did 100 years ago. Although the tribal social order was a lot simpler compared to what we have today, there was still plenty to do and many people had to be very smart jack-of-all-traders. A small number of trades/occupations compared to today, but a small number of brains too. You had to learn how to build the huts, simple tools, where to get materials, which ones were best. As Hayek put it:
“In civilized society it is indeed not so much the greater knowledge that the individual can acquire, as the greater benefit he receives from the knowledge possessed by others, which is the cause of his ability to pursue an infinitely wider range of ends than merely the satisfaction of his most pressing physical needs. Indeed, a ‘civilized’ individual may be very ignorant, more ignorant than many a savage, and yet greatly benefit from the civilization in which he lives.” (Hayek F. A., 1973, p. 14)
Even if it were true that Africans were not as smart as whites on average, which is what a lot of the “race realists” and the hordes of jealous/scared white men who understandably shiver at the thought of a physically stronger and perhaps more confident black man out-compete them in the mating game seem to focus on, this would not be the main reason why societies with larger white populations are more prosperous than Africans. Again, it is the economic system that really brings prosperity, not individual human intelligence. It is as if the market process can add up the IQs of people so that you are better off with 5 brains with IQs of 100 for a total of 500 “intelligence points”, than you are with 4 brains of 115 IQ for 460 intelligence points. Again, most of these “race realist” scientists and their followers have no understanding of what the market process is and much less how it has evolved. They are stuck looking for answers in their tiny world of genes and believe that the answers to most things somehow have to be found there, especially those things that are largely shaped by the market process and cultural evolution. Since they do not understand these concepts they are limited to using the same sort of genetic hammer to stomp every nail.
We should quickly add that IQ related testing is dubious at best. As Prof. Sowell explains:
“Like fertility rates, IQ scores differ substantially among ethnic groups at a given time, and have changed substantially over time — reshuffling the relative standings of the groups. As of about World War I, Jews scored sufficiently low on mental tests to cause a leading “expert” of that era to claim that the test score results “disprove the popular belief that the Jew is highly intelligent.” At the same time, IQ scores for many of the other more recently arrived groups — Italians, Greeks, Poles, Portuguese, and Slovaks — were virtually identical to those found today among blacks, Hispanics, and other disadvantaged groups. However, over the succeeding decades, as most of these immigrant groups became more acculturated and advanced socioeconomically, their IQ scores have risen by substantial amounts. Jewish IQs were already above the national average by the 1920s, and recent studies of Italian and Polish IQs show them to have reached or passed the national average in the post-World War II era. Polish IQs, which averaged eighty-five in the earlier studies — the same as that of blacks today — had risen to 109 by the 1970s. This twenty-four-point increase in two generations is greater than the current black-white difference(fifteen points).” (Sowell, pp. 8–9)
If IQs can change so much with socioeconomic achievement it does not tell us much about differences in mental capacity, and again, whatever differences might exist are insignificant compared to what really matters, the way the economy works. And why is it that if black people supposedly have lower IQs do they excel in music, comedy and so much more? Don’t these activities require great minds? Nigga please! Let us also assume the “worst”, let’s make the ridiculous assumption that only super smart Cubans can do certain things and they are highly paid for it. Big deal, as Prof. George Reisman’s tells us:
“If two people both want to be an automotive engineer, and the better qualified succeeds, while the less qualified ends up as an auto mechanic, the better qualified one can raise the productivity of the poorer-qualified one by designing a better car for him to work on. If their positions were reversed, this would not be possible.” (Reisman, p. 357)
Relative differences in intelligence between human populations just means that there would be a higher proportion of some groups/races being the engineers and others being the mechanics using Prof. Reisman’s example above, and to the benefit of all.
If a human being can grow up and learn something as complex as a language, which can take even the brightest of people years to master, everyone has more than enough intelligence to understand the basics of how freedom and privatization are the key to rapid socioeconomic progress. Clever economic education/marketing is the key to solving all of our problems and quickly getting us on a path to unimaginable prosperity. Back to Hayek’s Cultural Evolution…
Having identified this 3rd dimension of knowledge-creation and its paramount importance relative to human reason Hayek continued to step on the intellectual gas and run away from all prior thinkers by helping us realize that even our ability to reason is to a significant degree the result of this “group selection”/ “cultural competition” . To better understand this point imagine the following cruel scenario. A baby is taken from his mother at birth and raised by plain-looking mechanical arms. No human being looks at him in the eyes implying there is a “self” behind them. He is never spoken to and thus never picks up a language which is crucial for thinking. For example, the great economist Ludwig von Mises writes:
Thought is bound up with speech. The thinker’s conceptual edifice is built on the elements of language. The human mind works only in language; it is by the Word that it first breaks through from the obscurity of uncertainty and the vagueness of instinct to such clarity as it can ever hope to attain. Thinking and that which is thought cannot be detached from the language to which they owe their origin.
