Wednesday, April 28, 2010

Concrete vs. Abstract Society

Not that you should necessarily watch the whole thing (you would if you were a nerd like me) but here's an interview with Friedrich Hayek from 1985:

F.A. Hayek Interviewed By John O'Sullivan from FEE on Vimeo.

Here's a key idea. As humans move from small, homogeneous societies to large, pluralist societies, they also have to move from "concrete" to "abstract." In a small society, you know the people you work for, both your employers and your customers. In a large, pluralist society, you don't know whom you work for. In a complex society designed to sustain the number of people who now exist in the world it is impossible to see how it all fits together.

This has crucial implications, Hayek says, for how we view serving one another. In a small, concrete society, you know what it means to serve others: you address their needs directly. In a large, abstract society, this is impossible. The best way to serve others, he argues, is to maximize profit, i.e. be as efficient as possible. Efficient markets ensure that resources will shift to where they are needed the most.

The problem is that it's impossible to actually see those resources shifting the way you hope they will. We see in our common experience that a lot of people make money out of sheer luck, others by hard work. Some professions which seem more worthy of higher salaries don't pay as well as we think they should. How can we possibly trust that in the end, resources are going where they need to?

Well, partly these problems stem from the fact that our markets aren't entirely free. (For instance, I could go on about how the teaching profession is dominated by a monopoly created by bad government policies. This, I am convinced, is the reason why the salary for a teacher isn't as high as it should be.) But to be fair, results that seem grating to a person's intuition are bound to happen in a free market system.

Hayek suggests we ought to overcome that intuition. He even suggests that for exactly this reason, human beings may not be ready for a free market system. We are simply not ready to overcome our desire to see the system as a whole achieve a predetermined outcome. We do not like spontaneous growth. We prefer systematic, planned growth.

Perhaps what appeals to me about Hayek's argument is its critique of rationalism, i.e. the belief that human reason can obtain all the means necessary for progress. Moreover, Hayek's preference for spontaneous over planned growth suggests that he cherishes life over machines. Life is spontaneous and beautiful; machines are cold and rational, and they don't have the same self-sustaining qualities that life does.

But in times of economic turmoil, it seems most likely that people will turn to rationalistic attempts to fix the economy, disregarding the possibly disastrous side effects such a route could have. I guess that just proves there's nothing "natural" about the free market. Only a principled society can sustain it.

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