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Quotation of the Day…

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… is from page 226 of the 2014 collection, The Market and Other Orders [2] (Bruce Caldwell, ed.), of some of F.A. Hayek’s essays on spontaneous-ordering forces; specifically, this quotation is from an essay of Hayek’s that, although it is relatively unknown, has long been among my favorites – namely, his June 1962 lecture, upon taking a faculty position at the University of Freiburg, “The Economy, Science and Politics” (available on-line here [3]):

Not because he knows so much, but because he knows how much he would have to know in order to interfere successfully, and because he knows that he will never know all the relevant circumstances, it would seem that the economist should refrain from recommending isolated acts of interference even in conditions in which the theory tells him that they may sometimes be beneficial.

Few statements from Hayek’s pen convey so succinctly and clearly the essence of his political economy as does this one.  Far too many economists, intoxicated by the abstract knowledge that their theoretical understanding gives to them, forget (or never learn) that this abstract knowledge is knowledge only of the general character and logic of complex markets rather than knowledge of the countless, ever-changing, and often unobservable details that must somehow be taken account of if millions of strangers are to cooperate and exchange with each other in ways that generate a reasonably well-working economic order that produces prosperity for the bulk of ordinary people.  The decentralized, private-property and contract-based competitive market is the only institution that humans have stumbled upon that manages to collect and use in reasonably tolerable ways the colossally large number of bits of knowledge dispersed across millions of people.  The results of this market process are, of course, not perfect – but they are far superior to the results that are produced by efforts to replace all or parts of this market process with the conscious interventions of people empowered to use force to alter market relationships.

In order to intervene successfully in markets would require not only the kind of abstract knowledge that the best economists learn by mastering their discipline but also knowledge of what Hayek elsewhere [4] famously called “knowledge of the particular circumstances of time and place.”  The very nature of this latter knowledge is that it cannot possibly be known to a single mind or agency.  Statistics, for all their value in many contexts, are not – contrary to the mistaken supposition of many people – adequate substitutes for the “knowledge of the particular circumstances of time and place.”  Indeed, the very best economists understand that perhaps the principal lesson to be drawn from the abstract knowledge that they master is that the competitive market order is so complex that it is folly to imagine that conscious interventions into it will generally succeed in improving the economic well-being of ordinary people.

Such a stance in support of non-intervention is unfashionable.  Confessing honestly one’s unavoidable ignorance of what must in reality be known to intervene successfully does not get one many gigs on television and other media venues where various “solutions” are paraded about.  A path to popularity isn’t paved by consistently noting humbly that one cannot predict any details of the future but can say only that whatever is likely to emerge over time from the competition of consumers and producers each spending his and her, and only his and her, own money will likely be better than the results of this Senator’s plan, of that president’s program, or of those economists’ proposed interventions.

In short, steadfastly taking stands based upon the mature understanding that reality is both far more complex than most policy wonks, politicians, and media types think and that reality is not optional is not as fashionable as is feeding the popular delusion that smart, well-advised, and well-spoken people in government can reliably and consistently improve reality through their conscious, hubris-fueled interventions.

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