Henry Hazlitt makes the same point while elaborating further:
[referring to man in general]He could not think at all(or only at the level of a chimpanzee) if he did not inherit from the society and civilization in which he was born the priceless gift of an already created language. Without this he would not only be unable to reason logically, he would have nothing worthy to be called a “concept”. He could not frame a sentence; he could not even name things. We think in words, even in conversations. Our language, concepts, and logic are part of the social inheritance of all of us… As the great nineteenth-century philologist Max Mueller put it: “To think is to speak low. To speak is to think aloud”. The corollary of this is tremendously important. A man with a scant vocabulary will almost certainly be a weak thinker. The richer and more copious one’s vocabulary and the greater one’s awareness of the fine distinctions and subtle nuances of meaning, the more fertile and precise is likely to be one’s thinking. Knowledge of things and knowledge of the words for them grow together. If you do not know the words, you can hardly know the thing. We are told that the Tasmanian method of counting is: “One, two, plenty.” This points to a very significant truth. Man could not even count, certainly not beyond the number of fingers on his hands, until he had invented names and symbols for numbers. For in speaking of the need for language for thought, we must, of course, include symbols as an integral part of language. It is amazing how recent in human history are even the Arabic numerals, the denary system, and elementary signs for addition, subtraction, multiplication, and division…
Man can be seen as having a potentially very powerful computer/brain that has the potential for reasonable and logical thinking but what makes the computer truly useful is the operating system and software that is loaded on to it as it “grows up”, in other words, the cultural/legal/linguistic concepts/traditions it absorbs. How would this unfortunate person “think” as an adult? Hayek writes:
“It may well be asked whether an individual who did not have the opportunity to tap such cultural tradition could be said even to have a mind”
My guess is that a bonobo, raised among humans and taught some rudimentary sign language would act far more reasonably than this “culture-less” person.
Hayek summarizes his insights beautifully in this brief clip(thanks José Manuel González!):
It is natural selection and its inherent competition between cultures/groups that inevitably selects for a more reasonable culture because a more reasonable culture leads to more productivity and growth. Hayek again:
“The basic contention of theory is rather that competition will make it necessary for people to act rationally in order to maintain themselves. It is based not on the assumption that most or all the participants in the market process are rational, but, on the contrary, on the assumption that it will in general be through competition that a few relatively more rational individuals will make it necessary for the rest to emulate them in order to prevail. In a society in which rational behavior confers an advantage on the individual, rational methods will progressively be developed and be spread by imitation. It is no use being more rational than the rest if one is not allowed to derive benefits from being so. And it is therefore in general not rationality which is required to make competition work, but competition, or traditions which allow competition, which will produce rational behavior.” (Hayek F. A., 1981, pp. 75–76)(emphasis mine)
This previous quote should remind one of those cultures or religions that are very rigid and punish those whose thinking goes against religious dogma and thus keep society stuck in “unreasonable” superstition.
