Quotation of the Day…

by Don Boudreaux on December 14, 2017

in Competition, Hayek, Reality Is Not Optional

… is from page 313 of F.A. Hayek’s 1968 brilliant lecture “Competition As a Discovery Procedure,” as reprinted in The Market and Other Orders (Bruce Caldwell, ed., 2014) – a collection of some of Hayek’s most influential essays:

Of course, it is one of the chief reasons for the dislike of competition that it not only shows how things can be done more effectively, but also confronts those who depend for their incomes on the market with the alternative of imitating the more successful or losing some or all of their income.  Competition produces in this way a kind of impersonal compulsion which makes it necessary for numerous individuals to adjust their way of life in a manner that no deliberate instructions or command could bring about.

DBx: The choices open on this front to you, a denizen of modernity, are three.  First, you can choose to remove yourself from the market by adopting a self-sufficient lifestyle.  Second, you can choose to enjoy the prosperity made possible only by the market by playing by market rules – a central one of which is that, in your role as a producer, the value of that which you produce is determined by the voluntary choices of consumers.  Third, you can hope to enjoy the prosperity made possible only by the market by seeking for yourself an exemption from the market rules that everyone else must obey if you are to prosper.

If you choose the first course, the dictates of nature will be brutal and inescapable.  You’ll be, from the perspective of a denizen of 21st-century modernity, unimaginably poor and miserable.  (But, hey, at least you won’t have to worry about the likes of Chinese currency manipulation or Vietnamese ‘dumping’ of shrimp.)

If you choose the second course, you will enjoy enormous material riches even if you are far from being the richest person in modernity, and even when your particular fortunes on the market wane.  You will, to use Hayek’s language, accept the “impersonal compulsion” of the market in place of, on the one hand, the impersonal yet far more harsh compulsion of nature, and, on the other hand, the personalized compulsion of a state that decides who is and who isn’t exempt from the rules of the market.

If you choose the third course, you will enjoy enormous material riches as long as only you and, perhaps, only a relatively small number of others succeed in breaking the rules of the market order.  If you succeed in having the state use its power of compulsion to exempt you – for example, with a protective tariff – from the forces of market competition while, at the same time, most other people continue to be subject to the “impersonal compulsion” of the market, some of your riches will be the result of your cheating others out of what is rightfully theirs.  You will enjoy both the riches of a still largely well-functioning market and the stolen booty that you’ve successfully convinced the state to seize for you from those who continue to play by the rules of the market.  But the more the state treats others as it treats you – that is, the more the state exempts others, as it exempts you, from the “impersonal compulsion” of the market – the more the state uses its own powers of compulsion to drain the market of its productive powers.  At some point, the substitution of state compulsion for the “impersonal compulsion” of the market results in everyone, including you, being made poorer than they and you would be if the state refused to use its powers to bestow upon anyone an exemption from the rules of the market.

In short, there is no escaping “compulsion.”  You must subject yourself to the brutal compulsion of nature, to the “impersonal compulsion” of the market, or to the politicized compulsion of the state.  Unless you are both untroubled by being unprincipled and quite sure that the politicized compulsion of the state will be used only against others for your benefit (rather than against you for others’ benefit), then prudence ought to lead you to support a regime in which the only “compulsion” is the “impersonal compulsion” of the market.


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