A couple of sentences later Hayek criticizes…
“those who are inclined to argue that competition will not work among people who lack the spirit of enterprise: let merely a few rise and be esteemed and powerful because they have successfully tried new ways, even if they may be in the first instance foreign intruders, and let those tempted to imitate them be free to do so, however few they may be in the first instance, and the spirit of enterprise will emerge by the only method which can produce it. Competition is as much a method for breeding certain types of mind as anything else: the very cast of thinking of the great entrepreneurs would not exist but for the environment in which they developed their gifts.” (Hayek F. A., 1981, p. 76)
Central to Hayek’s worldview was the fact that we have evolved in small tribes which make our “nature” susceptible to communist share-the-wealth ideology and tribalistic warfare. Although not a Hayek quote, the following by famed biologist Steven Pinker beautifully captures the source of mankind’s tribalistic flag-waging-warmongering-patriotism:
“… men go to war to get or keep women –not necessarily as a conscious goal of the warriors(though often it is exactly that), but as the ultimate payoff that allowed a willingness to fight to evolve. Access to women is the limiting factor on male’s reproductive success. Having two wives can double a man’s children, having three wives can triple it, and so on. The most common spoils of tribal warfare are women. Raiders kill the men, abduct the nubile women, gang-rape them, and allocate them as wives.” (Pinker, 1999, p. 510)
Hayek stressed the fact that “the market process” is something that evolved in just the last 40,000 thousand years or so, and that many of the rules that are required for its smooth functioning, like respecting private property, especially when it is that of people who are wealthier than you or from another tribe/culture/nation/religion go counter to our groupish/tribal instincts. The bottom line is that human beings are slightly smarter tribal apes who are biologically less-than-ideally suited for civilization. Hayek:
“Man has been civilized very much against his wishes. It was the price he had to pay for being able to raise a larger number of children. We especially dislike the economic disciplines… The indispensible rules of the free society require from us much that is unpleasant, such as suffering competition from others, seeing others being richer than ourselves, etc., etc.” (Hayek F. A., 1981, p. 168)
It took natural selection 2 billion years to evolve single cells into complex mulitcellular life, a process which still fails from time to time causing cells to revert to their “tribal” unicellular-uncooperative state and multiply rapidly without regard to the larger organism. When cells do this, we call them cancerous. This same process, of going from simpler tribal order, to global ‘Social Organism’ is what natural selection is currently doing, in spite of our tribalistic wars/nature and economic policies which get in the way of real economic freedom/privatization.
For brevity’s sake the final aspect of Hayek’s numerous contributions relates to his humble character and focus on intellectual error as the source of mankind’s problems and thus economic education as the main solution. Hayek dedicated his classic 1944 book “The Road to Serfdom” “To the socialists of all parties”. It is difficult to gauge the effect and significance of Hayek’s intellectual efforts. Soon after the publication of TRS, Reader’s Digest published a condensed version which reached millions of US households. This condensed version, really just a 39 page essay, remains one of the best introductions to economics and the vital role that freedom and competition play in the creation and maintenance of civilization.
After the Soviet Union collapsed in 1991, the Nobel Laureate Milton Friedman observed:
There is no figure who had more of an influence, no person had more of an influence on the intellectuals behind the Iron Curtain than Friedrich Hayek. His books were translated and published by the underground and black market editions, read widely, and undoubtedly influenced the climate of opinion that ultimately brought about the collapse of the Soviet Union.
Ron Paul, whose presidential runs of 2008 and 2012 did so much to spread an understanding of economics was one of the countless would-be intellectual leaders who would stumble upon sound economics thanks to Hayek. Ron Paul 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”
As an ambitious and idealistic 18 year old studying at Oxford university in 1944, future British Prime Minister Margaret Thatcher would also stumble upon Hayek’s TRS. Several decades later she would “cut short a presentation by a leftish member of the Conservative Research Department by fetching out a copy of The Constitution of Liberty from her bag and slamming it down on the table, declaring “this is what we believe” ”*
In a wonderful speech in honor of founder of the Foundation for Economic Education, Leonard Read, Hayek mentions that FEE:
with Leonard Read at its head, and all his co-fighters and friends are committed to is nothing more nor less than the defence of our civilisation against intellectual error.
Hayek continues with a lot of wisdom here:
When I stressed that is genuine intellectual error that we have to fight, what I meant to bring out is that we ought to remain aware that our opponents are often high-minded idealists whose harmful teachings are inspired by very noble ideals. It seems to me that the worst mistake a fighter for our ideals can make is to ascribe to our opponents dishonest or immoral aims.
I know it is sometimes difficult not to be irritated into a feeling that most of them are a bunch of irresponsible demagogues who ought to know better. But though many of the followers of what we regard as the wrong prophets are neither just plain silly, or merely mischievous troublemakers, we ought to realise that their conceptions derive from serious thinkers whose ultimate ideals are not so very different from our own and with whom we differ not so much on ultimate values, but on the effective means of achieving them.
I am indeed profoundly convinced that there is much less difference between us and our opponents on the ultimate values to be achieved than is commonly believed, and that the differences between us are chiefly intellectual differences. We at least believe that we have attained an understanding of the forces which have shaped civilisation which our opponents lack. Yet if we have not yet convinced them, the reason must be that our arguments are not yet quite good enough, that we have not yet made explicit some of the foundations on which our conclusions rest. Our chief task therefore must still be to improve the argument on which our case for a free society rests.
More Hayek:
“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)
“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)
Not just Hayek, but Mises also stressed the importance of treating the world’s problems as the result of intellectual error:
“The problems involved are purely intellectual and must be dealt with as such. It is disastrous to shift them to the moral sphere and to dispose of supporters of opposite ideologies by calling them villains. It is vain to insist that what we are aiming at is good and what our adversaries want is bad. The question to be solved is precisely what is to be considered as good and what as bad. The rigid dogmatism peculiar to religious groups and to Marxism results only in irreconcilable conflict. It condemns beforehand all dissenters as evildoers, it calls into question their good faith, it asks them to surrender unconditionally. No social cooperation is possible where such an attitude prevails.”
Hayek’s sort of blameless approach to understanding mankind’s problems, is not only vital for understanding our economic problems, but also the Israeli/Palestinian disaster which I currently believe is in all likelihood going too lead to nuclear Armageddon. Seriously.
The Pilgrimage
I’d like to begin this section by thanking and bringing attention to Keri Anderson who to my knowledge was the original modern Hayek pilgrim. She wrote this wonderful article about her pilgrimage to his grave which greatly motivated me to undertake mine.
Also while learning about the great Austrian economist and Hayekian scholar Jesus Huerta de Soto I became aware of the existence of this Carl Menger plaque located at the University of Vienna which also motivated me to take a similar picture.
So.. First stop in pilgrimage, Hayek’s birthplace at Messenhausergasse 14, Vienna:
Next at Wollzeile 24 we have the location where Ludwig von Mises lived from 1904–1934. According to Benjamin Powell: “Unfortunately his apartment building is gone. A post WWII building now stands at the address.” It was from this location where the Nazis took Mises’ papers which were later discovered in Soviet archives by Prof. Richard Ebeling.
“Ma Creperie” is the restaurant which now occupies the location where the older “Grüner Anker Restaurant” stood. It was here where Mises and friends, (the “Mises Circle”) would get together. Again, see Ben Powell’s article for more details.
Next, University of Vienna. As you walk in through the main entrance you look to your left and will find the following images, each of a Nobel laureate associated with the university and thus Hayek.
Walking towards the center of the building will land you at a central square:
At one of the corners you will find the Carl Menger plaque:
To my pleasant surprise, there is an adjacent plaque for Eugen Böhm von Bawerk:
And Hayek’s teacher, Friedrich von Wieser:
You will also find famous and influential friend of Hayek’s, Karl Popper:
Next we head over to Hayek’s grave at Cemetery Neustift am Walde. After taking a bus that left me nearby I had to walk about 10 mins as I recall. Once you see this sign, make a left and the cemetery parking lot will be about 1-2 mins away.
Once you enter just go straight:
You will have to walk straight about 1,000 feet:
Once you get to a large intersection where on left side you see a post that says “Gruppe 2” as shown below…
Make a sharp right to head downhill through a small path.
Last but definitely not least is the grave of Carl Menger at the Vienna Central Cemetery:
I will finish in a rather somber and depressing note. In the following interview recorded in 1978, Hayek is asked by Tom Hazlett:
“Are you optimistic about the survival of freedom?”
Hayek: “Not really.. If politicians do not destroy civilization in the next twenty years there is good hope, but I am not, by no means certain that they shan’t succeed in destroying it before then”
Actually, no… I changed my mind. I’ll finish with some inspiring words from Henry Hazlitt’s speech on his 70th birthday:
This is the duty that is laid upon us. We have a duty to speak even more clearly and courageously, to work harder, and to keep fighting this battle while the strength is still in us. But I can’t do better than to read the words of the great economist, the great thinker, the great writer, who honors me more than I can say by his presence here tonight, Ludwig von Mises. This is what he wrote in the final paragraph of his great book on socialism 40 years ago:
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.
Those words — uncannily prophetic words — were written in the early 1920s. Well, I haven’t any new message, any better message than that.
Even those of us who have reached and passed our 70th birthdays cannot afford to rest on our oars and spend the rest of our lives dozing in the Florida sun. The times call for courage. The times call for hard work. But if the demands are high, it is because the stakes are even higher. They are nothing less than the future of human liberty, which means the future of civilization.
